Utility Latecomer Agreements – Legislature Gives Municipalities an Alternative

The 2015 Legislature enacted legislation (SSB 5795) providing municipalities (defined for this purpose as cities, towns, counties, and drainage districts) the authority to initiate an assessment reimbursement area to finance all the costs of a water or sewer improvement and to become the sole beneficiary of the reimbursements. This is an alternative process to that in RCW 35.91.020 for entering into water and sewer latecomer agreements. SSB 5795 is effective on July 24, 2015.

Latecomer agreements, also referred to as recovery contracts or reimbursement agreements, allow a property owner who has installed utility or street improvements (see chapter 35.72 RCW regarding street latecomer agreements) to recover a portion of the costs of those improvements from other property owners who later develop property in the vicinity and use the improvements. Prior to the passage of SSB 5795, cities, towns, and counties could initiate and become the sole beneficiaries only of street or road latecomer agreements (see RCW 35.72.050), although they, and drainage districts, have been able since 2009 to participate in the financing of utility latecomer agreements. (Water-sewer districts have separate authority in chapter 57.22 RCW for latecomer agreements, including for district participation in those agreements.)

Under the new legislation, municipalities - on their own initiative and without the participation of private property owners - may establish “assessment reimbursement areas” where ordinances require the construction or improvement of water or sewer facilities before further development of property. The boundaries of an assessment reimbursement area must be based upon a determination of which parcels in the proposed area would be required to construct or improve of water or sewer facilities upon development or redevelopment, or would be allowed to connect to or use those facilities.

The legislation specifies the notice that must be provided to property owners within the proposed reimbursement area and provides that, upon the request of an owner, the municipality must hold a public hearing on the preliminary determination of the assessment reimbursement area and assessments.

A municipality may be reimbursed only for the costs associated with construction or improvements of water or sewer facilities that benefit property within the assessment reimbursement area that will connect to or use those facilities. The amount of the reimbursement may be no greater than the property owner’s pro rata share of the cost of the construction or improvement and is to be paid when the property owner is required to connect or requests connection to the new or improved facilities. Associated legal and administrative costs are not reimbursable, nor are the costs for the portion of the construction or improvements that benefit the general public.

For a more detailed summary of this legislation, see the Final Bill Report, and for information on latecomer agreements, visit MRSC’s Latecomer Agreements page and the February 2014 MRSC Insight post, Utility Latecomer Agreement Statutes Change on July 1, 2014.

Image courtesy of Chris Schrier.