Incentivizing water-efficient growth in Austin

This report examines water impact fees as a financial tool for incentivizing water-efficient growth for the purpose of determining whether this strategy represents a cost-effective solution for the City of Austin.

Currently, the City of Austin in the initial stages of developing its first long-range integrated water resource plan. As part of the planning process, the city will be projecting municipal demands and identifying future needs over a 100-year time horizon. To achieve the plan’s vision for a water resilient future, water conservation and demand-side management will play an integral part in the city’s holistic approach. Planning for the future, however, involves many uncertainties—future demand, population growth, drought conditions, etc. To tackle these complex issues, it is critical for the city to explore a diverse portfolio of options for reducing future water demands. Aside from more traditional policy mechanisms for promoting conservation, what additional strategies can the city pursue? To address this question, this report evaluates the potential for designing water impact fees to encourage water-efficient growth in new development.

As part of this analysis, this report evaluates the political, legal, and financial feasibility of implementing conservation-based impact fee structures. To begin, the report provides an overview of Austin’s prior efforts to promote water conservation and how these accomplishments have positioned the city to develop its first IWRP. Next, the rules and procedures dictating how cities in Texas calculate impact fees as well as typical fee structures are discussed. The third section evaluates Austin’s current and projected water use patterns to help identify specific strategies the city can use to incentivize water efficiency in new development. A financial analysis of these strategies is then provided to illustrate how the city could implement a conservation-driven impact fee structure and what the cost-effectiveness of doing so would be. The report concludes by offering recommendations on how the City of Austin can incorporate this strategy into its comprehensive water management plan.