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HomeMy WebLinkAbout2026.01.20 Council Mtg Handout from Davis Wright Tremaine LLP�� Davis Wright J Tremaine Ll_P January 15, 2026 VIA US MAIL & EMAIL Pasco City Council 525 N. 3rd Avenue, 3rd Floor Pasco, WA 99301 Email: ci clerkgpasco-wa.gov Suite 3300 920 Fifth Avenue Seattle, WA 98104-1610 Clayton Graham 206-757-8052 tel 206-757-7052fax claytongraham@dwt.com Re: Public Comments on Proposed Sewer and Water Connection Charge Increases Dear Councilmembers: Thank you for the opportunity to comment on the City's proposal to increase sewer and water connection fees. This firm represents Road 68 LLC ("Road 68"), which owns property located near the intersection of Road 68 and Burns Road, associated with Tax Parcel No. 116150072 (the "Road 68 Property"). Last year, Road 68 received City preliminary plat approval for subdivision of the Road 68 Property into 140 residential lots, known as the Three Rivers Ranch Subdivision (referred to herein as "Three Rivers Ranch"). See Hearing Examiner Decision PP2025-002, dated May 27, 2025. As such, Three Rivers Ranch will be subject to the City's sewer and water connection fee regime. We write to ask the City to clarify that the proposed connection fee regime will not retroactively apply to proiects that have already secured preliminary plat approval. Based on the City's public discussions regarding a phase -in of the new connection fee regime, we believe this aligns with the City's current proposal. However, we ask the City make the phase in explicit to avoid ambiguity and potential legal infirmities. We understand that a major driver of the proposed fee increases is the need for capital investments to replace aging and obsolete infrastructure such as the Butterfield Water Treatment Plant, which are expected to occur over the next ten years. See City Manager Agenda Report dated October 3, 2025. Three Rivers Ranch will be constructed and operational well before completion of the replacement facilities —perhaps even before any work commences on these capacity - expanding projects. Imposing connection fees intended to recoup the cost of facilities not yet constructed that will not benefit Three Rivers Ranch and other approved projects would be inappropriate and would likely violate existing laws relating to the financing of utility systems. As you know, the City's ability to charge connection fees is constrained by state law — primarily RCW 35.92.025 (referred to here as the "Connection Fee Statute"), which requires DWT.COM 4910-8620-1990v.7 0117972-000002 Pasco City Council January 15, 2026 Page 2 connection fees to reflect an equitable share of system costs; and RCW 82.02.020, which prohibits fees exceeding the proportionate share of capital costs attributable to new development. Case law interpreting the Connection Fee Statute confirms that this law allows connection fees based on the construction cost of the system serving the development (in this case, the existing system), not replacement costs of those systems. See, e.g., Boe v. City of Seattle, 66 Wn.2d 152 (1965). The Connection Fee Statute generally mandates that the legislative body (the City Council here) set connection charges under which owners "bear their equitable share of the cost of [the] system" their development is connecting to. See RCW 35.92.025. Charging developers for the cost of future replacements to a system, as opposed to the value of the existing system they're connecting to, is inequitable and unsupported by the Connection Fee Statute. Additionally, RCW 82.02.020 generally prohibits local governments from charging development to address impacts unrelated to that specific development. Under this law, the City bears the burden of establishing that any covered fee is "reasonably necessary as a direct result" of the development. See, e.g., Home Builders Assn of Kitsap County v. City of Bainbridge Island, 137 Wash. App. 338, 351 (2007) (holding that "the burden is on the City to show that the fees it imposes are fully within the statutory exceptions [of RCW 82.02.020] and are reasonable ..."). Relatedly, the Unconstitutional Conditions Doctrine arising under the Fifth and Fourteenth Amendments of the United States Constitution has been definitively extended to development fees in the recent US Supreme Court decision in Sheetz v. County of El Dorado. See, 601 U.S. 276, 280 (2024). So these charges must satisfy the "essential nexus" and "rough proportionality" tests set forth in the related precedents of Nollan v. California Coastal Commission and Dolan v. City of Tigard. As with RCW 82.02.020, the Unconstitutional Conditions Doctrine requires cities to ensure that these charges are proportional to the impacts that will be directly caused by new development. Applying the new fees needed for replacement of existing infrastructure to already approved projects would appear to violate these requirements. To avoid these legal infirmities and associated policy concerns, we ask the City to include the following or similar language in its ordinance imposing the new fee regime: "Any development project that has received preliminary plat approval prior to the effective date of this Ordinance shall be subject to the water and sanitary sewer connection fees in effect as of the date of this Ordinance, prior to the Ordinance's effect." To be sure, the proposed exemption would apply to a very limited set of development projects. Under state and local law, a subdivision must generally be brought to final plat within five years of preliminary plat approval to maintain statutory vesting to the law in place as of the date of preliminary plat approval. RCW 58.17.140; PMC 21.30.010(l). Therefore, in practice, only projects built within the next five years —well in advance of completion of the proposed replacement facilities —would benefit from the phase -in proposed here. Any projects that will benefit from the new capital investments (i.e., those not yet approved) would and likely should be 4910-8620-1990v.7 0117972-000002 Pasco City Council January 15, 2026 Page 3 charged under the new fee regime, so long as such fees comply with the above -cited law and the City's local policies, including its Capital Facilities Plan and Comprehensive Plan. To be clear, our client fully supports responsible, transparent cost recovery to maintain the City's utility systems. As such, in adopting the new connection fees, we urge the City to clarify their inapplicability to already approved projects. Thank you for your attention to this matter. Very truly yours, Davis Wright Tremaine LLP Clayton Graham cc: Daniel Kenny, Pasco City Attorney (dpkenny_(a)omwlaw.com) Megan Raymond, DWT (meganra mondgdwt.com) Road 68, LLC 4910-8620-1990v.7 0117972-000002