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HomeMy WebLinkAbout10/17/2000, 3 - MODIFICATIONS TO THE WATER USE OFFSET PROGRAM (RETROFIT FOR NEW DEVELOPMENT) council. Myo�o - 3 .:(,\G_ . j , acenba uEpom -N C I T Y OF SAN LU IS O B I S P O FROM: John Moss, Utilities Director VationPrepared By: Ron Munds, Utilities CoCoordinato(3� SUBJECT: Modifications to the Water Use Offset Program (retrofit for new development) CAO RECOMMENDATION Adopt a resolution increasing the retrofit credit towards water impact fees from the current $150 per toilet to $300.00 per toilet for flush valve and handicapped type toilets. DISCUSSION Background The replacement of older toilets, which use from 3 '/1 to 6 gallons of water per flush to ultra-low flush toilets (ULFT), which use 1.6 gallons of water per flush, has been the cornerstone of the water conservation program. When developing the City's water management strategies, a decision was made that retrofitting would continue until essentially all the toilets in the community were replaced with ULFT's. This policy is part of the Water Element of the General Plan. Currently, the City has three programs to accomplish the toilet replacement goals. They are: • Retrofit Rebate Program • Retrofit Upon Sale Program • Water Use Offset Program (retrofit to build) The Water Use Offset Program accounts for about 65%of retrofit activity taking place to date. Staff estimates that there are approximately 39,000 toilets in the City of San Luis Obispo. As of September 1, 2000, about 26,600 toilets have been retrofitted leaving around 12,400 toilets left for replacement. The toilet count estimate is based on information provided by the Community Development Department and a California Urban Water Conservation Council (CUWCC) study which provides a methodology of estimating the number of commercial toilets in a community. Because of the strong economy and subsequent new development from both infill projects and newly annexed areas, it has become increasingly difficult to keep pace with the demand for the required retrofits. This can be attributed to several factors: • The types and number of projects currently in the planning process (i.e. large residential and commercial projects). • Limited number of plumbing contractors participating in the program. • The difficulty in finding the remaining retrofits. 3-1 Council Agenda Report—Water Use Offset Program Modifications Page 2 These factors will be discussed in more detail in the following.section. In order to achieve the City's goal to essentially retrofit all the toilets in the community and to facilitate the current growth taking place in a timely manner, changes to the existing Water Use Offset Program are being recommended and will be discussed in the following sections of this report. Water Use Offset Program Description The purposes of the Water Use Offset Program are to ensure that new development does not impact the City's ability to serve existing water customers and to assist in staying at or below the water planning figure of 145 gallons per person per day (gppd). Though any water saving plumbing fixture can qualify as a retrofit, typically, toilet replacement has been the most cost effective means to achieve the required water savings for new development projects. The current policy requires developer s to retrofit facilities served by the City which will reduce long-term water usage equal to twice the water allocation required for the new project. It is also current policy that this requirement be met prior to the issuance of a building permit. Commonly, a developer will hire a plumbing contractor to locate and perform the retrofits for a project. A $150.00 credit per bathroom replaced is given towards the water impact fee. This figure was arrived at by taking a sample of receipts received as verification for the Retrofit Rebate Program and then averaging the cost for the installation of the toilet, showerhead and faucet aerator to arrive at the $150.00 credit. This was done in an effort to provide equity to the developers so they would not have to pay the cost of retrofitting, which in essence is creating a water supply beyond the needs of their project, on top of paying full water impact fees. At the beginning of the program (around 1989) it was relatively easy to find willing participants. In fact, the program was operating relatively smoothly until last year. With the strong economy, there has been an increase in building activity which has resulted in a demand for over 200.acre feet of retrofit water with more projects coming in every day. Many of the developments are large residential and commercial projects. Since the current policy is to have the retrofit requirement completed prior to the issuance of the building permit, it has been difficult to achieve the required retrofit given the current conditions, causing minor delays and/or financial hardships on the developers. Though any plumbing contractor can perform the retrofit work, currently there are only two contractors that are actively pursuing this type of work. Even though there are an estimated 12,400 toilets available to retrofit, the contractors have indicated that it is becoming increasingly difficult to find willing participants for the program. Additionally, there are a number of flush valve type toilets (commonly found in public restrooms, schools, etc.) and handicap toilets that are more expensive to purchase than a tank type toilet and do not yield enough water savings to be economically feasible for the contractors to replace. Water Use Offset Program Modifications Recommendation- Increase the credit towards the water impact fee for flush valve and handicap toilets. 3-2 Council Agenda Report—Water Use Offset Program Modifications Page 3 Flush valve and handicap toilets cost significantly more than the standard tank type toilets. The $150.00 credit was based on the installation of a tank type toilet in single family residences. Since flush valve and handicap toilets are found in the commercial and institutional sectors, the water credit per toilet is based on the type of business and the expected water use of the toilet. An example would be a flush valve toilet in a restaurant would be used more often than one in a small office. Though the cost of replacement would be the same in both businesses, the water credit would be quite a bit less in the office retrofit. A majority of the remaining commercial and institutional retrofits fall into the lower water credit category, and therefore are not cost effective for plumbing contractors and their clients to replace at the $150.00 credit. By raising the credit amount to better reflect the replacement cost(replacement costs range from $300 to $375 according to local plumbing contractors), the flush valve and handicap toilets will be exchanged at a higher rate than is currently occurring and move the City forward in accomplishing its retrofit goals. Advantages-By increasing the credit towards water impact fees, there will be a greater participation rate in the commercial and institutional sectors that may not otherwise be achieved. through any of the City's program's. Additionally, it will temporarily help alleviate the backlog of retrofits for projects currently in planning and building process. Disadvantages-This action would finther reduce the amount of water impact fee revenue currently being collected. Recommendation: Increase the credit towards the water impact fee for flush valve and handicap toilets from $150.00 to $300.00 to better reflect the true cost of the retrofit and increase the replacement of these types of toilets. Alternative 1- Allow developers to post a bond or provide a monetary guarantee to ensure the retrofitting is completed in a timely manner after the building permit is granted. Because of the backlog for retrofit credits, developers have been inquiring if it was possible to pay a fee or post a bond in order to obtain their building permit if the retrofit condition is not met at the time they are ready to proceed with construction. As previously stated, the current policy is that the retrofit requirement be completed prior to the issuance of the building permit. The purpose of this policy is to ensure that the City's water management goals are achieved. Additionally, this policy simplifies the administration of this very complicated program. To date there have only been minor delays caused by the current policy. As there are fewer retrofit opportunities available, staff can foresee problems arising in the near future from this policy. Advantages- This alternative would alleviate the timing problem associated with the issuance of the building permit if the retrofit requirement is not complete at the time construction is ready to proceed. Additionally, if the bond or other monetary guarantee is significant enough in terms of cost, the developers should have adequate motivation to complete the retrofitting. 3-3 Council Agenda Report—Water Use Offset Program Modifications Page 4 Disadvantage- If a developer decides not to do the retrofitting and forfeit the bond or guarantee, the City would not only lose the water savings but would then have to administer the funds generated from this activity to accomplish the desired retrofit. While this alternative may provide a reasonable and feasible means of dealing with the backlog or retrofits, staff believes it is premature to provide this option at this time. As development proceeds, and if the staff recommendation is approved by Council, staff will reevaluate the need for this alternative in the future and if needed,return to Council with a revised recommendation at that time. Alternative 2- Change the retrofit ratio from the current 2:1 to a 1:1. Since the inception of the Water Use Offset Program, developer's have been required to retrofit facilities served by the City which will reduce long-term water usage equal to twice the water allocation required for the new project. Reasons for this requirement are to ensure that new development does not impact the City's ability to serve existing customers and to achieve the city-wide retrofit goal in an expeditious manner. Advantage- By decreasing the retrofit requirement for new development, it will temporarily help alleviate the backlog of retrofits for projects currently in the planning and building process. Disadvantages- Changing the retrofit requirement at this point in time would not be fair to developers that have previously participated in the program. Additionally, by changing the program to the 1:1 ratio, completion of the city-wide retrofit goal would take longer to achieve. Because of these factors, staff does not recommend this alternative. Alternative 3- Levy a water efficiency surcharge on water customers who have not retrofitted. To encourage water customers to participate in the Water Use Offset Program, a water efficiency surcharge could be established and levied on water customers who have not retrofitted their home or business. The charge would be eliminated when a customer provides documentation that they have retrofitted. Advantages-This approach would likely persuade most water customers to come forward and participate in the program and achieve the City's goal to essentially retrofit the entire community. Disadvantages-It would be difficult to accurately merge the retrofit database with utility billing database. This could lead to errors in assessing the surcharge. Additionally, from the customers perspective, this could be perceived as a draconian or heavy handed measure. This could be an alternative to be considered in the future, but because of the technical and perception issues, staff does not recommend this alternative at this time. 3-4 Council Agenda Report—Water Use Offset Program Modifications Page 5 Alternative 4- Pass an ordinance that requires all businesses and residences to be retrofitted. A mandatory retrofit ordinance could be adopted which would give water customers a certain period of time (i.e. 1 year, 2 year, etc.) to provide verification that their property has been retrofitted. After the grace period, the City could end all the incentive programs and levy some sort of penalty on properties which are not in compliance. Advantages-This approach, like Alternative 3, would persuade water customers to come forward and participate in the program and achieve the City's goal to essentially retrofit the entire community. Disadvantages- Similar to Alternative 3, it would be difficult to accurately merge the retrofit database with utility billing. This could lead to errors in assessing a penalty. Additionally, from the customers perspective, this could be perceived a draconian or heavy handed measure. This could be an alternative to be considered in the future but because of the technical and perception issues, staff does not recommend this alternative at this time. Alternative 5- Retain the Current Water Use Offset Program Council could decide the current program and water impact fee credit is adequate and retain the current policies and procedures. Advantages- Retrofitting would continue to occur and the City, over time, would essentially be retrofitted. Disadvantages-Retaining the current program would not address the cost issues previously identified in this report and the backlog of retrofitting. Additionally, many of the remaining flush valve and handicap toilets may not be replaced under the current system. Because of these factors, staff does not recommend this alternative. Alternative 6- Terminate the Water Use Offset Program. Council could determine that the remaining higher gallonage toilets will be retrofitted over time through the Retrofit Upon Sale Program and/or the Retrofit Rebate Program and that the Water Use Offset Program should be terminated. Advantages-The Water Fund would receive the full water impact fees instead of the partial fees currently being collected and it would significantly reduce the amount of staff time currently spent administering the program. This time could then be redirected towards other water conservation program areas. Disadvantages-Terminating the program does not accomplish the goal of essentially retrofitting the entire community which will put into question the integrity of our water management policies. 3-5 Council Agenda Report—Water Use Offset Program Modifications Page 6 Because retrofitting is such an important component of the City's overall water management strategy, staff does not recommend this alternative. CONCURRENCES The Finance and Community Development Departments concur with the recommendation made in the report. FISCAL IMPACT Based on estimates provided by the retrofit plumbing contractors, there could be as many as 2,000 flush valve and handicap toilets remaining to be retrofitted. At the additional credit, the potential net impact to the Water Fund based on this estimate could be a revenue loss of $300,000 in impact fees over the next 2 to 3 years. Divided by 2 years, the annual impact to revenues is less than 1.7%. The annual Water Fund analysis currently accounts for a reduction in water impact fee collection revenue due to the retrofit credit and other factors such as tract maps which were vested prior to establishment of water impact fees, so this additional minor reduction will not impact the Water Fund analysis to any significant degree. The financial impact is especially minor when considering the cost to obtain additional water supplies. Attachments Resolution ATTACHMENT 1 xESOLUTION NO. (2000 Ser,.,. 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 has determined that new development must continue to retrofit at a 2 to 1 ratio until the City is essentially retrofitted; and WHEREAS, the intent of the water impact fee retrofit credit is to provide an equitable reduction of the water impact fee in recognition of the costs involved in retrofitting existing facilities. BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Set a variable water impact fee credit for the cost of retrofitting, when it is mandatory as a condition of development based on the number retrofitted bathrooms required to meet water offsets, at $150 per bathroom when replacing a tank type toilet and $300 per toilet when replacing a flush valve or handicap type toilet not to exceed the actual water impact fee. SECTION 2. Authorize the Utilities Director to establish an equitable retrofit credit in cases where retrofit offsets are achieved through methods other than bathroom retrofits. SECTION 3. Rescind Resolution No. 8389. Upon motion of , seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of , 2000. Mayor Allen Settle ATTEST: Lee Price, City Clerk APPROVED AS TO FORM: ffr� Jgjym. C' Attorney 3-6