New homes, such as this development, called Tangerine Terrace, may become more expensive if Oro Valley approves pricier water-connection fees.

Jim Davis / Arizona Daily Star

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Oro Valley's Town Council will hold public hearings Wednesday night on its plans to dramatically increase the town's water-connection fees — one fee by as much as 26 times its current cost.

Increasing those fees will make it more expensive to build a new home or business within the town — a factor that some say could hinder residential and commercial development, but others say is necessary to support the town's existing and future water needs.

The public hearings will be on two separate water-connection fees — the Potable Water System and Alternative Water Resources development impact fees — that the council will consider adopting June 20. If adopted, the fees would go into effect Sept. 19.

The Alternative Water Resources Development Impact Fee, which will pay to bring Central Arizona Project water to Oro Valley, is the most controversial of the two because of how much it would increase.

If approved as proposed, it would go up from $300 to $4,982 for the most common residential connection and from $2,400 to $63,760 for a 2-inch commercial meter — a common size for Oro Valley businesses.

An increase of that size could significantly impact development in Oro Valley by pushing builders to other areas such as Marana, unincorporated Pima County or Pinal County, said Marshall Vest, an economist at the University of Arizona's Eller School of Management.

Impact fees make a huge difference because they differ between jurisdictions, he said.

The council can choose to adopt less expensive fees or phase in the increase over the next few years, among other options.

But the proposed amounts are the best options from the Oro Valley Water Utility's overall perspective, said Philip Saletta, the utility's director.

Representatives from stakeholder groups — such as the Southern Arizona Home Builders Association and Metropolitan Pima Alliance — spoke at a March meeting against raising the fees. SAHBA's government liaison, Alex Jácome, said the increased fees would stop construction.

Since then, Oro Valley Water Utility employees have had numerous meetings with stakeholder groups, residential and commercial developers, Saletta said.

One suggestion made is to phase in the increase in three stages: to $2,061 this year, $3,621 in 2008 and $5,182 in 2009.

The phase-in option would benefit people who are building in the town within the next two years, but not those building later on, Saletta said.

"Developers who are ready now won't have to pay as much. The downside is that developers in the future will have to pay more to compensate for lost revenues," he said.

The council could also choose to lower the fee but raise the town's Groundwater Preservation Fee, which existing customers pay to bring renewable water to Oro Valley.

"There's always a trade-off," Vest said. "With every proposal there are winners and losers."

Saletta will say how much the Groundwater Preservation Fee would have to increase to offset the difference at Wednesday night's meeting. He presented draft figures at a May 21 study session that suggested increasing the fee by 35 cents if the development impact fee were lowered by $500.