Latecomer Agreements for Cities, Towns, Counties, and Water-Sewer Districts
2013 Legislative Changes
In 2013, the Legislature passed ESHB 1717, which, among other things, modified chapter 35.91 RCW in several key areas for sewer and water facility latecomer agreements in cities, towns, counties, and drainage districts. These changes to chapter 35.91 RCW took effect on July 1, 2014. However, no corresponding changes have been made to the street latecomer statute (Ch. 35.72 RCW).
What Are They?
Latecomer agreements, also referred to as recovery contracts or reimbursement agreements, allow a property owner who has installed street or utility improvements 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.
- Chapter 35.72 RCW applies to cities, towns, and counties who may contract with owners of real estate for the construction or improvement of street projects.
- Chapter 35.91 RCW applies to "municipalities" (defined as a city, town, county, or drainage district) who must contract with owners of real estate for the construction of water or sewer facilities upon request, if a municipality’s ordinances require the facilities to be improved or constructed as a prerequisite to further property development.
- Chapter 57.22 RCW provides a similar latecomer agreement process for water-sewer districts, who shall contract with owners of real estate located within the district boundaries, at an owner's request, for the purpose of constructing extensions to the district's system.
What They Are Not
Latecomer agreement charges are not to be confused with local improvement district (LID) assessments. While the computation of charges to be recovered under a latecomer agreement can be very similar to that of an LID assessment, the procedures are very different. And, under an LID, the money goes to the municipality for the purposes of paying off the LID bonds rather than to the property owner. In addition, LID assessments apply to all properties within the reimbursement area, whether or not the property is developed. Latecomer assessments, however, are triggered only if a property owner submits an application for a development that would have required similar improvements.
Latecomer agreement charges are also not to be confused with connection fees, also known as facilities charges or system development charges, for utilities under chapter 35.92 RCW (cities and towns) and RCW 57.08.081 (water-sewer districts). These fees or charges are a property owner's equitable share of the cost of the entire utility system and not just for improvements that serve his/her property.
Street Latecomer Agreements Q&A
Street Latecomer Agreements are regulated under chapter 35.72 RCW.
Who can contract? Any city, town, or county may contract with "owners of real estate." They are not required to contract under the statute.
For what? Construction or improvement of street projects that the owners elect to install as a result of ordinances that require the projects as a prerequisite to further property development.
What's included? Street projects subject to reimbursement may include design, grading, paving, installation of curbs, gutters, storm drainage, sidewalks, street lighting, traffic controls, and other similar improvements, as required by the street standards of a city or county.
Where? Inside the municipal corporate boundaries.
Why? To provide for reimbursement, for a period not to exceed 15 years, of a portion of the costs of the project by other property owners who:
- are determined to be within an assessment reimbursement area;
- are determined to have a reimbursement share;
- did not contribute to the original cost of the street project; and
- subsequently develop their property within the 15-year period and at the time of development are not required to install similar street projects because they were already provided by the original developer.
What is the reimbursement amount? The reimbursement is to be a pro rata share of design, construction, and contract administration costs of the street project, determined by a method of cost apportionment based on the benefit to the property owner from the project.
What are the required procedures? In addition to the procedures set out in RCW 35.72.040, summarized below, the courts have held that a prerequisite to the latecomer agreement process is having in place an ordinance that requires the particular street improvements as a condition of property development. Woodcreek Partnerships. v. City of Puyallup, 69 Wn. App. 1 (1993).
With such an ordinance in place, the following statutory procedures must be followed:
- The city, town, or county formulates an assessment reimbursement area based upon a determination of which parcels adjacent to the improvements would require similar street improvements upon development.
- The city, town, or county sends, by certified mail, a preliminary determination of area boundaries and assessments, along with a description of the property owners' rights and options, to property owners within the proposed assessment area. If any property owner requests a hearing in writing within 20 days of the mailing of the preliminary determination, the city or county legislative body must hold a hearing, with notice to all affected property owners. The legislative body's ruling is final.
- The contract must be recorded in the appropriate county auditor's office within 30 days of its final execution.
- The filed contract is binding on property owners within the assessment area who are not party to the contract.
Can a city or county participate in or create a street latecomer agreement, and can it be the sole beneficiary of the reimbursements? Yes. RCW 35.72.050 authorizes a city or county to join in the financing of street improvement projects and to be reimbursed in the same manner as the property owners of real estate who participate in the projects, if the city or county has specified the conditions of its participation in an ordinance. Or, a city, town, or county may create an assessment reimbursement area on its own initiative, without the participation of a private property owner, finance the costs of the street improvements, and become the sole beneficiary of the reimbursements that are contributed. A city or county may be reimbursed only for the costs that benefit that portion of the public who will use the improvements within the assessment reimbursement area. A city, town, or county may not be reimbursed for improvements that benefit the general public.
Can WSDOT participate in or create a street latecomer agreement, and can it be the sole beneficiary of the reimbursements? Yes. RCW 35.72.050 authorizes WSDOT participation in the same manner and subject to the same restrictions as cities, towns, or counties. However, the appropriate city, town, or county is to act as a WSDOT's agent through an interlocal agreement.
Utility Latecomer Agreements Q&A
Utility Latecomer Agreements are regulated under chapter 35.91 RCW and chapter 57.22 RCW.
- "Latecomer fee" means a charge collected by a municipality, whether separately stated or as part of a connection fee for providing access to a municipal system, against a real property owner who connects to or uses a water or sewer facility subject to a contract created under RCW 35.91.020.
- "Municipality" means the governing body of any county, city, town, or drainage district.
- "Water or sewer facilities" means storm, sanitary, or combination sewers, pumping stations, and disposal plants, water mains, hydrants, reservoirs, or appurtenances.
Who must contract? Any municipality under chapter 35.91 RCW for the construction or improvement of water or sewer facilities that the owner elects to install solely at the owner's expense in locations where a municipality's ordinances require the facilities to be improved or constructed as a prerequisite to further property development. RCW 57.22.010 - for water-sewer districts - says that a district shall contract with owners of real estate located within the district boundaries, at an owner's request, for the purpose of permitting extensions to the district's system to be constructed by such owner at such owner's sole cost where such extensions are required as a prerequisite to further property development.
With who? Owners of real estate, upon request. The owner must submit a request for a contract to the municipality or district prior to approval of the water or sewer facility by the municipality/district.
For what? Construction of water and sewer facilities (storm, sanitary, or combination sewers, pumping stations, and disposal plants, water mains, hydrants, reservoirs, or appurtenances). The water-sewer district statute refers to "extension to the system."
Where? For cities and towns, both inside and within 10 miles of the corporate boundaries. For counties, within the county boundaries. For water- sewer districts, within the district boundaries.
What is the recording requirement? The contract must be filed and recorded with the county auditor and must contain conditions required by the municipality in accordance with its adopted policies and standards. [RCW 35.91.020 (1)(a)]
How about comprehensive plans? Unless the municipality provides written notice to the owner of its intent to request a comprehensive plan approval, the owner must request a comprehensive plan approval for a water or sewer facility, if required. In water-sewer districts, a district is to request comprehensive plan approval for an extension to the system, if required.
What conditions must be met? Connection of the water or sewer facility to a municipality’s system must be conditioned upon:
- Construction of the water or sewer facility according to plans and specifications approved by the municipality;
- Inspection and approval of the water or sewer facility by the municipality;
- Transfer to the municipality of the water or sewer facility, without cost to the municipality, upon acceptance by the municipality of the water or sewer facility;
- Full compliance with the owner's obligations under the contract and with the municipality's rules and regulations;
- Provision of sufficient security to the municipality to ensure completion of the water or sewer facility and other performance under the contract;
- Payment by the owner to the municipality of all of the municipality's costs associated with the water or sewer facility including, but not limited to, engineering, legal, and administrative costs; and
- Verification and approval of all contracts and costs related to the water or sewer facility. Cost information must be furnished with 120 days of the completion of a water or sewer facility.
Connection of an extension to a water-sewer district system is conditioned upon:
- Construction of such extension according to plans and specifications approved by the district;
- Inspection and approval of such extension by the district;
- Transfer to the district of such extension without cost to the district upon acceptance by the district of such extension;
- Payment of all required connection charges to the district;
- Full compliance with the owner's obligations under such contract and with the district's rules and regulations;
- Provision of sufficient security to the district to ensure completion of the extension and other performance under the contract;
- Payment by the owner to the district of all of the district's costs associated with such extension including, but not limited to, the district's engineering, legal, and administrative costs; and
- Verification and approval of all contracts and costs related to such extension.
How long is the reimbursement period? For cities, towns, and counties, the period is 20 years, with possible extensions. For water-sewer districts, the period is 15 years. In both instances, extensions of time granted are not to exceed the duration of any moratorium, phasing ordinance, concurrency designation, or other governmental action that prevents making applications for, or the approval of, any new development for a period of six months or more within the benefit area of the system extension.
If a contract is extended, the contract must specify the duration of the contract extension and must be filed and recorded with the county auditor. Property owners who are subject to the reimbursement obligations shall be notified by the contracting municipality or district of the extension filed under this subsection.
Subject to? Reasonable rules and regulations established by a municipality or water-sewer district.
What about the boundary review board? If the extension of water or sewer facilities is outside of the boundaries of a city or town, that extension is subject to potential review by a boundary review board under chapter 36.93 RCW. There is no corresponding provision for counties and water-sewer districts.
How about approval and acceptance? Upon completion of the facilities, the governing body must approve their construction and accept them as facilities of the municipality. There is no similar requirement for water-sewer districts.
What about operation and maintenance costs? If the water or sewer facilities are approved and accepted, the city town, county, or district is responsible for all further maintenance and operation costs.
Can a city, town, county, or district participate in a utility latecomer agreement? Yes, subject to RCW 35.91.020(1)(b):
(b) If authorized by ordinance or contract, a municipality may participate in financing water or sewer facilities development projects authorized and improved or constructed in accordance with (a) of this subsection. Unless otherwise provided by ordinance or contract, municipalities that participate in the financing of water or sewer facilities improved or constructed in accordance with (a) of this subsection:
(i) Have the same rights to reimbursement as owners of real estate who make contributions as authorized under this section; andWater-sewer districts may join in the financing of improvement projects and may be reimbursed in the same manner as the owners of real estate who participate in the projects, if the district board of commissioners has specified the conditions of its participation in a resolution.
(ii) Are entitled to a pro rata share of the reimbursement based on the respective contribution of the owner and the municipality.
Can the city, town, county, or district recover its administrative costs for establishing a contract and administering it? A municipality or district may collect fees that are reasonable and proportionate to the total expenses incurred by the municipality/district in complying.
How is the original property owner reimbursed? RCW 35.91.040 states that nobody can connect to water or sewer facilities under a latecomer agreement during the life of the agreement without first paying to the city, town, or county the amount required by the agreement. Moneys received under a latecomer agreement are to be paid out under the terms of the agreement within 60 days. If connection is made into a contracted water or sewer facility without payment having been made, the city, town, or county may remove the unauthorized connection and all connecting tile or pipe located in the facility right-of-way and dispose of unauthorized material without any liability.
How are the costs due under a utility latecomer agreement determined?
While the latecomer agreement may contain a cost estimate, the actual costs are determined as provided in RCW 35.91.020(8):
Within one hundred twenty days of the completion of a water or sewer facility, the owners of the real estate must submit the total cost of the water or sewer facility to the applicable municipality. This information must be used by the municipality as the basis for determining reimbursements by future users who benefit from the water or sewer facility, but who did not contribute to the original cost of the water or sewer facility.
Does a latecomer agreement need to be recorded? Yes. The agreement must be recorded with the county auditor. RCW 35.91.020; RCW 57.22.040. In addition, a "notice of additional tap or connection charges," that includes a legal description or a map of the affected property, must also be filed with the county auditor. RCW 65.08.170.
Does an owner of real property have an obligation to advise a municipality or district of his/her current address? Yes, both sets of statutes require a contract with an owner to include a provision requiring that every two years from the date the contract is executed a property owner entitled to reimbursement under this section provide the water-sewer district with information regarding the current contract name, address, and telephone number of the person, company, or partnership that originally entered into the contract. If the property owner fails to comply with the notification requirements of this subsection within 60 days of the specified time, then a municipality or district may collect any reimbursement funds owed to the property owner under the contract. Such funds must be deposited in the capital fund of the municipality or water-sewer district.
Combined Street and Utility Latecomer Agreements
In many, if not most, instances, a latecomer agreement in a city, town, or county is sought for both street and water/sewer improvements, as they are constructed together. Several cities, towns, and counties have combined street and utility latecomer agreements into a single ordinance or set of code sections. Since there are differences in required procedures between each set of statutes, any ordinance or code must meet the most requirements of each set of statutes. For example, the street latecomer statutes require a public hearing at the request of an aggrieved property owner, while the utility statutes do not have a specific hearing requirement. Similarly, the recording requirement for a street latecomer agreement is more explicitly stated than for utility agreements. In addition, a street latecomer agreement can extend to 15 years, while a utility latecomer agreement can extend to 20 years.
A combined set of code sections should contain uniform application and processing procedures, uniform (but flexible) requirements for establishing the pro rata share to be reimbursed, uniform hearing requirements, and uniform recording requirements. All these should be based on the more restrictive language in either set of statutes.
Latecomer Code Provisions
Combined Street and Utility Latecomer Agreement Code Provisions
All municipalities must update their combined street and utility latecomer agreement municipal code sections to reflect the 2013 changes in the utility latecomer’s statute, chapter 35.91 RCW. Five key things to look at are:
- Definition of "water and sewer facilities."
- Municipalities are required to honor a request for a utility latecomer agreement, but still have the option not to enter into a street latecomer agreement.
- Street latecomer agreements can be up to 15 years and utility latecomers agreements up to 20 years’ duration (both with possibilities for extension as noted in the statute).
- Conditions to be met by a property owner who wishes to contract with a municipality or district for water or sewer facilities should mimic those stated above under What conditions must be met?
- Use of a public hearing on request provision per chapter 35.72 RCW that applies to both street and utility latecomer agreements.
The following combined code sections are suitable for use under the new statute, albeit with "tweaking" to reflect the 2013 changes:
- Everett Municipal Code Ch. 14.36 - Latecomer Agreements
- Lynnwood Municipal Code Ch. 3.30 - Reimbursement Agreements
- Renton Municipal Code Ch. 9.5 - Latecomer's Agreements
Combined Street and Utility Latecomer Agreements (Pre-2013 – Use with Caution)
Street Latecomer Agreement Code Provisions
- Cheney Municipal Code Ch. 12.22 - Street Improvements-Assessment Reimbursement Area
- Clark County Code Ch. 12.36 - Road Improvement Reimbursement
- Des Moines Municipal Code Ch. 12.44 - Latecomers Agreements
- Puyallup Municipal Code Ch. 11.24 - Latecomer Charges - Contracts for Street Projects
- Vancouver Municipal Code Ch. 11.97 - Street Assessment Reimbursement Agreements
Street Latecomer Agreements
Utility Latecomer Agreement Code Provisions
The following code sections are suitable for use under the new statute, albeit with "tweaking" to reflect the 2013 changes. Key things to look at are:
- Definition of "water and sewer facilities."
- Municipalities are required to honor a request for a utility latecomer agreement.
- Utility latecomer agreements are of 20 years’ duration, with possibilities for extension as noted in the statute.
- Conditions to be met by a property owner who wishes to contract with a municipality for water or sewer facilities should mimic those stated above under What conditions must be met?
- Lake Stevens Municipal Code Ch. 6.24 - Utility Reimbursement Agreements
- Oak Harbor Municipal Code Ch. 18.35 - Water and Sewer Facilities Reimbursement Agreements
- Port Angeles Municipal Code Ch. 13.68 - Developer Reimbursement
- Port Townsend Municipal Code Ch. 13.04 - Latecomer Agreements
- Redmond Municipal Code Ch. 13.12 - Reimbursement Agreements for Utility Improvements
Utility Latecomer Agreements (Pre-2013 – Use with Caution)