HomeMy WebLinkAbout08-20-2013 ph1 water & wastewater dev impact fees
FROM: Carrie Mattingly, Utilities Director
Prepared By: Wade Horton, Water Division Manager
David Hix, Wastewater Division Manager
Jennifer Metz, Utilities Project Manager
Ron Munds, Conservation Manager
SUBJECT: UPDATE OF THE CITY’S WATER AND WASTEWATER DEVELOPMENT
IMPACT FEES
RECOMMENDATION
Adopt a resolution amending the water and wastewater development impact fees retroactively
effective to July 1, 2013.
REPORT IN BRIEF
Water and wastewater city-wide development impact fees (impact fees) are decreasing based on
demographic, population, and policy changes that have taken place since the last impact fee update
in 2004. Water is decreasing 38 percent per equivalent dwelling unit (EDU) and wastewater is
decreasing 11.3 percent per EDU. Per the 2004 Wastewater Development Impact Fee Study, “add-
on” fees were attributed to each of the City’s planning areas served by particular wastewater
facilities. In this study, the planning areas are assigned to the catchment area served by a sewer lift
station in order to better align the costs and nexus for the impact fee as required by state law. In
general, the catchment area fees are increasing while the city-wide fees are decreasing resulting in a
net decrease in the total fee. The proposed impact fees are shown in Attachment 1, Exhibits A and B
to this report.
Water and wastewater impact fees are developed under the guidelines of Assembly Bill (AB) 1600,
which requires a nexus between fees imposed, the use of the impact fees, and the development
projects on which the fees are imposed. The 2013 City of San Luis Obispo Water and Wastewater
Development Impact Fee Study (2013 Study) complies with the guidelines set forth in AB 1600,
codified in Section 66000 et seq. (GC § 66000) of the California Government Code.
The City conducted previous impact fee studies in compliance with City ordinance numbers 1200
and 1256, adopted on September 3, 1991 and April 5, 1994, respectively, for the purpose of
mitigating the impact of future development on the City’s water and wastewater facilities. The
current water and wastewater impact fee program was adopted in 2004 and accounted for known
changes in facilities, estimated costs for water supply, and wastewater collection improvements.
The 2013 Study incorporates current information for population estimates, demographics, project
costs, and General Plan Water and Wastewater Management Element (2010) policies. Moreover,
the study is consistent with the City’s General Plan (Land Use Element, Policy 1.13 cost of Growth
which asserts that new development shall pay its costs of new public facilities and services needed
to serve that new development.
Meeting Date
Item Number August 20, 2013
PH1 - 1
Update of the City’s Water and Wastewater Development Impact Fees Page 2
THIS PAGE INTENTIONALLY LEFT BLANK
PH1 - 2
Update of the City’s Water and Wastewater Development Impact Fees Page 3
DISCUSSION
Background
Water and wastewater impact fees are developed under the guidelines of AB 1600, which requires a
nexus between fees (and their use) and the impact created by the development on which the fees are
imposed. The 2013 Study complies with the guidelines set forth in AB 1600, codified in
Government Code § 66000. Enacted by the State in 1987, this code outlines the nexus requirements
for AB 1600-compliant impact fee studies. To impose an impact fee as a condition for a
development project, a public agency must do the following:
• Identify the purpose of the impact fee,
• Identify the use to which the impact fee is to be applied (if the use is financing public
facilities, the facilities must be identified),
• Determine the reasonable relationship between the impact fee’s use and the type of
development project on which the impact fee is imposed,
• Determine the reasonable relationship between the need for a public facility and the
type of development project on which the impact fee is being imposed, and
• Determine the reasonable relationship between the amount of the impact fee and the
cost of the public facility attributed to the development on which the impact fee is
imposed.
The proposed impact fees are based on future growth under the City’s General Plan used in
conjunction with capital improvement planning to ensure adequate water supply, water treatment
capacity, wastewater collection infrastructure (lift stations), and wastewater treatment capacity. The
methodology used to calculate the impact fees considers the cost of the facility and the location,
types, and size of anticipated development. Impact fees are used to finance improvements to the
benefit of future development.
The City’s General Plan (Land Use Element, Policy 1.13 Costs of Growth) states:
The costs of public facilities and services needed for new development shall be borne by the
new development, unless the community chooses to help pay the costs for a certain
development to obtain community-wide benefits. The City will adopt a development-fee
program and other appropriate financing measures, so that new development pays its share
of the costs of new services and facilities needed to serve it.
The City conducted previous impact fee studies in compliance with City ordinance numbers 1200
and 1256, adopted on September 3, 1991 and April 5, 1994, respectively, for the purpose of
mitigating the impact of future development on the City’s water and wastewater facilities. In 2004,
the City adopted the current impact fee program which accounted for known changes in facilities,
estimated costs for water supply, and wastewater collection improvements at that time.
The 2013 Study was prepared by Utilities Department staff and uses current information available
for population estimates, demographics, project costs, and the application of water and wastewater
policy found in the 2010 Water and Wastewater Management Element. Third party review of the
staff-prepared study was performed by HDR Engineering, the consultant who conducted the
Council’s 2012 Water Rate Structure Study. HDR issued a technical memorandum (Attachment 2)
wherein it states ”the City has used an appropriate methodology to determine the Development
Impact Fees for the water and sewer utilities” and meets the legal requirements of state law.
PH1 - 3
Update of the City’s Water and Wastewater Development Impact Fees Page 4
The following changes have occurred since the adoption of the current fees in 2004.
Changes Influencing the Water Impact Fee:
• Applied policies from the General Plan, Water and Wastewater Management Element
(2010).
• Updated water demand and factors used to project future water demand.
• Updated City demographics from the 2010 Census the General Plan’s Housing Element
(2010).
• Updated water supply capital costs.
• Eliminated the Water Area-Specific add-on fee for the Airport and Margarita Areas.
Changes Influencing the Wastewater Impact Fee:
• Updated existing and projected wastewater generation rates.
• Updated wastewater capital facility costs from the 2013-15 Financial Plan, the 2011
Water Reclamation Facility Master Plan, and City project financing resources.
• Changed from “Area Specific Add-On” fees to “Catchment Area” fees for specific
wastewater lift station facilities.
• Eliminated the 3.5 percent adjustment in the citywide non-residential fee related to
higher wastewater discharge strengths.
Changes to Water and Wastewater Impact Fees:
• Inclusion of a new fee class for secondary dwelling units (studio units less than 450 square
feet) that is 30 percent of one equivalent dwelling unit. This unit type was previously
charged the fee for a multi-family residential unit (70 percent of one equivalent dwelling
unit).
• Decrease of multi-family unit development impact fee from 80 to 70 percent of one
equivalent dwelling unit.
• Updated EDU projections for future residential and non-residential development
including updated water meter size equivalency factors with American Water Works
Association standards.
Affordable Housing Incentives - Waiving Impact Fees
The City has adopted policies to provide financial incentives for those developments that provide
affordable housing beyond their inclusionary requirement. These incentives have taken the form of
impact fee waivers in order to lower the permit cost of providing deed-restricted affordable units for
the benefit of the community. In 2000, the Council adopted Resolution 9131 that waived city-wide
development impact fees with the finding that reducing the cost of public facilities and
infrastructure may help encourage the production of even more affordable housing units. In 2007,
the Council adopted an amended resolution that clarified that impact fee waivers were also available
for units built by the Housing Authority and for affordable units provided voluntarily in
developments where inclusionary requirements did not apply.
In a recent review of legislation, staff determined that impact fees are intended to capture the actual
cost of providing services and distribute those costs fairly and proportionally to those uses that
require the services. Affordable units create the same impacts as market rate units and therefore any
PH1 - 4
Update of the City’s Water and Wastewater Development Impact Fees Page 5
impact fee waivers granted must be reimbursed to those accounts to comply with the legislation.
The City has temporarily suspended the granting of new impact fee waivers for affordable housing
because a funding source to reimburse the impact fee accounts has not been identified. Staff will
return at a future date with alternatives for Council consideration to address options for affordable
housing incentives. It should be noted that this determination has not impacted affordable housing
projects in process. The sole affordable housing development in process (ROEM) has requested that
impact fees be loaned instead of waived. This approach assists the project in competing for state tax
credit financing while also meeting the City’s need to comply with legislation.
The 2013 Study assumes that the City would collect development impact fees for all future
residential units consistent with current practice.
Comparison of Current and Proposed Citywide Impact Fees
The proposed City-wide impact fees, and the net fee change, are shown in Tables 1 and 2.
Table 1: Citywide Water Impact Fee Comparison
Current Water
Impact Fee
Proposed Water
Impact Fee
Net Fee
Change % Change
Residential Uses
Single-family Unit $17,383 $10,775 -$6,608 -38.0%
Multi-family Unit $13,906 $7,542 -$6,364 -46.8%
Mobile Home $12,168 $6,465 -$5,703 -46.9%
Studio Unit, 450 square feet or
less $13,906 $3,232 -$10,674 -76.8%
Non-Residential Uses
¾ inch Water Meter $17,383 $10,775 -$6,608 -38.0%
1 inch Water Meter $34,766 $18,317 -$16,449 -47.3%
1.5 inch Water Meter $69,532 $36,633 -$32,899 -47.3%
2 inch Water Meter $111,251 $58,182 -$53,069 -47.7%
3 inch Water Meter $243,362 $115,287 -$128,075 -52.6%
4 inch Water Meter $382,426 $179,934 -$202,492 -52.9%
6 inch Water Meter $782,235 $359,869 -$422,366 -54.0%
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Single Family Studio 1 inch Meter 2 inch Meter
Current Water Impact Fee
Proposed Water Impact Fee
PH1 - 5
Update of the City’s Water and Wastewater Development Impact Fees Page 6
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Single
Family
Studio 1 inch
Meter
2 inch
Meter
Current Wastewater Impact Fee
Proposed Wastewater Impact Fee
Table 2: Citywide Wastewater Impact Fee Comparison
Current Wastewater
Impact Fee
Proposed Wastewater
Impact Fee
Net Fee
Change
%
Change
Residential Uses
Single-family Unit $4,203 $3,729 -$474 -11.3%
Multi-family Unit $3,362 $2,610 -$752 -22.4%
Mobile Home $2,942 $2,237 -$705 -24.0%
Studio Unit, 450 square feet or less $3,362 $1,119 -$2,243 -66.7%
Non-Residential Uses
¾ inch Water Meter $4,349 $ 3,729 -$620 -14.3%
1 inch Water Meter $8,698 $ 6,339 -$2,359 -27.1%
1.5 inch Water Meter $17,396 $12,678 -$4,718 -27.1%
2 inch Water Meter $27,834 $20,135 -$7,699 -27.7%
3 inch Water Meter $60,886 $39,897 -$20,989 -34.5%
4 inch Water Meter $95,678 $62,274 -$33,404 -34.9%
6 inch Water Meter $195,705 $124,540 -$71,165 -36.4%
“Area Specific Add-On” fees to “Catchment Area” fees
In the 2004 Wastewater Development Impact Fee Study, “add-on” fees were attributed to each of
the City’s planning areas served by particular wastewater facilities. In this study, the planning areas
are assigned more specifically to the catchment area served by lift station in order to better align the
estimated costs and nexus for the impact fee as required by state law. Table 3 summarizes the
changes in cost and the new alignment for the various catchment areas.
PH1 - 6
Update of the City’s Water and Wastewater Development Impact Fees Page 7
Table 3: Wastewater Catchment Area
Impact Fee Comparison
Area Specific “Add-On” Current Wastewater
Impact Fee
Proposed Wastewater
Impact Fee
Net Fee
Change % Change
Airport $1,853 $3,630 (now Tank Farm) +$1,777 +95.9%
Margarita* $1,853
$2,745 (now Margarita)
$1,356 (now Silver City)
$3,630 (now Tank Farm)
+$892
-$497
+$1,777
+48.1%
-26.8%
+95.9%
Dalidio $271 $ 490 (now Laguna) +$219 +80.8%
Madonna $271 $ 490 (now Laguna) +$219 +80.8%
McBride $271 $1,829 (now Calle
Joaquin) +$ 1,558 +574.9%
Irish Hills $477 $1,829 (now Calle
Joaquin) +$1,352 +283.4%
Orcutt $3,383 $3,630 (now Tank Farm) +$247 +7.3%
*NOTE: Portions of the Margarita Planning Area flow to the Margarita, Silver City, and Tank Farm catchment areas.
Retroactive Application of the Water and Wastewater Development Impact Fees
Staff recommends the proposed impact fees be retroactively applied to projects that paid fees on or
after July 1, 2013 (these are paid at time of permit issuance) and to “pipeline” projects that were
provided fee estimates and locked into fees as part of their planning application but have not yet
paid the fees. Should Council approve impact fees retroactive to July 1, 2013, staff will
automatically process refunds to all project owners that fall into this time period. In the case of
“pipeline” projects, staff will amend the water and wastewater fee estimates to reflect the new fees
which will make the transition seamless to these projects. The recommendation is based on the
consideration that combined impact fee costs will decrease, impacting building applicants that paid
current fees this fiscal year. In fairness, staff believes that retroactively applying the fees to July 1,
2013 is a reasonable date for implementation of the proposed impact fee schedule.
Future Fee Updates
While development impact fees are one means of ensuring new development pays its fair share of
public facilities and services, for water and wastewater infrastructure, capacity and connection fees
may be a better means of capturing costs for the water and sewer funds. As recommended in HDR
Engineering’s technical memorandum (Attachment 2), it is the Utilities Department’s intent to
consider capacity and connection fees (as opposed to development impact fees) in its next fee
update, anticipated in 2016. It is likely that this effort (transition to capacity and connection fees)
will result in increased total water and wastewater fees for new development as it will take into
consideration the City’s capital investment in its collection and distribution pipeline infrastructure
(as well as other components) which has historically not been included in the development impact
fee.
Environmental Review
Modification of rates and charges by public agencies is statutorily exempt from the California
Environmental Quality Act (CEQA) under Section 15273 of the Public Resources Code because the
change in fees is not intended to fund expansion of capital projects not otherwise evaluated under
CEQA. Both Wastewater and Water Treatment Master Plans were evaluated for their respective
impacts to the environment and this action to adjust fees merely provides a more equitable
distribution of costs associated with envisioned infrastructure.
PH1 - 7
Update of the City’s Water and Wastewater Development Impact Fees Page 8
CONCURRENCES
As the results of the 2013 Study support the goals and policies found in the City’s General Plan, the
Community Development Department concurs with the recommendation.
FISCAL IMPACT
If the City Council chooses to retroactively apply the proposed water and wastewater impact fees
back to July 1, 2013, as of August 2, 2013, the total credit to all building applicants who have paid
fees since July 1, 2013, including add-on fees, would be as follows:
Water Wastewater
Credit Total $94,653 $11,310
Projected impact fee revenue identified in the 2013-2015 Financial Plan was conservatively
estimated in both funds. Therefore a negative fiscal impact associated with taking this action should
not occur.
ALTERNATIVES
1. Do not retroactively apply the proposed water and wastewater development impact fees to
July 1, 2013. The Council could decide that the impact fees be applied following adoption,
which is normal practice when adopting fees. In fairness, because overall fees are going down,
staff believes that retroactively applying the fees to July 1, 2013 is a reasonable date for
implementation of the proposed impact fee schedule. The standard practice is to prospectively
apply the proposed fee schedule.
2. Retroactively apply the proposed water and wastewater development impact fees to a
different date. Council could decide to retroactively apply the fees to some date other than July
1, 2013. Council should only choose this option if it feels there is some overriding reason to use
some other date other than July 1, 2013. Staff recommends that the Council continue this item if
this alternative is selected as staff would need to determine the amounts to be refunded and the
overall fiscal impact to the water and wastewater funds. The standard practice is to
prospectively apply the proposed fee schedule.
ATTACHMENTS
1. Resolution and Exhibit A & B
2. HDR Engineering Technical Memorandum, July 31, 2013
AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE
2013 Water and Wastewater Development Impact Fee Study
T:\Council Agenda Reports\2013\2013-08-20\Water & Wastewater Dev Impact Fees (Horton-Mattingly)\Water & Wastewater Impact Fees.docx
PH1 - 8
Attachment 1
RESOLUTION NO. (2013 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
AMENDING WATER AND WASTEWATER IMPACT FEES
WHEREAS, Chapter 4.20.140 of the City of San Luis Obispo Municipal Code
establishes water and wastewater development impact fees, hereinafter referred to as
impact fees, and provides for the setting of impact fee amounts and other matters by
resolution of the Council; and
WHEREAS, the Council has received the 2000 Wastewater System Master
Plan which identifies needed improvements to the City's sewer systems including lift
stations and other infrastructure needs to meet General Plan build-out; and
WHEREAS, the Council has approved the 2011 Water Reclamation Facility
Master Plan which identifies capacity, treatment processes and other improvements to
meet General Plan build-out; and
WHEREAS, updated cost information for the Catchment Area lift stations
necessitate updating the area specific "add-on" fees to address new development's share
of the cost for the lift stations; and
WHEREAS, on February 10, 2004 the Council for the City of San Luis Obispo
directed staff to proceed with participation in the Nacimiento Pipeline Water Supply
Project to provide additional water supplies for new development and service reliability
for existing customers; and
WHEREAS, on March 7, 2006 the Council approved the Water Treatment
Plant Master Plan improvements which provided additional treatment processes and
capacity to meet General Plan build-out; and
WHEREAS, modification of rates and charges by public agencies is statutorily exempt
from the California Environmental Quality Act (CEQA) under Section 15273 of the
Public Resources Code because the change in fees is not intended to fund expansion of
capital projects not otherwise evaluated under CEQA. Both Wastewater and Water
Treatment Master Plans were evaluated for their respective impacts to the environment
and this action to adjust fees merely provides a more equitable distribution of costs
associated with envisioned infrastructure.
WHEREAS, an analysis of the required amendments to both the water and
wastewater impact fees to support the City's operations, maintenance and debt service in
the Nacimiento Pipeline Water Supply Project, the facility and system improvements
identified in the Wastewater Master Plan, Water Reclamation Facility Master Plan,
Water Treatment Plant Master Plan and updated cost information for the catchment
area lift stations have been completed and amended fees identified as included in the
attached Exhibits A and B.
PH1 - 9
Resolution No. (2013 Series) Attachment 1
Page 2
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San
Luis Obispo as that:
SECTION 1. Findings.
a. The purpose of impact fees is to protect the public health, safety, and general
welfare by providing adequate water supply, treatment, distribution, and wastewater
collection and treatment facilities to satisfy the needs of new development and to mitigate
the impacts of new development on the City's water and wastewater facilities and
improvements.
b. The impact fees collected pursuant to this resolution shall be used only to pay for
facilities and improvements identified in the impact fee analysis and shall not be in lieu
of any other fee or tax as may be required by the Municipal Code.
c. There is a reasonable relationship between the types of development on which the
impact fees are imposed and the use of the impact fees and the need for the facilities and
improvements. All new development requires adequate water supply, treatment and
distribution as well as wastewater collection and treatment facilities to protect the public
health and safety.
d. As required by Government Code Section 66001 et seq., there is a reasonable
relationship between the amount of the impact fees and the cost of the facilities and
improvements attributable to the developments on which the impact fees are imposed.
The estimated costs of facilities and improvements, including financing costs, to be paid
for by impact fees as shown in the 2013 City of San Luis Obispo Water and Wastewater
Development Impact Fee Study analysis prepared by City of San Luis Obispo’s Utilities
Department and peer reviewed by HDR Engineering, the findings and analysis of which
are hereby incorporated by reference, have been allocated to new development on the
basis of dwelling unit type (residential) or water meter size (non-residential).
SECTION 2. Cost Estimates.
At any time that the actual or estimated costs of facilities identified in the impact fee
analysis changes, the Finance Director shall review the impact fees and determine
whether the change affects the amount of the impact fees. If the impact fees are
significantly affected, the Finance Director shall, within thirty (30) days, recommend to
the Council a revised fee for their consideration.
SECTION 3. Amount of Impact Fees
Effective July 1, 2013, impact fees shall be in the amounts set fort h in Exhibits A and B
attached hereto. Unless otherwise acted upon by the Council, the amount of the impact
fees will automatically be adjusted on July 1 of each subsequent year by the annual
percentage change in the U .S. Bureau of Labor Statistics consumer price index for all
urban consumers (CPI-U), all-cities average for the prior calendar year. Since the
PH1 - 10
Resolution No. (2013 Series) Attachment 1
Page 3
facilities and improvements for which connection impact fees are charged will be
financed through bonds or other form of debt, the annual adjustments are indexed to
consumer prices rather than construction costs.
SECTION 4. Time of Payment
a. Impact fees for any development project or portion thereof shall be payable prior
to issuance of building permits required for that development or at a later time as
determined by the Community Development Director, and shall be collected by the
Building Official. Under Government Code Section 66007(b), the City is authorized to
collect the impact fees at the time of building permit issuance or at a subsequent date
because the impact fees are for public facilities and improvement s for which an account
has been established and funds appropriated, and for which the City has adopted a
proposed construction schedule; or the impact fees are to reimburse the City for
expenditures previously made.
b. For any development project or portion thereof, impact fees shall be assessed at
the time of application and remain valid for as long as the application is proceeding
through valid processing as per the Uniform Administrative Code.
SECTION 5. Exemptions
a. Fire Protection. Upgrading existing water services and/or meters for the sole
purpose of providing new or improved fire protection facilities shall be exempt from any
impact fee provided for in this resolution.
b. Landscape Irrigation. Any water services and/or meters installed solely for
landscape irrigation purposes for properties with existing water service shall be exempt
from any impact fees provided for in this resolution. However, if an increase in water
demand is required, the Utilities Director shall impose a water impact fee.
SECTION 6. Separate Accounts
The Finance Director shall deposit fees collected under this resolution in separate water
impact fee and wastewater impact fee accounts as required by Government Code Section
66006. Within sixty (60) days of the close of each fiscal year, the Finance Director shall
make available to the public an accounting of the fund, and the City Council shall review
that information at its next regular public meeting.
Upon motion of ________________, seconded by _________________, and on
the following roll call vote:
AYES:
NOES:
ABSENT:
PH1 - 11
Resolution No. (2013 Series) Attachment 1
Page 4
The foregoing resolution was adopted on this 20th day of August 2013.
_____________________________
Mayor Jan Marx
ATTEST:
____________________________
Sheryll Schroeder
Interim City Clerk
APPROVED AS TO FORM:
____________________________
Christine Dietrick
City Attorney
PH1 - 12
Exhibit A
WATER DEVELOPMENT IMPACT FEE
Effective July 1, 2013
Equivalent Dwelling Unit
(EDU) Water Development Impact Fee
Residential
Single-family Unit 1.0 $10,775
Multi-family Unit 0.7 $7,542
Mobile Home 0.6 $6,465
Studio Unit, 450 square
feet or less 0.3 $3,232
Non-Residential (Meter Size)
¾ “ 1.0 $10,775
1” 1.7 $18,317
1.5” 3.4 $36,633
2” 5.4 $58,182
3” 10.7 $115,287
4” 16.7 $179,934
6” 33.4 $359,869
PH1 - 13
Exhibit B
WASTEWATER DEVELOPMENT IMPACT FEE
Effective July 1, 2013
EDU Margarita Tank Farm Silver City Calle
Joaquin Laguna
Residential, Single Family 1.0 3,729$ 2,745$ 3,630$ 1,356$ 1,829$ 490$
Residential, Multi Family 0.7 2,610$ 1,922$ 2,541$ 949$ 1,280$ 343$
Mobile Home 0.6 2,237$ 1,647$ 2,178$ 814$ 1,097$ 294$
Studio Unit (450 sf or less)0.3 1,119$ 824$ 1,089$ 407$ 549$ 147$
5/8" to 3/4"1.0 3,729$ 2,745$ 3,630$ 1,356$ 1,829$ 490$
1"1.7 $ 6,339 $ 4,667 $ 6,171 $ 2,305 $ 3,109 $ 833
1-1/2"3.4 $ 12,678 $ 9,059 $ 11,979 $ 4,475 $ 6,036 $ 1,617
2"5.4 $ 20,135 $ 14,549 $ 19,239 $ 7,187 $ 9,694 $ 2,597
3"10.7 $ 39,897 $ 29,372 $ 38,841 $ 14,509 $ 19,570 $ 5,243
4"16.7 $ 62,274 $ 45,842 $ 60,621 $ 22,645 $ 30,544 $ 8,183
6"33.4 $ 124,540 $ 91,409 $ 120,879 $ 45,155 $ 60,906 $ 16,317
Land Use Type Citywide
Fee
Residential Unit
Non-Residential (Meter Size)
Additional Catchment Area Charges
PH1 - 14
HDR Engineering, Inc.
Page 1 of 5
Technical Memorandum
To: Ron Munds, City of San Luis Obispo
Jennifer Metz, City of San Luis Obispo
From:
Shawn Koorn, HDR Engineering, Inc.
Cil Pierce, HDR Engineering, Inc.
Date: 8/2/13
Subject: Water and Wastewater Development Impact Fees Review
Introduction
HDR Engineering, Inc. (HDR) was retained by the City of San Luis Obispo (City) to conduct a
peer review of the City’s water and wastewater Development Impact Fee (DIF) analysis and
methodology. This technical memorandum summarizes HDR’s review of the analysis and
methodology for the City’s water and wastewater DIF update as well as provides additional
recommendations for future updates of the City’s water and wastewater DIFs.
Review Provided by HDR
City staff provided HDR with a copy of the Draft 2013 Water and Wastewater Development
Impact Fee Study (DIF Study) detailing the development of the water and wastewater DIFs.
HDR reviewed the methodology and development of the water and wastewater DIFs. After
the review, a list of key questions and areas needing further discussion was provided to City
staff on July 12, 2013. HDR and City staff then held a conference call to discuss the key
questions and areas needing further discussion. At the completion of the conference call
HDR provided the City with a brief memorandum dated July 19, 2013 providing edits and
additional comments that could be made to the City’s DIF Study and methodology.
Subsequently, HDR and City staff reviewed those items and the City is completing the final
draft DIF Study.
Development Impact Fee Methodology
Development Impact Fees are a one-time charge applied to new customers for the demand
they place on the system and the capacity required for providing service. It is important to
use an appropriate methodology to allocate costs to these new customers such that existing
customers are generally sheltered from cost impacts of serving new customers with
available system capacity, to follow the theory that “growth pays for growth”. The American
Water Works Association (AWWA) has published the Water Rates, Fees and Charges, M1
Manual which describes several appropriate methodologies for establishing cost based
DIFs 1. These are considered to be industry standards of “generally accepted” principles and
methodologies for establishing rate, fees and charges for both water and wastewater
utilities. Additionally, other references provide additional insight into appropriate
methodologies and techniques for calculating these fees 2.
1 American Water Works Association, Principles of Water Rate, Fees and Charges, 6th Edition, 2012, p 268.
2 Arthur C. Nelson, System Development Charges for Water, Wastewater, and Stormwater Facilities, Lewis
Publishers, New York, 1995.
Water Environment Federation, Financing and Charges for Wastewater Systems, Manual of Practice 27,
Chapter 10
PH1 - 15
HDR Engineering, Inc.
Page 2 of 5
Overview of the City’s DIF Analysis
The City has developed its water and wastewater DIFs based on available data, City policies,
City growth projections, and “generally accepted” methodologies. This update followed past
DIF practices and policies and reflected current growth assumptions and customer
consumption patterns.
HDR’s Technical Opinion
It is HDR’s opinion that the City has used an appropriate methodology to determine the DIFs
for the water and wastewater utilities based on the costs included and the assumptions of
EDUs. This methodology is based on past practices, available data and calculates an
equitable share of the cost of these facilities to serve new customers. The methodology was
compared to generally accepted methodologies for setting water and wastewater DIFs as
well as the City’s past practices. As noted, HDR worked with City staff to discuss any areas
of concern and as a result of the discussions the City’s methodology appears to be
appropriate for developing a reasonable nexus between the facilities with available capacity
and the demand a new customer places on the water and wastewater systems.
Additionally, it is important to note that the City’s DIF Study is in compliance with California
state law regarding development and implementation of such fees. The laws for the
enactment of development impact charges in California are codified in California
Government Code sections 66013, 66016, and 66022, which are interspersed within the
‘Mitigation Fee Act.’ The Mitigation Fee Act is comprehensive legislation dealing mainly with
development impact fees. The sections noted above set forth the various requirements for
imposition of development impact fees in California: calculation of the fees, noticing,
accounting and reporting requirements, and processes for judicial review. A summary of a
portion of the relevant statutes follows:
“66013 (b) (3) ‘Capacity charge’ means a charge for public facilities in existence at
the time a charge is imposed or charges for new public facilities to be acquired or
constructed in the future that are of proportional benefit to the person or property
being charged, including supply or capacity contracts for rights or entitlements, real
property interests, and entitlements and other rights of the local agency involving
capital expense relating to its use of existing or new public facilities. A “capacity
charge” does not include a commodity charge.”
The basic principle that needs to be followed under California law is that the charge be
based on a proportionate share of the costs of the system required to provide service
and that the requirements for adoptions and accounting be followed in compliance with
California law. In addition, In Richmond v. Shasta Community Services Dist., 32 Cal.4th
409 (2004), the California Supreme Court held that water connection fees and capacity
charges are not “assessments” under Proposition 218 because they are imposed only
on those who are voluntarily seeking water service, rather than being charged to
particular identified parcels, and therefore such fees are not subject to the procedural or
substantive requirements of Proposition 218. The court also held that such fees can
properly be enacted by either ordinance or resolution.
Disclaimer: This should not be construed as a legal opinion with respect to California law.
HDR recommends that the City have its legal counsel review the DIFs as set forth in The
City’s DIF Study to ensure compliance with California law.
PH1 - 16
HDR Engineering, Inc.
Page 3 of 5
Review Comments and Recommendations
Upon reviewing the City’s methodology and report, in light of industry standards and
references, HDR has the following comments and recommendations.
• The methodology the City is using is consistent with past practice and is based on
the best available data.
• This approach includes portions of major facilities used to serve growth, and
divides through by the anticipated number of EDUs expected to be served by
these facilities in order to develop a fee based on the reasonable cost and benefit
new customers will receive from connecting to the City’s utility systems. There
are other facilities and other portions of facilities used to provide service to new
customers that could be considered for inclusion in subsequent fee updates. This
is addressed below under recommendations.
• To determine fees for larger size meters, the City has determined water demand
per equivalent meter and using equivalent meter capacities for determining fees
for larger sized meters. This approach is appropriate.
• HDR would add that for any meters larger than 2-inch, it is often appropriate to
evaluate the fee based on the customers projected usage. This is done to verify
that usage won’t exceed the AWWA safe operating measures used to establish
the fees, or the average use on an equivalent customer basis. For example, if a
bottle washing business were to want to connect to the system, they may be
using two 3 or 4-inch meters 24/7 to meet there business goals. This level of
usage would exceed a fee based on the safe operating equivalencies by meter
size. While the City may not anticipate this type of customer or many customers
over a 2-inch meter size, it is a good provision to have in place in case sometime
in the future such a situation should arise. It simply provides the City with the
authority to review fees for customers applying for any meter larger than a 2-inch
meter.
While the City has followed “generally accepted” industry approaches in setting its water and
wastewater DIFs, HDR does have recommendations for the City to consider for future DIF
updates. These recommendations reflect an approach, per industry recommended
methodologies, that would incorporate all facilities with available capacity used to serve new
customers, and can result in similar costs per unit.
• The City’s current methodology includes the cost of major facilities providing
water and wastewater services. HDR observed that there are other facilities
assisting in providing service to new customers that could be included in a DIF
calculation. For example, there are water pump stations, transmission lines,
storage facilities (distribution tanks and reservoirs), and City funded distribution
facilities that are not included in the fee. For the wastewater system there are
portions of the Water Reclamation Facility (WRF), lift stations, and City funded
collection system components that have not been included. These facilities also
have capacity to serve new customers and for the greatest equity between
existing and new customers, the portion of these facilities used to provide service
to new customers should be allocated to those new customers through a DIF
charge.
PH1 - 17
HDR Engineering, Inc.
Page 4 of 5
• The City has completed the DIF Update by establishing fees for residential and
non-residential use. The methodology is appropriate and consistent with past
practice and available data. However, HDR recommends that for future fee
updates the City consider doing a comprehensive update, including other facilities
with capacity to serve growth, as noted above. A component by component
calculation can be completed, similar to the City’s method, with the exception that
supply and treatment facilities typically can be calculated on a cost per unit basis.
That is, treatment can be calculated on a dollar per gallon basis, and then by
applying the gallons per EDU, the cost per EDU can be determined. For collection,
distribution and transmission facilities, dividing by build-out EDUs, as the City has
done in their calculations, is typically the methodology for determining an
equitable cost per EDU for those facilities.
By calculating an average cost per unit the City can avoid the multi-step process
of determining EDUs by class of service. This methodology is simpler and more
straight-forward where it is less likely that a component of the calculation could
be missed.
The City may need to develop and maintain facility data in a slightly different
manner to expedite this type of calculation for future updates.
• Finally, HDR observes that in the future when the City decides to complete a
comprehensive update to the fees, including other facilities with capacity for
providing service to new customers, and using the cost per unit methodology, the
gallons per should be calculated separately for water and wastewater.
The current calculation of 150 gallons per EDU is the average winter water
usage and for wastewater, it does not include inflow and infiltration (I&I)
that may exist in the system and require treatment at the plant. Since the
plant needs to be designed to meet peak flows with I&I, this component
should be addressed. In particular, while new customers may not
contribute as much I&I as existing customers, the methodology calls for
using a cost of the total facility, and dividing through by total capacity to
get a cost per unit of capacity. In this way, the cost I&I is spread among all
customers.
For calculating water DIFs in the future using this methodology, it would be
important to include peaking factors in order to appropriately calculate
each new equivalent unit’s contribution to peak day capacity and the
facilities needed to meet that unit’s capacity demand. By applying a
system-wide peaking factor, each EDU is treated equally. When dividing
total facility costs by total capacity the cost per EDU is determined for any
new EDU, as well as the existing EDUs.
Summary
Based on HDR’s peer review of the City’s methodology for determining development impact
fees, HDR is of the opinion that the City appears to be using a reasonable and appropriate
methodology to calculate the fees, given available data and that these fees are in
compliance with California State law. HDR recommends that in the future the City consider
including additional system facilities with capacity that aide in providing service to new
PH1 - 18
HDR Engineering, Inc.
Page 5 of 5
customers and that the City consider collecting data that can facilitate developing the fee on
a cost per gallon/unit basis.
PH1 - 19
Page intentionally left
blank.
PH1 - 20
CORRESPONDENCE
Date_ z D " 3 1teM# PH L
�► council MCMORAnbum
I�ECFIVM
August 20, 2013
AU6 2 0 2013
TO: Mayor and City Council
VIA: Katie Lichtig, City Manager
FROM: Carrie Mattingly, Utilities Director
SUBJECT: Item PHI — Update of the City's Water and Wastewater Development Impact
Fees
Council members requested information regarding Item PHI for the August 20, 2013 Council
meeting.
A request was received to illustrate the changes in the water and wastewater impact fees since
their original adoption in 1991 to the current fee and the percent change. Updates to the fees
occurred in 1994, 2002 (twice), 2004, and 2013 (proposed). Between updates, the fees were
increased by the Consumer Price Index (CPI) at the beginning of each fiscal year.
The table below shows a side -by -side comparison of fees and percent change through 2004 for
one equivalent dwelling unit or EDU. The graph below also shows the fees for one EDU. An
EDU is the unit of measure other development types (i.e. multi - family residential, non-
residential based on meter size, etc.) are based upon and are set proportional to.
The wastewater impact fee has increased due to cost adjustments for facility upgrades and the
water fee has fluctuated due mainly to changes in water policy, updated estimated and or/ actual
infrastructure costs, water supply development costs, and revised estimates on water demand.
Other inquiries:
Nacimiento Debt: Nacimiento debt figures in the study reflect the original debt amount, not the
amount currently owing.
Timing related to the Land Use and Circulation Element adoption: While the Land Use and
Circulation Element will be updated in 2014, which may have build out and service implications,
the current study was coordinated between Utilities and Community Development to ensure it
used the most current build out assumptions and land use information. It is anticipated that
impact fee study will be updated in 2016 with changes from the 2014 Land Use and Circulation
Element. This will incorporate any items the current study did not capture. Updating these fees
has been in the works for a while (ideally fees should be updated at least every five years) and in
view of major changes related to other policies; water demand and wastewater generation
factors, among other items, proceeding now seemed the right thing to do.
City Attorney concurrence: The City Attorney is in concurrence with the legal analysis of the
consultant and staff recommendations.
Council Memorandum — PH1. Water and Wastewater Development Impact Fees Page 2
Develo ment Imp act Fees and Percent Change — Ince on to Current Fee
Year
1991
1994
%
2002 -A
%
2002 -J
%
2004
%
Water
$2,628
2,704
2.9
111256
316.3
8,065
-28.3
1 13,967
73.2
Wwater
$2,218
2,282
1.91
3,236
41.8
0
01
3,377
5.5
History of Water and Wastewater Development Impact 'Fees
(per Equivalent Dwelling Unit)
$6,D00 — Chi Inge 5 _
377 541133
52.704 +5 'S% (current fee)
$4.400 +29%.... $1 , 313
n�
52,628 Change — -
53236 $3,729
52,000 , -11.3%
$2,218 57..287 +41.8% — -- _ _.___ Change
+1.9% Change
Change
1991 1992 1993 1"4 1995 1996 1997 1998 1999 2000 2oo: 2002 2OO22oo3 2004 2.005 2006 2007 2008 2009 2010 2011 2012 2013 2043
—$--Water —8-Wastewater
NOTE: Previous Development impact Fees were adopted by the City Council in August 1991, January 1994, April 2002, June 2002, and June 2004.
Water and Wastewater Development Impact Fee Key Dates
Year
Water
I Wastewater
1991
First study completed establishing water and wastewater impact fees
1994
$17, 383
S18,D0p
April
Updated to include costs identified in the
(-current fee)
2002
2000 Water Master Plan and the updated
2000 Wastewater Master Plan (lift stations
516.000
and Water Reclamation Facility).
June
s4
2002
to the Reliability Reserve.
2004
Fee adjusted to account for the City's
+7i
S 14,4D0 -
-
Change
Project and improvements to the Water
$12,000
$11,256
Treatment Plant.
upgrade costs.
+316.3% ,-
Change f ;,
S 1 D DD0
r
_ $.10,775
-38.0%
Changie
- 96
$6,D00 — Chi Inge 5 _
377 541133
52.704 +5 'S% (current fee)
$4.400 +29%.... $1 , 313
n�
52,628 Change — -
53236 $3,729
52,000 , -11.3%
$2,218 57..287 +41.8% — -- _ _.___ Change
+1.9% Change
Change
1991 1992 1993 1"4 1995 1996 1997 1998 1999 2000 2oo: 2002 2OO22oo3 2004 2.005 2006 2007 2008 2009 2010 2011 2012 2013 2043
—$--Water —8-Wastewater
NOTE: Previous Development impact Fees were adopted by the City Council in August 1991, January 1994, April 2002, June 2002, and June 2004.
Water and Wastewater Development Impact Fee Key Dates
Year
Water
I Wastewater
1991
First study completed establishing water and wastewater impact fees
1994
Adjustments made to original fee study for
both water and wastewater
April
Updated to include costs identified in the
Updated to include costs identified in the
2002
2000 Water Master Plan and the updated
2000 Wastewater Master Plan (lift stations
water supply component
and Water Reclamation Facility).
June
Fee reduced due to policy change related
2002
to the Reliability Reserve.
2004
Fee adjusted to account for the City's
Fee reflects mostly consumer price index
participation in the Nacimiento Pipeline
increases with minor adjustment for
Project and improvements to the Water
updated Water Reclamation Facility
Treatment Plant.
upgrade costs.
G: \Council Cotnmunications \Council Memos \Water and Wastewater Impact Fees Council memo 8- 19- 13.doc
Ouagfino
MI"N®r.
August 9, 2013
The Honorable Jan Howell Marx, Mayor of San Luis Obispo
and Members of the San Luis Obispo City Council
995 Palm Street
San Luis Obispo, CA 93401
Re: Water & Waste Water impact Fee Review
Dear Mayor Marx and Members of the City Council:
RECEIVED
AUG 12 2013
SLO CITY CLERK
AGENDA
CORRESPONDENCE
Date -2 f�Item # fg L_
I was very surprised and appreciative to receive the attached proposed correction to the water and wastewater
development fee schedule that will be heard at the August 20`h, city council meeting. If approved, the fee
reduction will be a welcome savings for development projects as well as an obvious needed correction to the
current fees. The adjusted fees are a significant reduction that will make a meaningful difference.
With that said I have a question and several comments regarding the proposal;
1. The memo from the utility Department recommends the corrected fees be retroactive to July 1, 2013.
What does or will the retroactive date apply to; the date fees were paid, the date of plan submission, the
date of entitlement or some other milestone? I would hope the retroactive date Is defined in the staff
report, which I look forward to reviewing.
2. The memo also outlines twelve changes influencing the decision to propose the rate correction. It is my
belief the retroactive date should coincide with; when the city was able to define the point in time at
which the rates should have been adjusted based on the twelve influencing changes. Why July 1, 2013,
why not January 1, 2013 or January 1, 2012? It is only fair to apply reimbursements retroactive to the date
the actual cost savings were realized by the utility department. If the city is to be true to their own
philosophy that; "Development Pay Their Fair Share" then It is only fair and equitable to reimburse those
that have been paying more than their fair share. Regardless of the dollar amount and or the length of
time that has passed. All fees paid In excess of what should have been paid should be returned to their
rightful owners. I believe the July 1, 2013 retroactive date is arbitrary and should be reviewed and
adjusted to actual, or something other than a date without substantiation such as July 1, 2013.
In closing I want to thank you for taking the steps necessary to reduce development fees whenever possible. Any
help provides much needed relief from the high cost of developing in the city of San Luis Obispo.
Thank you and please contact me with any questions that I may be able to answer.
Sincerely
Matt Quaglino
WVA%quag1i110.001n 815 Fiero Lane San Luis Obispo California 93401 P: 805.543.0560 F: 805.543.0679
2013 Water & Wastewater (
Development Impact Fee Utilities
Summary IDgmriment
City of San Luis Obispo
The City Council will consider the adoption of the proposed water and wastewater
impact fees at its meeting on August 20, 2013. The meeting starts at 6:00 p.m.
and will be held in the City Council Chambers located at 990 Palm Street. Staff is
recommending the water and wastewater development impact fees be applied
retroactive to July 1, 2013.
The Utilities Department prepared the 2013 Development Impact Fee Study to update the City's
water and wastewater development impact fees. The Study reflects the following changes since the
adoption of the current fees in 2004.
Changes influencing the Water Development Impact Fee:
1. Applied policies from the General Plan's Water and Wastewater Management Element
(2010).
2. Updated water demand and factors used to project future water demand.
3. Updated City demographics from the 2010 Census and the General Plan's Housing Element
(2010).
4. Updated water supply capital costs.
5. Eliminated the Water Area - Specific add -on fee for the Airport and Margarita Areas.
Changes Influencing the Wastewater Development Impact Fee:
1. Changed existing and projected wastewater generation rates.
2. Updated wastewater capital facility costs from the 2013 -15 Financial Plan, the 2011 Water
Reclamation Facility Master Plan, and City project financing resources.
3. Changed from "Area Specific Add -On" fees to "Catchment Area" fees for specific wastewater
lift station facilities.
4. Eliminated the 3.5 percent adjustment in the citywide non - residential fee related to higher
wastewater discharge strengths.
Changes influencing both Water and Wastewater Development Impact Fees:
1. Inclusion of a new fee class for secondary dwelling units (studio units less than 450 square
feet) that is 30 percent of one equivalent dwelling unit. This unit type was previously charged
the fee for a multi - family residential unit.
2. Decrease of multi - family unit development impact fee from 80 to 70 percent of one equivalent
dwelling unit.
3. Updated equivalent dwelling units (EDUs) projections for future residential and non-
residential development including updated water meter size equivalency factors with
American Water Works Association standards.
The tables on the next page summarize the existing (as of July 1, 2013) and proposed water and
wastewater and development impact fees as they apply to residential and non - residential
development.
r?f San Luis Obispo
2013 Water & Wastewater Development Impact Fee Summary
Existing and Proposed Water Development Impact Fees
Fvietino
Residential Uses
r- `arnii,r Unit
Multi- family Unit
Mobile Home
Studio Unit, 450 square feet or less
Non- kesidential Uses
% inch Water Meter
1 inch Water Meter
1.5 inch Water Meter
2 inch Water Meter
3 inch Water Meter
4 inch Water Meter
6 inch Water Meter
Net Fee Change
$17,383
$10,775
- $6,608
$13,906
$7,542
- $6,364
$12,168
$6,465
- $5,703
$13,906
$3,232
-$10,674
$17,383
$10,775
- $6,608
$34,766
$18, 317
-$16,449
$69,532
$36,633
- $32,899
$111,251
$58,182
- $53,069
$243,362
$115,287
- $128,075
$382,426
$179,934
- $202,492
$782,235
$359,869
-_�499 RFS
Existing and Proposed Wastewater Development Impact Fees
Residential Uses
Single-family Unit
Existing Wastewater Proposed Wastewater
Development Impact Fee Development Impact Fee
Net Change
$4,203 $3,729 -$474
Multi- family Unit
$3,362
$2,610
_$752
Mobile Home
$2,942
$2,237
-$705
Studio Unit, 450 square feet or less
$3,362
$1,119
- $2,243
Non - Residential Uses
3/< inch Water Meter
$4,349
$ 3,729
-$620
1 inch Water Meter
$8,698
$ 6,339
- $2,359
1.5 inch Water Meter
$17,396
$12,678
- $4,718
2 inch Water Meter
$27,834
$20,135
- $7,699
3 inch Water Meter
$60,886
$39,897
- $20,989
4 inch Water Meter
6 inch Water Meter
$95,678
$195,705
$62,270
- $33,408
$124,540 1
- $71,165
Existing and Proposed Wastewater "Add -On" Fees
Planning Areas
_
Existing Wastewater
Development Impact Fee
Proposed Wastewater
Development Impact Fee
Net Change
Area Specific "Add -On" Airport
$1,853 _
$3,630 (now Tank Farm)
+$1,777
Area Specific "Add -On" Margarita*
$1,853
$2,745 (now Margarita)
$1,356 (now Silver City)
$3,630 (now Tank Farm)
$3,630 (now Tank Farm)
+$892
-$497
+$1,777
+$1,777
Area Specific "Add -On" Edna Islay
$1,853
Area Specific "Add -On" Dalidio
$271
$ 490 (now Laguna)
+$219
Area Specific "Add -On" Madonna
$271
$ 490 (now Laguna)
+$219
Area Specific "Add -On" McBride
$271
$1,829 (now Calle Joaquin)
+$1,558
Area Specific "Add -On" Irish Hills
$477
$1,829 (now Calle Joaquin)
+$1,352
Area Specific "Add -On" Orcutt
$3,383
$3,630 (now Tank Farm)
+$247
*NOTE: Portions of the Margarita Planning Area flow to the Margarita, Silver City, and Tank Farm catchment areas.