When new development increases water use, the City Council wants small projects to pay for the cost (literally, with cash) and large projects to offset their use with water reductions in other locations.

Council discussed a new water neutrality proposal last week and directed staff to pursue a hybrid approach that will balance the need for water savings with a desire to protect residential development.

New construction is currently subject to a pair of potential fees. The Water Demand Mitigation fee is a one time fee designed to mitigate the increase in water use during a water shortage. The fee is set at $3 per gallon and remains in place at its 1991 level. New development also pays a fee to connect to the existing system.

Staff said the current fees significantly undervalue the cost of mitigating water use. Dean Kubani, director of Santa Monica’s Office of Sustainability and the Environment, said his staff had looked at several recent projects and his ball-park estimate was that it cost about $110 per gallon to actually offset use.

Under the neutrality rules any construction that increases water use on a site will be required to mitigate the difference between the amounts used prior to the project and the use of the new project. Staff presented council with a pair of possible options including direct offsets or in-lieu fees.

Under a direct offset program, developers would have to reduce water use by the exact amount they propose to use. That would be accomplished by identifying opportunities to make existing buildings more efficient. For example, a development downtown might pay to install new toilets and showerheads in an apartment building on Pico. Staff said direct offsets are the best way to ensure 100 percent of water use is accounted for but could prove burdensome to small projects such as a single-family home remodel.

The second option would have required developers to pay a fee to the City. That money would then be applied to water saving projects as needed. In-Lieu fees would be less connected to the projects but would be an easier requirement for developers of all sizes.

Several speakers addressed the council, arguing against the neutrality rules.

John Zinner owns a consulting company specializing in sustainable development and said water neutrality rules would impact already sustainable projects.

“I think it’s a bit ironic that these fees would be placed on what are going to be the most water efficient projects in the city’s history,” he said.

According to Zinner, the rules could have unintended consequences such as discouraging housing or hotel development due to the relatively high water needs compared to other uses.

Council asked staff to explore a system that would mandate offsets by large projects but allow small projects the option of paying a fee. Council said the offset system should be managed by the city or an independent third part vendor, but could offer some kind of exemption for affordable housing.

Councilman Terry O’Day said the rules should acknowledge the value of residential development.

“It is in the context of the fact that the state’s population is growing,” he said. “People have to live somewhere and the likelihood of them living in a multifamily building in Santa Monica implies an already significantly lower water consumption than an Inland Empire single-family home with the lawn.”

He said Santa Monica wanted to make it more appealing to adopt a low water lifestyle.

“We want to encourage people to adopt that urban form of living and use less water in doing so and not penalize it,” he said.

Council’s action Tuesday night was limited to providing direction to staff. Kubani said his office will continue to refine the proposal and the item will return to council at a future meeting before any formal action is taken.

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