In what would be a major shift in how El Paso pays for growth, the Public Service Board is considering a new fee that would add $59 a month to the water and wastewater bills of new homes being built on the city’s fringe.

The new fee, which PSB is calling a sustainable infrastructure surcharge, would apply to new developments in Northwest, Northeast and Far East El Paso and would be used to pay for the cost of new water and wastewater infrastructure. The fee would be in place for 30 years.

For decades, the PSB – which oversees El Paso Water – has paid for growth and its needed infrastructure through bills on existing homes and businesses.

“There’s a certain amount of money that they pay in their bill that’s used to subsidize growth. And so we’ve struggled with that for many years,” John Balliew, the CEO of El Paso Water, said in an interview with El Paso Matters. “And so the question is, what can we do to try to shift that burden off of our existing core customers? And so that’s where we came up with this idea of this sustainable infrastructure surcharge, to shift the cost for those new facilities onto the customer who benefits from it.”

The new fee was unveiled at a PSB meeting Tuesday night. Balliew said El Paso would be the first Texas city to impose such a fee. 

The proposed surcharge would not cover the full costs of growth on the city’s water services, so existing customers would continue to pay for some of the growth, Balliew said.

Developer concerns

The plan is certain to draw fierce opposition from developers, particularly those building new subdivisions on the city’s edges. 

Mayor Oscar Leeser, who is a member of the PSB, said he’s heard concerns from developers and promised them continued conversations.

“They have concerns. There’s no doubt that they have concerns,” Leeser said. “But again, they also had some options that they thought would not cost that.”

Richard Dayoub, a consultant whose clients include developers, spoke briefly at the PSB to ask a couple questions of clarification. In an interview after the meeting, he said rising interest rates and housing costs are already squeezing some families out of the homebuying market, and an additional water fee on new construction could exacerbate the problem.

“That impacts the builders, that impacts the developers, that impacts the number of homes that they can project that they can sell going down the road,” Dayoub said. “It’s like a witch’s brew because you look at that and you say, well, if we’re not building more homes, there’s fewer tax dollars we’re getting from property taxes.” 

No decision is likely for several weeks or months. Balliew outlined several options for the PSB Tuesday night, including reducing the proposed surcharge, modifying it, or staying with the historic approach of having current customers sharing in the water infrastructure costs brought on by growth.

Growth and no growth, at the same time

The city of El Paso’s population has seen little growth since 2012, according to Census Bureau estimates. The additional housing construction since then, built mostly at the edges of the city, means that the urban population has been spread over a larger area while holding steady at around 680,000 people.

Balliew said El Paso Water currently has about 199,000 residential customers, and adds up to 3,500 new customers a year. 

He said he disagrees with developers’ concerns that the added water fee may make people less likely to buy a home. He pointed to one of the fastest-growing developments in the county, Paseo de Este, which is in an unincorporated area between El Paso and Horizon City.

That area has a municipal utility district that charges a $60 monthly rate for water hookups, about the same as El Paso Water’s proposed surcharge.

“The growth rate of Paseo del Este is the highest growth rate of any area in town. People deliberately choose to go there. They ignore the fact that they’re going to be paying $60 a month more on their water bill,” Balliew said.

However, Paseo del Este residents don’t pay a municipal property tax. The areas proposed for the sustainable infrastructure surcharge are almost entirely within the El Paso city limits, so homebuyers would have to pay the water fee and city property taxes.

Water and wastewater rates

El Paso Water’s proposed budget presented to the Public Service Board on Tuesday would increase the water bill on a typical residential customer from $66.99 a month to $76.02, a 13.5% increase. That covers fees for water, wastewater and stormwater services.

The increase is driven mostly by capital improvement projects, Balliew said, particularly the update and expansion of the Robert Bustamante Water Treatment Plant in the Lower Valley. That is a $730 million, five-year project.

The rates and other elements in El Paso Water’s proposed fiscal year 2023-24 budget will be discussed at a PSB meeting Dec. 14, then face a final vote Jan. 11.