Who am I talking about? The El Paso Times... again. It seems the can't quite get their tiny little brains around this impact fee issue. In an op-ed today they estimated that if the builders passes on the cost of the impact fee it would only cost $5.00 a month for the life of a mortgage.
STUPID, STUPID, STUPID, STUPID, STUPID, STUPID, STUPID!
I can't say it enough. Their complete lack of sense is astonishing.
First of all, their math is idiotic. They simply took the highest possible "hook up fee," which is $2000 and divided that by 30 years and then divided that by 12 and came up with 5.5. So they even rounded down in order to misinform their readers.
Here's what they didn't take into account.
1. Interest
2. The mark up passed on to the consumer. If builders make the industry standard 15 percent profit then you're talking at the minimum $2300 and that doesn't consider that many make twice that percentage in profit during the good times.
3. The builders have to pay the markup from the developer and the developer and builder are both covering interest on the loans they have to develop and build on the land. The rule of the thumb in the industry is for every $1,000 increase in the initial lot price, the end consumer sees a $5,000 increase in the final home sale. So we're talking $10,000 on top of the price, not $2,000. That's why the builders are freaking out. They have to try and sell a house at an increased cost of $10,000 smackaroos.
It's a typical situation where the public is being lied to and I'm not sure if it's on purpose or just by ignorance.
Here's some other statements in the article that flat out false:
"Nobody likes costs being passed on. But in this case it's good news for most. The impact fees on developers mean hundreds of thousands of El Pasoans get a fee break. Even if its $1 a month off the water bill, it adds up to a lot of money if you're, say, that person who has lived in Central for 25 years."
Uh? No. Nowhere has anyone said that your water or sewer bill (one in the same basically) is going down because of this. Show me where this has been promised? This is a lie. Your bill could actually go up! I'll get to that in a moment.
"Homeowners were the ones paying 100 percent of the $2,000 hookup fee per new home. In what it termed a compromise, Council has shifted 75 percent of that to the developer. And the developer will shift it to the person who buys the home or the commercial building."
What? No! Developers pay for 100 percent of the water and sewer pipe in a new subdivision plus the installation. Here's how a new development works.
1. Developer pays an engineer to design a subdivision.
2. Developer PAYS THE PSB to design the sewer and water in that subdivision. I repeat THE DEVELOPER PAYS THE PSB FOR THAT SERVICE AND HAS NO CHOICE IN THE MATTER.
3. The developer purchases every single piece of water and sewer pipe along with every fire hydrant and every individual hook up for each house.
4. The developer pays a contractor to install all the water and sewer, street, gutter and sidewalk leaving the sewer and water lines stubbed out behind the curb. The developer gets no money from the PSB to do this.
5. When a home builder buys a lot HE CONNECTS THE NEW HOUSE TO THE STUBBED OUT WATER AND SEWER AT HIS COST.
The only thing rate payers pay for is the inspection by the PSB and that runs about half of what the developer paid to have the PSB design the water and sewer in the first place.
The impact fees are to be used to build improvements that wouldn't be needed if the new subdivision wasn't there. We're talking about sewage treatment plants ($10 million minimum), water storage (a few million for the smallest), larger main lines (water and sewer) as well as other improvements needed to adequately serve the new community.
Most of these improvements are already being put on the developers to build in exchange for the permission to do the projects. Many developers have built at their own cost these improvements in order to speed along the process of development. Remember, if a new development needs a water storage unit, the developer has to wait until the PSB gets good and God damned ready to put it in. It could be years before the get to it. So the developer builds it at his cost and HANDS IT OVER TO THE PSB AT NO COST TO THE RATE PAYERS. Sometimes, in rare events, the PSB pays the developer back a small portion of the improvement - rarely.
There's no way new developments at even the highest hook up cost will cover the improvements needed. It would take 5,000 new homes to cover one sewage treatment plant. That amount of homes would need millions of other service upgrades that won't even be paid for.
Here's the kicker. By state law, if the PSB doesn't use the impact fees within ten years to build improvements for that subdivision - THE DEVELOPER GETS EVERY DIME BACK PLUS INTEREST! This means that most of the money will be given back if they can't RAISE YOUR RATES TO PAY FOR IMPROVEMENTS! Remember, the fees themselves come woefully short in paying for improvements and the rate payers are the ones who will pick up the cost.
All that is actually happening here is increased cost of housing in El Paso. Nothing else will change. Maybe more development in New Mexico, that's about it.
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