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HomeMy WebLinkAbout04/16/2002, PH 1 - WATER AND WASTEWATER IMPACT FEES Council M..tin Da. 4-16-02. acEnda i2Epo12t It..n.6.. P14 CITY OF SAN LUIS 0BAISP�O FROM: Bill Statler, Director of Financak Prepared By: Sue Baasch, Utilities Administrative Analyst SUBJECT: WATER AND WASTEWATER IMPACT FEES CAO RECOMMENDATION Adopt a resolution amending water and wastewater impact fees effective July 1, 2002. DISCUSSION Background. In 1991, the Council adopted impact fees in order to implement the City's General Plan policy that new development pay its fair share of the water and wastewater facilities needed to serve it. Except for increases in the consumer price index, wastewater impact fees have not been revised since 1991. Water impact fees were increased in 1994 to reflect water supply costs, and they have also been adjusted by increases in the consumer price index since then. At their March 12, 2002 study session, the Council considered proposed increases in water and wastewater impact fees resulting from updated facility plans and related costs. Based on this review, the Council directed staff to set a public hearing for April 16, 2002 for the adoption of amended water and wastewater impact fees. The attached resolution adopts the new fees with an effective date of July 1, 2002. The proposed fees were developed under the guidelines of AB 1600, which require a nexus between fees imposed, the use of the fees and the development projects on which the fees are imposed. Water-Sewer Master Plans and Related New Development Impact Fees. The City recently completed a comprehensive analysis of the long-term water and wastewater infrastructure needed to meet the City's adopted General Plan. As part of this planning effort, we evaluated the impact fees necessary to ensure that new development pays its fair share of both system-wide and area- specific improvements. Along with these infrastructure fee studies for our treatment, collection and distribution systems, we also updated the water supply component of the water development impact fees. The results of this work were presented to the Council on March 12, 2002. Proposed Citywide Impact Fees. Provided in the side bar are the current and proposed Citywide water and wastewater impact fees for single family residential (SFR) uses. Each SFR unit represents one "equivalent dwelling unit," which is the basis for all other residential and non-residential fees. A Current Pro osed complete listing of current and proposed Water $7,059 $11,256 impact fees for all uses—residential and Wastewater $2,795 $3,236 non-residential—is provided in Exhibit A of the attached resolution. Single family residential units represent one"equivalent dwelling unit,"which is the basis for setting all other fees. Council Agenda Report–Water and Wastewater Impact Fees Page 2 Proposed Area-Specific Fees. "Area-specific" impact fees are also being recommended that will be added onto the Citywide fees. These area-specific fees are also included in Exhibit A. Wastewater Impact Fees: Consolidation of Three Areas. The wastewater impact fees are based on the analysis prepared by David Taussig and Associates, which shows six separate "add-on" areas. In reviewing these further, three of these areas—Airport, Margarita and Edna-Islay—have per unit costs that are within 5% of each other. This small difference makes sense given how close these areas are to each other. Because of Airport Area 751 this, in the interest of simplicity, we Edna Islay 722Margarita 713 recommend consolidating these into one area Consolidated Area Fee $ 729 as shown in the sidebar. This will result in four"add-on" areas instead of six. Other Administrative Changes. The current resolution setting water and wastewater impact fees exempts landscape meters from paying these fees. This was initially done to avoid over- assessing impact fees for wastewater facilities, which are not affected by landscape uses. It was also done to avoid penalizing customers who, with no change in water requirements, subsequently wanted to separate their landscape from "inside" usage for management purposes. However, in some cases, we believe this has resulted in the unintended consequence of new development under-sizing their initial water meter size for a lower fee, and subsequently returning a later date to install a landscape meter to correct for this—with no additional fee assessed due to this exemption. On balance, we believe it makes the most sense to charge water impact fees for landscape meters but to exempt them from wastewater fees. At this point, we have already accommodated most of those cases where a separate meter may be warranted by an existing customer for"management" reasons (and not to address increased water requirements or an initial under-sizing). In those cases where an additional landscape (or other meter) is requested, no fees will be charged if the existing meter is down-sized so that the total "EDU's"at the site remain the same (or less). In those rare cases where this won't work and there is a legitimate case for another meter unrelated to water demand, the Utility Billing Adjustments Committee is already authorized to make equity adjustments where this is truly warranted. In summary on this point, we believe it makes the most sense for our rate structure to assume that an initial (or subsequent) request for a landscape meter is based on demand, not other factors. In the event that it is genuinely due to "other factors,"this should be considered the exception,not the rule. Public Notification. We have provided extensive notification about the proposed fee increases for both the March 12 study session as well as this public hearing. In both cases, along with our usual public notice, we mailed notices to over 200 community groups or individuals who have expressed interest in fee issues in the past. Along with providing background information about the proposed fees (and for the April 16 public hearing, a detailed listing of the proposed Citywide and area-specific fees), the notice offered to provide additional information upon request and to meet with them at any time at their convenience. As of April 8, we have received several /-a Council Agenda Report—Water and Wastewater Impact Fees Page 3 requests for information via telephone and email; however, we have not received any meeting requests nor have we received any correspondence in support or opposition to the proposed fee increases. FISCAL IMPACT There are no direct fiscal impacts associated with adopting the proposed impact fees. In fact, their purpose is to avoid adverse fiscal impacts on our ratepayers by ensuring that new development pays its fair share of the water and wastewater improvements needed to serve it. ALTERNATIVES As presented at the March 12, 2002 study session, alternatives include: 1. Defer adopting the water supply portion of the updated fees. The recommended fees are based on Council-adopted policies and the best information we have at this time. Deferring adoption of the water supply portion of the proposed fees makes sense if new information or underlying policy changes are likely in the near term. However, no new information is likely in the near term; and revision of these policies, while certainly possible, is unlikely to occur soon given the high level of community interest in water supply issues. If these policies are revised at some point in the future, the fees can be correspondingly revised at that time. 2. Adopt lower fees. The facility costs allocated to new development are based on the best engineering and financial analysis available to the City at this time, which is not likely to change soon. Based on past experience, adopting lower fees based on less-than-likely assumptions simply defers hard decision-making to the future, when the cumulative impact of deferral may make these decisions even more difficult. Moreover, this will result in higher general-purpose water rates in the future than would otherwise be required. Lastly, purposely setting fees at levels that are less than the supported cost would be inconsistent with adopted City policy. 3. Do not adopt any revisions to current fees. As with Alternative 2, this would also be inconsistent with adopted City policy that new development "pay its own way." Additionally, given the high cost of this infrastructure, this option would also result in higher general-purpose rate increases in the future than would otherwise be required. ATTACHMENT Resolution amending water and wastewater impact fees AVAILABLE IN THE COUNCIL READING FILE 1. Council Agenda Reports from March 12, 2002 Council Study Session on Water and Wastewater Development Impact Fees l I Council Agenda Report—Water and Wastewater Impact Fees Page 4 2. Water and Wastewater Development Impact Fee Studies Prepared by David Taussig and Associates and the Department of Finance G:Water and Sewer Impact Fee Update/Council Agenda Report—Adoption of Water and Wastewater Impact Fees q RESOLUTION NO. (2002 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 connection fees, hereinafter referred to as impact fees, and provides for the setting of fee amounts and other matters by resolution of the Council; and WHEREAS, the Council has reviewed the WATER AND WASTEWATER SYSTEM MASTER PLANS which identify needed improvements to the City's water and sewer systems to meet General Plan build-out; and WHEREAS, David Taussig and Associates has prepared an AB 1600 FEE STUDY UPDATE dated February 2-5, 2002 showing appropriate impact fees based on these master plans; and WHEREAS, the Council has approved the Water Element to the General Plan that identifies the amount of water necessary to meet build-out based on adopted planning policies; and WHEREAS, the March 12, 2002 study titled WATER DEVELOPMENT IMPACT FEES updates water supply costs based on the best engineering information available and allocates them appropriately to new development. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. FINDINGS a. The purpose of water and wastewater 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 water and wastewater 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. 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. There is a reasonable relationship between the amount of the fee and the cost of the facilities and improvements attributable to the developments on which the fees are imposed. The estimated costs of facilities and improvements, including financing costs, to be paid for by _s Resolution No. (2002 Series) Page 2 connection fees are shown in the February 25, 2002, Water and Wastewater AB 1600 Fee Study Update prepared by David Taussig and Associates, Inc., and the March 12, 2002, Water Development Impact Fees study prepared by the City of San Luis Obispo Finance Department. The costs have been allocated to new development on the basis of dwelling unit type(residential) or water meter size and estimated strength of sewer system discharge (non-residential), which are reasonably related to the water and wastewater facility capacity consumed by a development proj ect. 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 will recommend to the Council a revised fee for their consideration. SECTION 3. AMOUNT OF IMPACT FEES Effective July 1, 2002, water and wastewater impact fees shall be in the amounts set forth in Exhibit A attached hereto. Unless otherwise acted upon by the Council, the amount of the 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. 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, and shall be collected by the Building Official. Under Government Code Section 66007(b), the City is authorized to collect the fees at the time of building permit issuance because the fees are for public facilities and improvements for which an account has been established and funds appropriated, and for which the City has adopted a proposed construction schedule; or the 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 processing time period allowed by the Uniform Administrative Code as adopted by the Council. SECTION 5. EXEMPTIONS a. Fire Protection. Upgrading existing water service 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. No wastewater impact fees will be charged for meters installed solely for landscape irrigation purposes. l' I 1 Resolution No. (2002 Series) Page 3 SECTION 6. SEPARATE ACCOUNTS The Finance Director shall deposit fees collected under this resolution in a separate water impact fee and wastewater impact fee accounts as required by Government Code Section 66006. Within one hundred and eighty (180) days of the close of each fiscal year, the Finance Director shall make available to the public an accounting of these fees, and the 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: the foregoing resolution was adopted on April 16, 2002. Mayor Allen Settle ATTEST: Lee Price, City Clerk APPROVED AS TO FORM: Joh". Jor nsen ity orney EXHIBIT A Water and Wastewater Development Impact Fee Schedule Effective July 1, 2002 WATER DEVELOPMENT IMPACT FEES .:. Area-Specific "Add-On" Airport EDU* Citywide Margarita Residential Per Unit Single Family Residential 1.0 $ 11,256 $ 746 Multi-Family Residential 0.8 9,005 597 Mobile Home 0.6 6,754 448 Non-Residential Meter Size 3/4 Inch 1.0 11,256 746 1Inch 2.0 22,512 1,492 1Y2 Inch 4.0 45,024 2,984 2Inch 6.4 72,038 4,774 3 Inch 14.0 157,584 10,444 4Inch 22.0 247,632 16,412 .6 Inch 45.0 506,520 33,570 WASTEWATER DEVELOPMENT IMPACT FEES Impact Area-Specific"Add-On" Airport Dalidio Margarita Madonna Irish 7EDU* 70tywideEdna-Islay McBride Hills Orcutt Residential Per Unit Single Family Residential 1.0 $ 3,236 $ 729 $ 207 $ 367 $ 1,689 Multi-Family Residential 0.8 2,589 583 166 294 1,351 Mobile Home 0.6 1,942 437 124 220 1,013 Non-Residential Meter Size ** '/41nch 1.0 3,350 729 207 367 1,689 IInch 2.0 6,700 1,458 414 734 3,378 1%2 Inch 4.0 13,400 2,916 828 1,468 6,756 2Inch 6.4 21,440 4,666 1,325 2,349 10,810 3Inch 14.0 46,900 10,206 2,898 5,138 23,646 4Inch 22.0 73,700 16,038 4,554 8,074 37,158 ,6 Inch 45.0 150,750 32,805 9,315 16,515 76,005 * Equivalent dwelling unit ** Citywide non-residential EDU is adjusted upwards by about 3.5%to account for higher discharge strengths I-� DATE N ___ ITE !j�� San Luis Obispo Chamber of Commerce 1039 Chorro Street • San Luis Obispo, California 93401-3278 (805) 781-2777 a FAX (805) 543-1255 • TDD (805) 541-8416 David E. Garth, President/CEO April 15, 2002 UNCIL ❑ CIDD DIR i2rgAO DIR r?ACAO [I FXCHIEF Mayor Allen Settle " RNEY (�W DIR y LERK/ORIG ❑ POLICE CHF Members of the City CouncilMiaq0 ` REC DIR City of San Luis Obispo UTIL DIR 990 Palm Street HR DIR San Luis Obispo, CA 93401 �h"'"" 777977, Re: Water Impact Fees, Item# PH 1, Council Agenda for Apr11 16 Dear Mayor Settle and Council Members: While our Chamber has not adopted an official position regarding the proposed Citywide water and wastewater impact fees, we would like to re-iterate at this time our concern about water policy issues that have a direct effect on the need to raise rates so dramatically. In our letter of July, 2001 on the subject of the water management element policies, we requested that Council take action on City staffs suggestion regarding the need to reassess the policy (4.1.1) requiring a reliability reserve of half of the safe annual yield from a new water supply. Our statement at that time was that this may not be economically feasible in today's water market and we recommended that the percentage be adjusted. Council's decision not to do so at that time has now contributed to the need for significantly higher water impact fees. We ask that you re- visit the issue and once again look at the possibility of reducing the amount of water required for the reliability reserve. We think that it would be prudent to re-evaluate some of the underlying assumptions and policies that create a scenario where we need to increase water impact fees by over$4,000 and, in the years to come, increase fees by 21.5% for all ratepayers. Thank you for considering our input on this matter. Sincerely, RECEIVED nod 1 5 2<<ill � 4eanne Potter Chairperson of the Board SLO CITY COUNCIL e-mail: slochamber@slochamber.org • websites: www.slochamber.org www.visitsio.com i To Honorable Mayor and City Council From: Dave Romero Subject: Water Impact Fee Increase—April 16, 2002 The Council is considering raising.the impact fee for new connections from$7095/house (already the highest within the county or among comparison cities)to $11,256/house, which will be BY FAR the highest in the county or among comparison cities. Most of this fee increase is driven by the inclusion of costs for a "Reliability Reserve". Water customers will pay$3.1 million every year though it may NEVER be used I believe city water users would be well served by a reconsideration of this costly approach to reliability and deferring this fee increase until after the fimdamental approach has been reviewed. Rather than continually paying for excess water from one source, I believe reliability can more effectively be achieved by utilizing many different water supply sources. Thus if one failsto produce full yield, other sources can fill the need The City currently relies on 2 Vz sources of supply- 1. upply1. Salinas Dam 2. Whale Rock Dam 3. Limited pumping from Los Osos Valley The City could greatly increase reliability by- 1. y1. Agreement with Morro Bay for joint use of Desal plant 2. A connection to the State Water pipeline which is adjacent to our city. 3. An agreement with the Dalidio family permitting city pumping and use of water historically used for farming,thereby greatly increasing Los Osos valley water. If all three of these additional sources were obtained,the city would have 5 separate water sources, and supplies would be VERY secure,more reliable than any other community I have heard of Costs for adding these sources would be minimal and would. allow elimination ofthe 2000 acJft reserve and its$3.1 million/yr cost. This might result in REDUCED water impact fees and water rates rather than INCREASED fees and rates. San.Luis Obispo housing costs are among the highest in the nation,with city fees adding significantly to the cost. Young fimnlies cannot afford to live here(including our own children and grandchildren), and San Luis Obispo is rapidly becoming a city of seniors and students,with fewer and fewer moderate-income fimn7ies able to afford housing and provide vitg&y. The fee issue is so fimdamental to our community that I urge:the Council to defer adding these fees until the alternatives have been thoroughly considered