Santa Rosa council balks at water fees for builders, signaling stance on new housing amid drought

Should Santa Rosa charge developers an extra fee to offset the water demands of new housing if the city enters a more severe supply crisis amid the ongoing drought?

That was the question before the City Council late last month, pitting two of the city’s biggest challenges — its affordable housing shortage and the climate-driven likelihood of longer and more intense periods of drought — against each other.

The City Council, in past and current form, has for years endorsed the idea of a fee to offset water demand from new homes should a drought require water rationing by residents.

The charge would be used to fund conservation projects citywide, like rebates for replacing grass lawns or inefficient toilets and showers. Water managers have pointed to such moves as a sound way to conserve supplies while allowing housing projects to proceed even in times of water scarcity.

But housing advocates said funding any such measures with a fee that could increase the cost of building would be a drag on Santa Rosa’s efforts to speed new housing.

It’s also an equity issue, advocates contend.

Charging developers an additional fee would hurt the county’s marginalized and lower-income residents most and benefit those who already have homes, said Jen Klose, executive director of the advocacy group Generation Housing.

“Slowing development through raising cost barriers is making a choice to maintain the status quo, which is one population, primarily whites, continue to be safely, stably and affordably housed and another population, primarily our communities of color, continue to suffer myriad impacts of housing-cost burden instability,” Klose said.

“Any housing policy that does not improve opportunity for our communities of color is inequitable on its face. It’s preserving and exacerbating structural inequities and, let’s be clear, that’s structural racism,” she added.

Those arguments swayed the City Council, which, without a vote, sent water planners last month back to the drawing board to come up with another way to pay for their conservation projects.

“I just don’t like the message,” Councilman Jack Tibbetts said. “This council’s priority has been on housing.”

The current council has demonstrated itself willing to override many hurdles to housing projects, including opposition from neighbors concerned about parking, loosened density and height limits or environmental impacts.

The policy debate and direction given at the Nov. 30 meeting was a new benchmark of that stance as council members overruled the city’s water experts to avoid burdening housing development with a new fee. Such a charge would have been politically unpopular with housing and justice advocates as well as with developers.

They rebuffed water planners even after being told the department had reviewed other ways to pay for water conservation measures and did not see a good alternative.

The per-unit fees ranged from $868 for attached dwelling units and small, dense apartments to $1,649 for duplexes and triplexes to $5,047 for a single-family residence on a 1 acre-plus lot.

Water planners say the question is more nuanced than a simple one of affordable housing versus water conservation.

The city’s water shortage plan, in place since 1992, has called for a so-called demand offset fee during more severe drought stages for at least a decade, according to Colin Close, a senior water resource planner with the city.

Now, “there is a sense of urgency because (Lake Sonoma) has not been this low since it was filled,” Close said in an interview with The Press Democrat. “Climate change is real and it’s here.”

But City Hall has never finalized a policy to implement the fee. The current council voted to approve the latest version of the plan in June. The city has been in a stage 3 drought crisis since summer, with a citywide water savings target of 20%. If it entered stage 5 without a policy in place, water planners say, new construction could be prohibited because there would not be a clear path or funding to make up water savings elsewhere.

“There’s no water in that equation for new demand,” Close said. “If there isn’t some way to accommodate new demand, then … it does look to us like there would be a moratorium.”

Such a moratorium seemed unlikely to Klose, the Generation Housing director.

“It would really surprise me if that happened, and it would certainly interfere with the city’s ability to meet its Regional Housing Needs Allocation goals” if it did, she said. Klose was referring to requirements for new construction for local governments that are set by the state. Cities can lose local control over zoning and planning if officials fail to meet construction mandates.

Housing advocates, as well as council member, including Victoria Fleming, Tibbetts and Tom Schwedhelm, were skeptical. Charging developers was the easy out for the water department, they said. Instead, the agency ought to look for a way that maintained housing goals, while still funding needed conservation measures, fee opponents said.

Fleming pressed for a budget review to find those dollars.

The city’s current annual budget for its water-use efficiency program is $869,000, of which $93,000 goes to services and supplies and the rest to staff that conduct water conservation outreach and administer the rebate programs. The agency has $1.14 million on hand for those rebate programs.

The water department’s overall $187 million annual budget is supported in large part by residential and commercial ratepayers. Only $736,453 comes from the city’s general funds.

Water managers say they can’t use ratepayer money to pay for rebates because of state laws that say fees have to go toward a specific purpose and cannot be spent like tax money.

“Ratepayer funds have to be used to benefit our ratepayers and it can’t be used to help a certain class of customers coming onto the system,” Close said.

But council members didn’t buy the explanation that there was no other way forward. “To assume there is no room in any of their budgets, and they have many budgets … is absurd,” Fleming said.

Tibbetts, a housing advocate who announced he is resigning from the council on Tuesday, argued the city should implement stricter penalties on heavy water users during droughts.

“I don’t think it’s unfair to have people who want to have green lawns and take long showers pay for that privilege,” he said.

But during droughts, the water department’s goal is to reduce water use, not charge residents more to raise revenues, Close said. The department favors education and working with customers over penalizing them, he said, and the agency’s ultimate tool was the threat of water shutoffs, not financial penalties.

New development must meet exacting water efficiency standards, meaning any housing units built today will use less water than their older equivalents, housing advocate Klose pointed out.

The city’s water rebate programs do not have income caps, she said.

“You might be taking money that should be creating affordable housing for those who need it most and putting it directly into the pockets of people who are safely, affordably housed and don’t really need the money,” she said.

Council members also said they could consider paying for the water offsets out of the city’s general fund, if they had an estimate of the costs.

That suggestion drew a gentle warning from Interim City Manager Jeff Kolin, also nearing the end of his tenure. The city is operating at a budget deficit of about $11 million this year.

And the council has already advanced a number of subsidies, including forgiving unpaid water accounts during the pandemic, in the name of equity. In the same Nov. 30 meeting, it authorized spending millions of dollars in federal stimulus money and money paid by PG&E through a court settlement over the 2017 wildfires on progressive social programming, over many more traditional governing costs.

“If you do decide to subsidize with general funds, what other things are you not going to move forward with as a result of those decisions?” Kolin asked the council.

“The council is clearly moving in a direction that is increasing equity, and there’s a price tag that comes with it,” Fleming said in response. “Everybody loves equity until you have to pay for it, right?”

The council did not set a date for when it would revisit the water offset fees.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88.