Fernandina Beach has repaid about $732,000 in water and sewer impact fees to developers, construction companies and others after the city’s attorney discovered that the city did not properly follow a state law that requires notifying the public of plans to increase the fees.

A 2006 state law requires that plans for the increases, which began in 2009 and continued into this year, should have been published 90 days before the City Commission considered acting.

Other public notices also were required and were published, a practice which usually involves an advertisement in the local newspaper, City Attorney Tammi Bach said.

About 330 accounts involving about 100 customers were reimbursed, she said.

Such utility impact fees are usually collected to offset infrastructure improvements created by development.

In 2009 the city increased the water impact fees charged to property owners from $1,500 to $1,931 when they applied for a building permit, Back said.

That refund amounted to $155,000 including interest, records show. Bach said the sewer impact fees went from $1,385 to $3,603, leading to a refund of $577,000 including interest, records show.

Bach said the money will come from a water and sewer reserve account, one of several reserve accounts built up for emergencies and other unanticipated expenses.

While much of that money is set aside for such expenses, some is transferred once a year into the general fund for other uses.

Bach said the refunded money was not designated for any specific projects. About $1.6 million remains in the separate water and sewer reserve accounts.

Bach said she discovered the oversight while doing research for a pending 2011 class-action lawsuit involving hundreds of property owners claiming the current collection of impact fees is improper and unfair. The plaintiffs allege the city overpaid when buying its water utility from Florida Public Utilities in 2003 and imposed impact fees on new customers or new services to generate the money to make the payment.

The city, countering that the claim is without merit, is appealing a judge’s recent ruling certifying the class and allowing the lawsuit to move forward.

Bach’s research also included preparations to repay bonds used for improvements to the city’s water system. Impact fees are one source of revenue used to repay those bonds.

Bach said that it is unclear how the oversight occurred or who is responsible. The city attorney, the utility department, the finance department and city clerk are involved in the design and publishing of public notices.

The city commission voted 5-0 this month to repeal the ordinance imposing the impact fee increases and to make the refunds,

Bach said city officials agreed to the refund out of fairness to the payees after the oversight was discovered.

“We felt it was good public policy,” Bach said. “We thought it was the right thing to do.”

Commissioner Ed Boner, who took office in 2012, agreed with Bach and said he didn’t feel that the oversight embarrassed the city.

“I never feel embarrassed by anything we’ve done if I’m taking the corrective action at that time to make it right,” Boner said.

Jim Schoettler: (904) 359-4385