Sherman leaders took a step toward approving a new revenue stream this week based on growth within the city.

The City Council received an update this week on proposed impact fees, which would place a one-time fee on future development based on the impact it has on road, water, and wastewater resources.

City officials said that this fee structure, if approved, would take some of the burden for paying for future growth off of taxpayers and put it on the projects and developments that are adding demand on the system.

"Development is already being paid for in the city," City Manager Robby Hefton said. "It is being paid for through water rates, sewers rates or your property tax rates. All we are doing is shifting the burden of that to the people who act actually making the impact."

The topic of impact fees and paying for future development and growth has been a recurring topic for the Sherman City Council, which led the city to hire consultants to study the possibility of fees and draft a potential ordinance adopting them.

Currently, the Council is slated to hold a public hearing and consider adopting said ordinance on Sept. 21.

"In review, where we are at so far, Kimley-Horn (and Associates) has gone over the service areas, land use assumptions and the capital improvement plans and last meeting it was what the maximum fee that could be charged," said Rob Rae, incoming Sherman director of development services.

The fee would apply to future growth and would not affect existing properties. Exemptions are also proposed for reconstruction of a building that has been demolished, public schools and Habitat for Humanity, among others.

In determining the rate, consultants split the city into four service areas for the purposes of determining impact to local roadways. For water and sewer usage, there is only one zone each that covers the whole city.

Under the proposed rate, the impact fee for an average, single-family home would be about $4,300. By comparison, the fee for a multi-family development with 148 units would be about $231,741. A 10,000-square-foot retail strip center would see about $50,432 of fees.

In the majority of these cases, the water fee is the largest portion of the fee, and would represent $2,200 of the $4,300 for a single family home. City leaders attributed this to the recent expansion of Sherman’s water treatment plant. Many other cities, which Sherman compared itself to, do not process their own water and instead purchase it.

Hefton said the fee could generate enough revenue to offset future increases to the city’s water rate, sewer rate and property taxes. If the fees were put in place last year, the city could have generated about $2.68 million in additional revenue. For 2020, the city could have collected $1.7 million to date.

The proposed fees drew a mixed response from the council, ranging from those who feared it would stifle development to those who felt it placed the burden in the right place.

City Council Member Shawn Teamann said he worried about the effect these fees would have on smaller, local developers and builders.

"I would say minimizing that fee as possible, but specifically on our local builders who may not be building as many homes per year as many as these large developers," Teamann said. "They won’t be receiving the same incentives for building roads, and I think it is important to continue to support those guys."

Teamann went on to say that he would like to see economic development agreements formalized that could be offered to incoming development to help offset the impacts of an impact fee. Among the proposals was a economic development agreement offered to all retail who develop in the city.

"I think it is important that we do not put up roadblocks in front of that kind of development," Teamann said. "I would say any free in front of retailers will make it difficult for them to open up and start generating sales tax."

For his part, Hefton cautioned against building in limitations and exceptions into the fee itself as it would be venturing into uncharted territory that no city in Texas that has impact fees has ventured into. Instead, Hefton said economic agreements, including those through the Sherman Economic Development Corp., could be used to assist select, targeted developments.

"if the council has an appetite to minimize the impact on those that aren’t already grandfathered ... then we can come back with recommendations on what that would look like," he said.

Council Member Pam Howeth voiced support for the proposed rates, but added that she would like to see protections aimed at infill development. Howeth noted that many of the developments talking place in her part of town are infill lots in otherwise developed neighborhoods.

:I am seeing a revitalization of southeast Sherman of builders coming in and I want to see that continue," she said.