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HomeMy WebLinkAbout02/07/1995, 2 - WATER IMPACT FEE RETROFIT CREDIT Illlu^ly�l��l�lll^� � MEETING DATE: city of san Luis OBISPO February 7 1995 COUNCIL AGENDA REPORT REM NUMBER: FROM: JohnMoss Prepared By: Gary W. Henderson 4wN Utilities t r Water Division Manager SUBJECT: Water Impact Fee Retrofit Credit CAO RECOMMENDATION: Adopt a resolution establishing a variable water impact fee credit for the cost of retrofitting when it is mandatory as a condition of development, to be based on the number of retrofitted bathrooms required to meet water offsets and a cost of $150 per bathroom. DISCUSSION: At the November 15, 1994 Council meeting, the City Council adopted the Urban Water Management Plan. A component of the plan identified the need for an increase in the water impact fees to support the policies outlined in the plan. Policy 2.6.3 in the Urban Water Management Plan states: `'The cost for developing new water supplies necessary for new development will be paid by impact fees set at a rate sufficient to cover the annual debt service cost of the new water supplies attributable to new development." Based on this policy, revised water impact fees were adopted. Until new supplemental water supply projects are initiated, new development must continue to retrofit at a 2 to 1 ratio based on the water needed to serve the development. The City Council directed staff to evaluate alternatives for reduction of the water impact fees in recognition of the costs involved in retrofitting existing facilities. Staff has evaluated the costs involved with retrofitting existing bathrooms and has determined that the average cost associated with toilet, showerhead, and faucet aerator installation is approximately $150 per bathroom. Since the number of bathrooms which must be retrofitted depends on the amount of water necessary for the new development as well as the water savings estimated through replacement of existing water fixtures, staff would recommend that the credit applied towards the water impact fee be based. on the number of bathrooms retrofitted. Since water savings are based on variables such as intensity of facility use (ie. commercial or residential) and the type of fixture being replaced (ie. 5 gallon versus 3.5 gallon toilet), it would appear to be most equitable to base the credit on the actual number of bathrooms retrofitted. The revised water impact fee for a single family residence is $5,916, which went into effect on February 1, 1995. A typical single family residence (equivalent dwelling unit -EDU) would be required to retrofit approximately 20 bathrooms (based on 2 bath dwellings with 3.5 gallon toilets). Therefore, if Council adopts the recommendation, the impact fee per EDU would be reduced by about $3,000 (20 x $150) to $2,916. This methodology may not provide full reimbursement for the cost of retrofitting in all cases, but seems to provide the most equitable solution to the Council's direction. ����n��n►►��IIIIIIIII�p1h°OIIIIII city of San LAIS OBISPO Mi;% COUNCIL AGENDA REPORT Water Impact Fees Page 2 Public Input Staff sent a letter explaining the proposed methodology for reducing the water impact fee to a number of organizations and individuals. The letter was sent to groups who may be directly impacted by the fees such as the San Luis Obispo County Board of Realtors Association, the Builders Exchange, and the Chamber of Commerce. The correspondence invited individuals to attend a meeting on January 23, 1995 at 7:00 pm to answer any questions or concerns which people may have regarding the proposed credit for retrofit. No individuals attended the meeting, which may indicate that the information was understood and no one notified had any concerns. FISCAL EWPACT The fiscal impact of continuing credits for the cost of mandatory retrofitting depends on three factors: ■ Timeframe for evaluating the fiscal impact, since retrofit credits will not always be in place, assuming that this requirement will be discontinued when construction of an additional supply project is initiated pursuant to Policy 2.8.2(A) of the urban water management plan. ■ Level of water impact fee revenues that would otherwise have been received based on projected residential and non-residential growth rates. ■ Value of the credit that is granted. The following summarizes the assumptions used in this fiscal impact analysis for these three factors: ■ Timeframe. Fiscal impacts are projected for the next four years. This timeframe is consistent with the forecast periods used in our rate reviews and the capital improvement plan. Further, it is likely that mandatory retrofitting will be present during most if not all of this timeframe based on the status of current projects. On the other hand, it is possible that a new project could be initiated slightly sooner than this. These two factors together - our standard period for evaluating rate requirements and the status of current projects - make four years a reasonable timeframe for analysis, recognizing that retrofit credits could end or extend for periods significantly different than this assumption. ■ Growth rates and underlying impact fee revenues. Consistent with the assumptions used in preparing the five year General Fund fiscal forecast recently presented to the Council, it is projected that residential and non-residential development will grow by 0.3% in 1995-96, 0.5% in 1996-97, 0.7% in 1997-98 and by 1.0% in 1998-99. ��������►►II►Iillllllll 11° All III city of San Lai S OBISPO COUNCIL AGENDA REPORT Water Impact Fees Page 3 Impact fee revenues for supply projects (exclusive of the portion for treatment facilities) at the "low project cost" range adopted by the Council in the urban water management plan were projected at $1,315,900 annually based on a 1% growth rate. As such, the following revenues from the supply portion of the City's impact fee are projected for the next four years based on the growth rates presented above: 1995-96 394,800 1996-97 657,900 1997-98 921,100 1998-99 1,315,900 ■ Value of the credit. Assuming that the recommended credit of $150 per retrofitted bathroom is adopted and that it requires about 10 retrofitted bathrooms to equal one equivalent dwelling unit (EDU) - resulting in 20 bathrooms being retrofitted under the existing "2 to 1" program - then the credit per EDU would be about $3,000. The currently adopted impact fee is $5,916 ($5,243 for supply and $673 for treatment facilities), resulting in a credit of about 57% of the current fee for supply projects (or about 50% of total fees including treatment facilities). Resulting fiscal impact The following shows estimated revenue losses over the next four years based on the assumptions outlined above: Revenue Loss Revenue Loss Proposed Current Favorable Fiscal Year Retrofit Policy Retrofit Policy Variance 1995-96 225,900 394,800 168,900 1996-97 376,400 657,900 281,500 1997-98 527,000 921,100 3949100 1998-99 752,900 1,315,900 563,000 TOTAL 1 198829200 1 392899700 1 114079500 As reflected above, there is a significant revenue loss associated with providing retrofit credits. However, the proposed program has a much more favorable fiscal outcome than our current policy, which provides a credit for the total supply portion, or an 87% credit of the total fee (the similar percentage reduction under the revised fees would be about 89%). 2-3 ►�+���n►�iI►IIIIIIIIII i11 Il�hl MY Of San L.AI S OBI SPO Mij% COUNCIL AGENDA REPORT Water Impact Fees Page 4 In summary, the proposed program - based on the assumptions outline above - would result in $1.4 million more impact fees over the next four years than the current program. ALTERNATIVES There are four other alternatives which staff has evaluated as part of this report. The four alternatives are listed below: 1. No Credit for Retrofit - This alternative would not allow for any credit towards reduction of the water impact fee in recognition of the retrofit requirements. Since development must retrofit at a 2 to 1 ratio, this alternative would essentially charge new residents twice for the water necessary for their development. This alternative would generate additional funds necessary for the future supplemental water supply projects. Staff does not recommend this alternative because it does not meet the objectives as directed by Council. 2. Fixed Fee Reduction - The Council could adopt a fixed fee reduction based on a "single family equivalent". A $3,000 reduction based on the typical single . family residence could be adopted and this number could then be applied to various categories based on the concept of"equivalent dwelling units" as outlined in Appendix VII of the Urban Water Management Plan. For administrative purposes, this would be stated as a percentage reduction from the current fee (51%). This alternative does not take into account the exact number of bathrooms which had to be retrofitted, but is more easily understood and administered. This alternative may provide a higher level of customer service since the applicants can be told "up front" exactly what the water impact fees will be. However, staff does not recommend this alternative because it may not fairly compensate each development. 3. Reimburse for Actual Costs of Retrofitting - This alternative would attempt to reimburse the applicant based on the actual costs for accomplishing the required retrofits. This alternative would appear to be the most equitable alternative, but would be very difficult to administer. If this alternative were chosen, verification of costs would be difficult and very time consuming. Additionally, the costs to provide for the retrofits would likely increase to the point of equalling or exceeding the water impact fee. Staff does not recommend this alternative because it may create significant additional staff work and will be very cumbersome to administer. 4. Full Credit for Water Supply Portion of Fee - This alternative would reduce the water impact fee to $673 which is the component of the fee attributable to water treatment facility costs. This is the methodology currently in effect which Z� ii�H�►n►�i�►lilllllllli1" IIIUN city of san pais OBISPO COUNCIL AGENDA REPORT Water Impact Fees Page 5 provides an 87% fee credit. Since the City is relying on retrofit of all existing facilities to achieve the adopted per capita planning figure of 145 gpcd, the retrofitting of existing facilities is not adding a new water supply. In addition, additional water supplies are necessary to offset siltation and establish a reliability reserve, a portion of which is necessary for new development. The same amount of additional water supplies must be secured in the future for new development based on the planning figures. This alternative is not recommended because it will not recover the funds necessary to provide additional water sources for new development which are still necessary in the future. Summary Based on the evaluation of the alternatives and the Council direction to provide an equitable credit in recognition of the retrofit requirements, staff would recommend that Council adopt the concept for impact fee reduction based on the number of bathrooms which are actually retrofit. Attachment: 1. Resolution for Water Impact Fee Retrofit Credit ��J RESOLUTION NO. (1995 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO REVISING THE METHODOLOGY FOR SETTING WATER IMPACT FEE RETROFIT CREDITS WHEREAS, the City Council adopted revised water impact fees as a component of the Urban Water Management Plan adoption on November 15, 1994, and WHEREAS, until an additional supplemental water supply project is initiated, new development must continue to retrofit at a 2 to I ratio to provide for appropriate water offsets, and WHEREAS, the Council directed staff to evaluate alternatives for reduction of the water impact fee in recognition of the costs involved in retrofitting existing facilities. NOW, THEREFORE, BE IT RESOLVED, the City Council of the City of San Luis Obispo does hereby revise the previous method for setting water impact fee retrofit credits and establishes: 1. A variable water impact fee credit for the cost of retrofitting, when it is mandatory as a condition of development based on the number of retrofitted bathrooms required to meet water offsets, at $150 per bathroom. 2. Authorizes the Utilities Director to establish an equitable retrofit credit in cases where retrofit offsets are achieved through methods other than bathroom retrofits. 3. Rescinds Resolution No. 8160. Resolution No. (1995 Series) Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of , 1995. Mayor Allen Settle ATTEST: Diane Gladwell, City Clerk APPROVED: it ttor y of