40+ builders, property owners ask Pasco to repeal 140% fee increase. What we know

Forty-one Tri-City developers, builders, real estate agents and property owners are asking Pasco to walk back an increase to the city’s water rights acquisition fee.

Yakima-based attorney James Carmody handed over a letter signed by the individuals asking the city to rescind the recently approved ordinance, including a 140% increase to the fee.

They’ve also proposed the city form a “steering committee” with stakeholders to study the issue more.

“The fundamental issue is the process needs to be transparent and involve all of the stakeholders,” Carmody later told the Tri-City Herald.

While the topic wasn’t included on last week’s agenda for action, the city council also voted on a motion by newly installed Councilman Leo Perales asking staff to draft an ordinance rescinding the changes.

But favoring legislative tweaks over starting from scratch on the issue, the council ultimately voted against the move 7-0.

The topic is instead likely to resurface for a study session after the new year.

Fee increase

Water resources in Washington belong to the public and can’t be owned by any individual or group, according to the Washington State Department of Ecology. And water rights allow a person or group the use of water for a specific time, place and purpose.

The city council voted 5-2 at a special meeting Nov. 27 to increase the fee it charges on developers to buy new water rights, from $1,725 per acre-foot to the market rate of $4,150 per acre-foot.

The difference is about 8 pennies for each gallon of needed water rights. It went into effect Dec. 8.

The vote also included a new 50% surcharge on developers and property owners who relinquished their water rights within the past 10 years and were asking the city to supply water rights for new buildings.

Revenue from the fees is used by the city to buy water rights for new development that doesn’t have them.

The higher fee incentivizes property owners to provide the city with any rights tied to the land instead of absorbing the costs of the previous fee, which went into effect in 2014 when water rights were significantly cheaper to buy.

The value of water rights has risen so high that some developers are choosing to pay the city’s acquisition fee and request water service from the city, then sell their existing water rights at a higher price on the market.

“The need to adjust the fee comes down to the city’s ability to allow residential and commercial projects to continue to be developed,” City Manager Adam Lincoln said in a statement to the Herald.

“If properties don’t have water rights, the city will be limited in its ability to accommodate the forecasted population growth and provide the necessary housing and jobs expected in Pasco,” he continued.

Petition to lower Pasco water rights fee

Despite several months of public engagement from city staff about the proposed increase, opponents believe there needs to be “a more comprehensive, inclusive and transparent process.”

Those who signed the petition include several executives and business owners working on Osprey Pointe, Madison Park and many other local projects.

“Ordinance No. 4701 was adopted at a special meeting without adequate notice,” the letter reads. “The timing of the ordinance’s passage, just before the seating of a newly elected council, raises concerns about the democratic legitimacy of the decision.”

Petitioners also claim the ordinance will directly impact the affordability of housing and commercial development within the city.

Housing developers will simply pass the increase down to buyers and leasers, Carmody told the Herald.

“A developer, a home builder is not going to build a home unless they’re going to get a return on investment,” he said.

But it’s not clear if the ordinance will lead to higher home prices. Charging a higher fee to purchase more water rights will allow development to continue — not stall — and add to the available housing supply.

“It would seem that if the market is going to provide affordable housing, the growth of the market needs to continue and reach a marketable surplus of housing rather than a scenario that would limit the building of new homes,” Lincoln said.

Carmody also called the 50% surcharge “unconstitutional” because it discriminates against property owners, some of whom may have had nothing to do with removing water rights from their property. It’s not right for the government to penalize them for selling a resource, he argues.

“We’re not looking for war — we’re looking for conversation,” Carmody said.

A sign on Glade Road North displays the population to drivers traveling south into the Pasco city limits from rural Franklin County.
A sign on Glade Road North displays the population to drivers traveling south into the Pasco city limits from rural Franklin County.

WA’s fastest growing city

Pasco is among the fastest growing cities in Washington — and new residential and commercial developments have been booming.

Over the next 20 years, the city’s population will increase by 60,000, and the city needs to add 23,000 housing units just to keep up. At the moment, there are currently more than 2,000 homes being reviewed by the city for development.

City staff say the city does not have enough water rights remaining to serve all the new developments and projects currently in line for review and approval. The city currently leases or owns about 18,883 acre feet in annual water rights — or about 6.2 billion gallons of potable water drawn that’s drawn the Columbia River and underground.

The city used about 84% of that water last year and will need to buy more to meet expected growth.

“It is safe to say the rate of development will slow if the city has to compete with private rates,” Lincoln said.

He also says the city has been “aggressively targeting the removal of barriers” to increase housing availability, including passing substantial updates to ease restrictions of certain homes in city zones, expediting review processes, implementing tax increment financing to build infrastructure, and deferring impact fees.

On a per-capita basis, Pasco permits more housing units than either the Spokane, Yakima or greater Tri-Cities metro areas.

A surprise 7-0 vote

Both Councilmen Leo Perales and Charles Grimm took their oath of office and were seated on the city council last Monday night.

During regular council updates, Perales made a surprise motion to draft legislation to rescind the ordinance that included the acquisition fee. Councilman Pete Serrano seconded Perales’ motion to bring it to discussion and a vote.

“People are not able to buy homes right now in this city and in this county. And it’s this type of policy that is impacting that,” Perales said. “If I can assist that and get people into homes — by vetting this and making sure it’s not impacting that — then I’m happy with that.”

Before the vote, Councilwoman Zahra Roach asked the newly sitting council members to recuse themselves from the vote if they had received campaign contributions or endorsements from any of the petitioners listed in Carmody’s letter.

Grimm was the only council member who took contributions from petitioners. Earlier this year, he accepted a $1,000 donation from B4 Development and Construction, the local firm owned by Franklin County Republican Party chair Stephen Bauman. But Grimm said he did not believe he needed to recuse himself from the vote.

Councilwoman Melissa Blasdel said while there were several individuals on the list who shared her last name, they were distant relatives who she does not have a relationship with.

The city council ultimately chose in a 7-0 vote to decline Perales’ request to draft legislation rescinding the ordinance.