Proposed increases in water impact fees are going back to the Kalispell City Council for consideration after a second look by the city’s impact fee advisory committee.

Much larger proposed increases in sewer impact fees remain mired in review as they have for years.

After some debate about what level of growth is realistic to expect and healthy for the city, committee members on Tuesday signaled agreement with a 2 percent annual growth rate projection being used in the water impact fee calculation.

The growth rate can play a key role in the calculation, with the cost of growth-related infrastructure improvements divided among the number of new customers who are expected to materialize.

The proposed 2 percent growth rate was called into question by some committee members and the City Council.

Kalispell Planning Director Tom Jentz said a 1 to 2 percent growth rate is considered healthy and is about what he expects to see over the next two decades. Two percent growth means about 200 new houses built each year and growing any faster than that challenges the rest of the city’s ability to keep up, he said.

The decision to accept the figure was not unanimous.

It was opposed by committee members Chad Graham and Jason Mueller, both of whom are running for the City Council this fall and pushed for a higher growth rate.

The proposal on the table would increase Kalispell’s minimum water impact fee from $2,213 to $2,567. That’s the connection charge for a 3/4-inch water line. Fees are significantly higher for projects with larger or more water connections.

Kalispell’s water, sanitary sewer and stormwater impact fees have not been adjusted in more than five years, despite Montana law directing cities to review and update their impact fees every two years.

Police and fire impact fees last adjusted in 2010 also are coming due for review.

As set, impact fees total $6,357 for construction of a typical single-family home in Kalispell.

IMPACT FEE advisory committee members tabled their search for alternative funding methods for impact fees.

The one-time charges, imposed on development projects that create new service demand, raise money to pay for capital improvements that become needed as the city grows.

Two alternative funding methods have been proposed in recent months.

Similar ideas pitched by council member Phil Guiffrida III and Graham, the impact fee committee chairman, would set aside some portion of the property taxes paid by new growth for five to 10 years for capital improvements. That approach could help keep impact fees lower to encourage development and still leave the city with money for needed projects, they have said.

Jeff Zauner, a member of the City Council and the impact fee advisory committee, on Tuesday said the ideas have merit but need to be explored in more detail before they are formally recommended to the council.

Zauner also noted that it’s a budgeting maneuver. It would not create new tax revenues for the city but instead divert tax money from the city’s general fund where it would otherwise help pay for things such as police, fire and parks services.

“I think before this is publicly presented it needs to be vetted,” he said.

IN MONTHS to come, impact fee advisory committee members will continue reviewing a proposed increase in the city’s sanitary sewer impact fee. The proposal being considered would boost the minimum fee from $2,499 to $4,257 — a large spike in development costs some committee members have refused to support.

Committee members learned on Tuesday that one thing driving the increase is a difference in how the fee is calculated.

When the fee was reviewed and adjusted in 2006, city officials planned to undertake a four-phase, $24 million wastewater treatment plant expansion.

To calculate the impact fee, they divided that cost among all of the city’s existing sewer customers and the number of new sewer customers projected to materialize, essentially creating an artificially low sewer impact fee, Public Works Director Susie Turner said.

Kalispell completed two-plus phases of the expansion for $22 million in 2009, boosting treatment capacity from three million gallons to more than five million gallons per day.

Nearly 80 percent of the project cost can be attributed to increasing capacity to accommodate new growth, so city officials are splitting that portion of the project out and dividing it among only the 8,850 new sewer customers it can serve to calculate the impact fee.

Kalispell pays roughly $1 million a year in debt service for the expansion project.

With the artificially low impact fee and a slow economy with few development projects paying impact fees, the fees are paying for less than a quarter of that debt service payment each year. That has left the city’s existing sewer customers to pick up the slack through rates that normally pay only for system maintenance and operation.

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.