As a city grows, it develops needs to expand its infrastructure to meet the needs of added population. We may start with new subdivisions but they require the support of wastewater treatment facilities, wells, water towers, lift stations and other trunk facilities to provide the public improvements we all expect to have in a city.
Financing these types of facilities can be challenging and also can be handled by a number of different approaches. Each one has its pros and cons depending on how you look at them and whether you are a developer or not. In Becker we have chosen a number of different approaches to address the costs for infrastructure with charges and fees that support their establishment and replacement. Some infrastructure is supported by taxes, but most are not. They are largely supported by some form of user fees.
One of these mechanisms is that of Trunk Charges. Through a study of the infrastructure needs for water, sewer, and storm sewer the city looked at the need for trunk facilities that would be needed to serve the community when fully developed. Trunk facilities are the wells, water towers, lift stations, and over sized water and sewer mains as examples. They are primarily items we all need for the properly functioning systems we use, but serve the whole rather than individual households. Once we quantified the needs of these types of systems we attached price tags to them, looked at the comprehensive land use plan to ascertain densities of development and determined the “price” for trunk facilities of water, sewer and storm sewer. This becomes a fee a developer pays to the city for developing in the city. This charge is based on a per acre cost for the amount of land developed. In exchange the city pays for and installs these trunk facilities that provide development with the needed public improvements.
In managing this system a few things stand out as concerns. One involves the time of development. The city council in controlling trunk facilities controls the extent of development through capacity in the trunk facilities developed. They also control the timing of construction of these facilities. If a developer wants to move ahead of the city with development and the city doesn’t have the resources to install it, the developer can install these trunk facilities at his expense. This comes with a few provisions. The council needs to be agreeable to the situation, the developer pays all costs associated with the trunk facility that meets our expectations and the developer is not given credit for the trunk facility he installs. He is still expected to pay the city for the trunk costs associated with his development.
One of the cons to this approach is that of cash flow. Essentially the city has to finance the establishment of a trunk facility prior to development taking place. As such, early on there are expenses without cash support. In the middle term cash flow seems to meet needs. As the city becomes more fully developed, cash flow becomes less of an issue. In recognizing that problem a slow and deliberate approach is utilized in managing growth.
There are other methods Becker uses to recover costs which I’ll address another time. Keeping finances in perspective helps in managing growth and its consequences. In the end, maintaining control is in everyone’s best interests.
