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HomeMy WebLinkAboutAgenda - 03-03-1999 - 9cORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: Mazch 3, 1999 Action Agenda Item # A- C 1 SUBJECT: County Response to OWASA request for comments relative to its utility extension and assessment policy discussion paper DEPARTMENT: County Manager PUBLIC HEARING: Yes No ATTACHMENT(S): BUDGET AMENDMENT: Yes No (under separate cover) INFORMATION CONTACT: County Draft Letter County Engineer Extension 2303 OWASA Letters & discussion paper University of North Cazolina letter TELEPHONE NUMBERS: Chapel Hill Letter & attachments Hillsborough - 732-8181 Durham - 688-7331 Mebane - 227-2031 Chapel Hill - 967-9251/968-4501 PURPOSE: To present for BOCC review, revision and approval a draft letter to OWASA replying to OWASA's request for a County response or reaction to its position paper on utility extension and assessment policy. BACKGROUND: At its May 6, 1998 meeting, the BOCC heazd a presentation by OWASA on utility extension and assessment issues as encapsulated within an official OWASA discussion paper entitled "Assessment Policy Applicable to Water and Sewer Service Extensions into Existing Unserved Neighborhoods". By letter of June 16, 1998, OWASA requested that the BOCC provide OWASA with suggestions and comments relative to that discussion paper. Staff and County Commissioners have been working intermittently to develop a response to OWASA since September 1998. Providing an adequate response to OWASA has been complicated by a number of factors. Primary among these is the fact that Orange County has relatively little direct responsibility in the area of utility extension and assessment policy. However, the BOCC has historically been awaze of and concerned with: 1) utility extension issues as they relate to potential public health impacts in unsewered urbanized azeas; and 2) utility assessment related cost concerns as they apply to affordable housing opportunities in Orange County. In general, the BOCC has considered utility extension and 2 assessment policy as a component of a more comprehensive set of utility issues that include land use and growth implications of utility availability, equitable funding of all aspects of utility service and the public health implications of long term use of on-site utility service strategies. The attached draft letter attempts to provide some general guidance to OWASA in regard to its specific utility extension and assessment issues and to provide information on the County's role in the larger set of utility issues, concerns and strategies. RECOMMENDATION: The Administration recommends that the BOCC review the attached draft letter providing input to OWASA, revise the letter as necessary to accurately reflect its convictions, direct staff to make the necessary revisions and authorize the Chair to sign the revised letter on behalf of the BOCC. March 3, 1999 Mr. Daniel C. VanderMeer Chair, Board of Directors Orange Water and Sewer Authority P.O. Box 366 Carrboro, N.C. 27510-0366 Dear Mr. VanderMeer: The Orange County Board of Commissioners offers the following comments regarding the local water supply and water quality protection issues discussed at the October 1, 1998 meeting involving Orange and Chatham Counties, the Towns of Carrboro, Chapel Hill and Hillsborough, and OWASA. Clearly, our region's explosive population growth makes it imperative that all local jurisdictions work together to protect the quality of our natural resources and promote the most environmentally sound usage of those resources. Orange County is located in the upper portions of a number of important and environmentally sensitive water supply river systems. Consequently we are acutely conscious of the need to be judicious in our efforts to be good stewards of our water resources, and of the need to work with governmental entities within and adjacent to Orange County to develop strategies and accomplish goals consistent with that stewardship. In accordance with this philosophy, the Orange County Board of Commissioners commends OWASA on its efforts to bring together stakeholders in local water supply matters to discuss issues of mutual concern. Relative to the issues raised at the October 1st meeting, the Board of County Commissioners recommends that OWASA work with Chatham County, in consultation with the authority's constituent governments, to: -- Refine the emergency water supply agreements and infrastructure connections required to assure that customers dependent upon Chatham County and OWASA receive an uninterrupted supply ofhigh-quality water during emergency situations; -- Explore the use of OWASA's intake site to provide immediate access to Jordan Lake water supplies for Chatham County while preserving future access for OWASA. The Orange County Board of Commissioners is ready to join all existing and potential users of Jordan Lake water supplies in studying, developing, and implementing effective watershed and water quality protection strategies. The Orange County Board of Commissioners is similarly ready to work with Chatham County to discuss, develop and implement enhanced watershed and water quality protection strategies for University Lake water supplies. If I may provide any additional input or staff assistance, please contact me at your earliest convenience. sJ' `~ ~ V^~- ~~ ~~ S~ `til ~` s~ ~6 `~~ ~ 3 ~" JQ Mazch 3, 1999 a~~ a~~o`'~ ~ i ~~ Mr. Darnel C. VanderMeer Chair ~ G yip oazd of Directors ~ ~~,C-( ~., alt' Orange Water and Sewer Authority ~~' ~J ~ ~, - ~, PO Box 366 Cazrboro, NC 27510-0366 l%j~'~~~i~~ Dear Mr. VanderMeer: 7 ~ ~',! , This letter is written in response to Joal Broun's letter of June 16, 1998, soliciting Boazd ~ ~~ of County Commissioner continents on OWASA's discussion paper entitled "Assessment ~ Policy Applicable to Water and Sewer Service Extension to Existing Unserved Neighborhoods". The Boazd of County Commissioners appreciates the opportunity to provide input on OWASA policy initiatives. The Boazd is familiar with the issues outlined in your position paper and with the responses it elicited from the Town of Chapel Hill and the ~ ~, University of North Cazolina. Accordingly, the Board encourages OWASA to search out and evaluate high priority azeas for utility extension within the portion of the OWASA service area. deemed appropriate for such extensions under the provisions of local land use, planning and zoning ordinances. The Boazd also believes that OWASA should seek ~ ~ to increase its flexibility in assigning cost of service as this would be beneficial_for the ` entu~e community. To achieve this enhanced flexibility, the Boazd advi to: a) re-negotiate its purchase and sales agreement with the university; )use its general fund balance to pay the legal and engineering costs associated with utility extension projects; and c) acquire the remainder of utility extension project costs from the benefiting pazties. 1 In general, the Board of County Commissioners views utility assessment and extension policy as one component of a lazger and more comprehensive utility policy involving not only cost and cost allocation considerations but also efforts to: 1) protect the ground- water and water supply watersheds within the County; 2) deal with land use and growth concerns/impacts attributable to utility extension; 3) address ability to pay, affordable housing and equity concerns attendant to various utility extension fmancing strategies; and 4) protect the public and public health by melding utility extension strategies with Mr. Daniel C. VanderMeer Mazch 3, 1999 page 2 DRAFT strategies to ensure that single family and community on-site utility systems become more reliable and of minimal environmental impact. Accordingly, the Board of County Commissioners, the elected officials of other local government jurisdictions within the County and the Board of Health have been working together for a number of years to develop programs and regulations that will protect the health of the public and preserve the County's environment. Much time on the part of elected and appointed officials, including OWASA representatives, members of various ad hoc committees, and staff has been expended in efforts to identify, evaluate and address utility issues which include: a) implementing utility extension, utility service azea boundary and water supply watershed protection elements of land use, planning, zoning and subdivision regulations; b) creating programs to ensure that single family and community on-site utility systems become more reliable and of minimal environmental impact; and c) creating a "toolbox approach" to solving on-site utility related public health problems. The County and the community are continuing to work at resolving all outstanding utility-related issues and the County appreciates the many instances of OWASA's utility policy and technical issue input into these discussions.. The Boazd is certainly willing to enfold all of OWASA's suggestions, concerns and ideas into its current and future discussions and will actively welcome OWASA's inclusion in those discussions. If I may provide any additional information or input, please contact me at your earliest convenience. Sincerely, Alice M. Gordon, Chair Orange County Boazd of Commissioners 41NIaSA QRANG~ VY.ATER & SEWER ACiTHO~tx~'Y Quality Service Siacr 1977 June l6, 1998 Ms. Margaret Brown, Chair Orange County Board of Cornmtissioners Post O ffice Box 8 i 81 Hillsborough, NC 27278 .Dear Margare~: F am waiting to thaarLk you for the opportunity on May b, 199$ to discuss OWASA's provision of sewer service to unnerved neighborhoods through the assessment process. 1 and the rest of our Board appreciated the openness and candor with which we were able to discuss the challenging issues of project cost, subsidy, and custoaner equity. There aze no easy answers to these important policy rnatters, but it is clear from our discussions with atl three governmental entities that there is considerable interest in more carefully defining the "benefiting parties" terminology in our purchase and sale agreement between OWASA and the University. i am also writitlg to encourage you and the Board of Commissioners to provide us with your suggestions and wmmcnts regarding our March 12, 1998 discussion paper entitled assessment Poticy.4pplicable to Waster and Sewer Extensions to ,Existing Unnerved Neighborhoods no later than Friday, September 18, 1998. At that time the OWASA $oazd will begin consolidating the ideas we have received into a revised proposal that we would hope to innpleanent as quickly as possible. Please feel free to contact me or Ed Kerwin if you have further questions Sincerely, ~4 Joal H. Bro~u>y C air Board of Directors C: Board of Directors Ed Kerwin 4IM) Junco E:~•rry Rout F.ycw/Opportunitr,t'n~plmty V~;~ 1919) 96$•4321 I'C) 1)nx 3h6 Printevl un Ite•e; c6•.t -'sl>L. F:1X f 919) 968.4461 Carrlxnu, \c.' 27514-U3G6 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: May 6, 1998 Action Agenda Item No /0_Q SUBJECT: OAASA'S ASSESSMENT POLICY - DISCUSSION PAPER -------------------------------- DEPARTMENT County Commissioners -------------------------------- ----------------------------- PUBLIC HEARING YES NO~ x ATTACHMENT (S) Discussion Paper BUDGET AMENDMENT: _YES NO INFORMATION CONTACT Chair Margaret W. Brown TELEPHONE NUMBER Hillsborough 732-8181 Chapel Hill 968-4501 • Mebane 227-2031_ Durham 688-7331 ----------------------------------------------------------------------- PURPOSE: To hear a presentation about OWASA's Assessment Policy and the process by which the ORASA Board would like to receive feedback from the County Commissioners. BACKGROUND: The OAASA Board of Directors adopted a discussion paper entitled Assessment Policy Applicable to Water and Sewer Service Extensions to Existing Unserved neighborhoods. They will outline the process by which the OAASA board would like to receive feedback from its constituent governments. RECOMMENDATION: Receive report as information and give guidance to County staff for feedbacks to the OWASA Board. OWASA ORANGE WATER & SE~'VER AUTHORITY ~ 2 c, ..~.. -.,a Quality Service Since 1977 :>~a:.w~~ . ._ March 27, 1998 Ms. Margaret Brown, Chair Orange County Board of Commissioners Post Office Box 8181 Hillsborough, NC 27278 SUBJECT: OWASA Assessment Policy Dear Margaret: At our March 12, 1998 Board of Directors meeting., the OWASA Board of Directors adopted a discussion paper entitled Assessment Policy Applicable to Water and Sewer Service Extensions to Existing Unserved Neighborhoods. This document is enclosed for the Board of Commissioner's review. - ~ I would like to be added to the Commissioner's agenda for your May 1998 meeting to make a 10 or 15 minute presentation about OWASA's Assessment Policy and the process by which the OWASA Board would like to receive feedback from its constituent governments regarding this matter. I look forward to seeing you on May 5, 1998. Very truly yours, Joal Hall Broun Chairwoman Board of Directors cc: OWASA Board of Directors Ed Kerwin, Executive Director John Link, County Manager,/ 400 Jones Ferry Road Equa! Opportunity Employees Voice (919) 968-4421 PO Box 366_ -_- Printed on Rerycled Paper FAX (919) 968-446 O WASA OR.A.NGE WATER & SEWER AUTHORITY QuaL'ty Service Since 1977 DISCUSSION PAPER Assessment Policy Applicable To Water And Sewer Service Extensions To Existing Unserved Neighborhoods March 12, 1998 3 40Q Joncs Ferry Road Equal Opportunity Employer Voice (919) 968-~21 PO Box 366^'^. ^^ ~ Printed on Rerycled Paper Fr1X (919) 968-i-#64 Discussion Paper March l2, 1998 Page 3 4 Public water supply is considered to be more reliable than private wells in urban azeas. Similarly, public sewer service is much more reliable than septic tanks in densely populated urban areas. When private on-site sewage systems fail, polluted effluent may contaminate groundwater resources and nearby streams and may present a threat to public health. Extending public services to locations where these circumstances exist is desirable in order to alleviate or avoid public health and environmental concerns. In the summer of 1997, OWASA had a consultant prepaze a comprehensive study of the unsewered parcels in developed neighborhoods within the OWASA service area. The consultant generally examined 1,000 septic systems with an average age of 30 years and found that 37 systems (four percent) were failing. The report also found that based on the Soils Survey for Orange County, only 16 percent of the total land within these neighborhoods is considered suitable for septic systems. The remaining 84 percent is considered to be mazginally suitable or unsuitable, which is expected to result in additional septic tank failures. The estimated construction cost to provide sewer service to the unsewered areas studied was approximately $17 million. Individual lot costs ranged from $9,000 to $29,000 per lot excluding Service Availability Fees and private service laterals. Since 1977, OWASA has received only one petition to extend water service. Due to the very limited interest and tack of documented problems with private wells, OWASA has not commenced a comprehensive study of the areas without public water service. jbr C:Vawite\tmigoldoo4epprts\vnpol_ I O.wn Discussion Paper March 12, 1998 Page 2 ORANGE WATER AND SEWER AUTHORITY DISCUSSION PAPER ASSESSMENT POLICY APPLICABLE TO WATER AND SEWER SERVICE EXTENSIONS TO EXISTING UNSERVED NEIGHBORHOODS March 12, 1998 Purpose 5 The Orange Water and Sewer Authority (OWASA) desires to establish along-term policy for the extension of water and sewer services through the assessment process to existing unserved neighborhoods within the OWASA service area. Such a policy is driven by long-term public health and environmental concerns and will have significant legal, financial, and planning implications. These issues must be fully and carefully considered by the OWASA Boazd of Directors with input from - OWASA's customers, constituent governments, the University of North Cazolina at Chapel Hill, and other stakeholders prior to final policy action. The purpose of this document is to provide background and historical information; discuss issues and alternatives; and recommend a general policy framework for assessment projects. This document will serve as a basis for discussion and consideration of'this issue in a joint workshop with OWASA's constituent governments to discuss the Assessment Policy before the OWASA Boazd takes any formal action. Background OWASA currently provides water and wastewater services to 15,200 customer accounts. Within existing developed neighborhoods in the OWASA service area, approximately 700 pazcels do not have public water mains on ~or adjacent to the property and approximately 1,300 parcels do not have public sewer mains on or adjacent to the property. jbf f:Wuuia\amipm\dac+4eports\wspol_IO.sam Discussioe Paper March i2, 1998 Page 4 6 The existing Agreements of Sale and Purchase between OWASA and the Town of Carrboro, the Town of Chapel Hill, and the University of North Carolina established that OWASA should in general follow a policy where, to -the extent possible, fees are "based on cost of service" methodology. In the specific case of water and. sewer line extensions, this .policy was made explicit by the statement "...the ultimate cost of any such extension will be borne by those primarily benefiting from such extension." The agreements also authorize either Town to construct extensions to the water and sewer systems, and dedicate the improvements to OWASA. The Towns and Orange County have statutory authority to pay for water and sewer system improvements and to recover such- costs through several methods, including assessing the benefited parties. -- The OWASA Board of Directors has stated a willingness to seek the input of the parties and to work together to reach a construction of the terms of the original Agreements of Sale and Purchase in light of contemporary circumstances and needs. O WASA has the authority to make special assessments against benefiting properties for all or part of the costs of constructing; reconstructing, extending or otherwise building or improving water and sewer systems (G.S. 153A-185). From 1977 to 1993, OWASA extended water service to one project area and sewer service to five project areas. All of the project costs were assessed to the benefited parties. There were no subsidies from OWASA; however, several of the projects received State grant funds which reduced assessments to the benefited parties. Discussion Paper March 12, 1998 Page 5 7 In 1992 and 1993, OWASA was petitioned to provide sewer service to six neighborhoods. In response to citizen concerns about the high cost of the service, the OWASA Board of Directors adopted, in December 1993, a Policy Statement On Assessment Projects For Extension Of Water And Sewer Mains. This policy established a line foot method for determining the assessment amount and excluded a portion of engineering and legal fees. This policy was applied to the six sewer projects with the OWASA Boazd's direction to review the cost experience at the end of 30 months (June 1996). The Town of Chapel Hill contributed funds to five of the six sewer projects. The Town also developed a method for assisting individuals who met certain economic criteria with subsidies for availability fees and plumbing costs. The Town of Carrboro recently established a policy to provide $750 of assistance to property owners connecting. existing homes to the sewer system. . The OWASA Board developed incentives to encourage system connections within assessment areas. This program. rebates a portion of the availability fee if the property owner is connected to the new system within 90 days of project completion. The program also offers monetary assistance to property owners who were previously connected to the sewer system but not in accordance with OWASA's current water and sewer extension and service policies. Staff s review of the six sewer assessment projects andertaken during the 30 month period .revealed that the line foot rate established by the Board did not recover the full cost of the improvements. Of the six projects, the benefited parties paid approximately 39 percent of the total cost ($1,234,227}, the Town of jbr f:Wbuite~nigo~doo4eponalwspol_IO.san ' Discussion Paper March 12, t 998 Page 6 1 8 Chapel Hill paid approximately 11 percent of the total cost ($342,109) and the OWASA rate base assumed the remaining 50 percent of the total cost ($1,595,096). Since the expiration of the 30-month assessment policy in June 1996, additional petitions for sewer extensions have been received by OWASA. The Board desires to consider these petitions as part of a long-term policy. Funding Alternatives Possible alternatives for funding assessment. projects are outlined below. Potential advantages and disadvantages are indicated by plus (+) and minus (-) signs respectively. 1. Benefitins Party Pays 100 Percent Of Assessment Project Costs + Complies with cost-of-service methodology stipulated by the Agreements of Sale and Purchase. + Eliminates. financial impact on existing customers. - Financial impact on benefiting parties can be substantial. - Needed water and sewer improvement projects may not be done in a timely fashion without financial assistance. jbr C:v«su~~e~am~peo~auaaeport.~,•~po~_to.,.m Discussion Paper March 12, 1998 Page 7 2. OWASA Reduces Assessment By An Amount Commensurate With EYnected Benefits To The Entire OWASA Customer Base To Eliminate A Threat Or Potential Threat To OWASA's Drinking Water Suaaly + Financial contribution provides greater incentive for the timely elimination of existing or potential threats to the public drinking water supply. + Reduces costs to benefiting parties. ~ Impact on Agreements of Sale and Purchase may need further review. ~ Under some circumstances, precise estimates of the benefit may be difficult to deternune. - Increases- costs to existing customers. - As an enterprise operation which is solely supported by user fees, OWASA is not the most appropriate entity for redistributing the community's financial resources. 3. OWASA And Benefiting Party Share Assessment Project Costs + Financial assistance provides greater incentive for timely extension of water and sewer services. + Reduces costs to benefiting parties. - May not comply with the Agreements of Sale and Purchase. - Increases costs to existing customers. - As an enterprise operation which is solely supported by user fees, OWASA is not the most appropriate entity for redistributing the community's financial resources. jbr f:Wnuitel+mipro\doa4eports\wspol_IO.sam Discussion Paper March 12, 1998 Page 9 10 Findings and Recommendations OWASA has discussed assessment project policy throughout the recent rate study and during recent special work sessions and intergovernmental meetings with its constituent governments. Based on the information and discussions to date, OWASA hereby finds that: 1. Experience with previous assessment projects indicates that the customers appreciate the improvement that public water and sewer services provide their property and the community at large. It is widely acknowledged these improvements add lasting value to the property. 2. The existing provisions of the Agreements of Sale and Purchase cleaziy restrict OWASA's provision of financial assistance to parties benefited by the extension of water and sewer services. 3. Assessment costs aze 'a primary deterrent to the more timely extension of public water and sewer services to existing unnerved neighborhoods. 4. All existing and new developments should have economically and environmentally acceptable provisions for water gad sewer services which have a useful life corresponding to the anticipated life of the development. 5. A comprehensive management and inspection program for on-site (septic tanks) and alternative wastewater management systems does not currently exist within and azound the OWASA service area. Such a program is needed for the OWASA service area and for 0 WASA's water supply watersheds. The entity responsible for administering such a program would need to be determined by the Towns and the County, with participation by OWASA as requested. 6. It is appropriate and desirable for the Towns of Carrboro and Chapel Hill, and Orange County to fully consider and determine: jbr f:Vo~i[d+mipo\does4eporo\urapol_lo.sam Discussion Paper March 12, 1998 Pagc 8 11 4. Town(sl, County And Benefiting Party Share Assessment Proiect Costs + Financial assistance provides greater incentive for timely extension of water and sewer services. + Reduces costs to benefiting parties. + As general purpose elected governments, the Town(s) and County may be more appropriate entities and have greater flexibility for redistributing the community's financial resources and targeting subsidies for assessment projects than OWASA. + Eliminates need for OWASA to increase existing customer rates to fund these projects. - Places greater financial burden on property owners that may not "directly" benefit from the assessment projects. May constrain the Town(s) and County's ability to address other funding needs. 5. Combination Of Approaches 2, 3 And 4 Participation percentages could be varied among the benefiting party, OWASA, the Town(s) and the County. 6. State And Federal Grants Or Other Tbird-Party Assistance Any contribution from other sources, such as Community Development Block Grants or the State's Clean Water Management Trust Fund, would be beneficial to all parties. Eligibility for this type of assistance is uncertain, but is expected to be limited. jbr F.UoouiteWnipm~doeslreports\wspol_IO.sun Discussion Paper March 12, 1998 Page 10 12 a) the extent to which revenues from the general public tax base and other funding sources should be used to .offset the cost of providing water and sewer service to unnerved neighborhoods;. b) the appropriate method for providing this financial assistance; c) the merits of establishing a standing fund to which the constituent governments contribute and from which financial contributions would be made to reduce the burden of the benefiting parties. 7. OWASA wishes to continue to encourage the constituent governments to contribute funds to reduce the financial hardship on the benefiting parties. 8. It is desirable for the University to determine if it is willing to accept the view that the entire community, including the University, benefits from the elimination of public health threats from failing septic systems and therefore will agree to allow money from the general rate base to be used to subsidize extension projects. OWASA Assessment Polic~A~nlicable To Water And Sewer Service Extension To Existing Unnerved Neighborhoods Pending potential supplemental understandings and/or clarifications in the Agreements of Sale and Purchase, the OWASA Board of Directors will maintain in effect the following assessment policy applicable to extension of improvements into existing unnerved neighborhoods. Benefiting party to pay total project costs. 2. OWASA will seek to reduce the financial hardship on the benefiting parties through measures that may include, but are not limited to: jbr f:Vaauitelamipo\doo4epoMy\v.~poi IO.,.m Discussion Paper March t 2, 1998 Pagc t 1 a) contractual arrangements providing extended payback periods of payments for assessments; b) reducing up-front assessment charges and levying increased monthly service and/or commodity chazges for assessed parties; and c) consolidating the design and construction of improvements to various unnerved neighborhoods to obtain economies of scale. Closing Statement 13 The OWASA Board of Directors requests comments from the Town of Carrboro, the Town of Chapel Hill, Orange County Boazd of Commissioners, The University of North Cazolina at Chapel Hill, and the general public with regard to these issues. The OW~SA Boazd of Directors will consider entering into supplemental understandings and/or clarifications to the Agreements of Sale and Purchase if such actions better reflect the policy objectives of the constituent governments, The University of North Cazolina at Chapel Hill, and OWASA. jbr f Vooui~el~migo~doaYeporta\wspol_IO sam THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL Ofrioe of Uw aownire Yoe Chancellor May 12, 1998 Mr. Ed Kerwin Executive Director Orange Water & Sewer Authority P.O. Box 366 Carrboro, NC 27510-0366 Dear Ed: ~D'~~~~~,~~ -,,:;:. l~AY 5 • ' ~' ~. ;.; ~---.~. t ., --~ The Uaiveairy of Noah Carolun at Chapel HiU CSN 9155. 103 So°th aaUdiog ~ xal, lvc rs99Alss (919) 9626716 FwX: (919) 962.1647 Thank you for your letter of March 27, 1998. As you requested, we have~reviewed your discussion paper entitled Assessment Policy Applicable to FYater and Sewer Service Extensions to Existing Unserved Neighborhoods. Our comments are directed to the proposal that suggests 8liminating public health threats from failing septic systems by subsidizing sewer extension projects through the general rate base. As you are aware, the Agreements of Sale and Purchase between tfie University and OWASA for both water and sewer specify that "...the ultimate cost of any such extension will be borne by those primarily benefiting from such extension".' It is our continuing position that the general rate base should not be used to subsidize extension projects. The discussion paper describes various funding alternatives. Any alternative that envisions the use of OWASA funds accumulated from the resources generated by the sale of water and sewer services is not consistent with the terms of the agreements described above and, therefore, not acceptable to the University. The information provided relating to the six recent projects indicates that the OWASA rate base paid SO percent of the total cost ($1,595,096) for those six projects. These projects benefited a small portion of OWASA customers. Our records indicate that OWASA receives 24.1% of its annual revenue from the University. This suggests that the University's contribution to these six projects was approximately $385,100. It is our position that the use of funds received from,the sale of water and sewer services should clot have oeea used Y~orch~se projects. We agree that it is important to address long-term public health and environmental concerns. However, we feel that it is appropriate to deal with any subsidy issue through the city or county tax base rather than additionally burden the water and sewer rate. This approach appears to be the philosophy of our surrounding cities and towns in the Triangle and Triad areas. if you have any additional questions regarding our position on this issue, please do not hesitate to call me at 962-6176 or Bruce Runberg at 962-7248. Sincerely, ~. r-_Ison s. rl~yd ;:xecutive Vice: Chancellor a.~• <: ~, ~~ ~l I Tc~ J `; kT„ CAµO~' TOWN OF CHAPEL HILL 3O6 NORTH COLUMBIA STREET CHAPEL HILL, NORTH CAROLINA Z7S 16 OFFICE OF THE MAYOR September 17, 1998 Chairperson Joal H. Broun OWASA Boazd of Directors P.O. Box 366 Carrboro, North Cazolina 27510-0366 Dear Chairperson Broun: (919)968-2714 FAX (919) 967-8406 Attached is a copy of the resolution adopted by the Council at its September 9~' meeting. The resolution responds to the request from OWASA. to consider the discussion paper, "Assessment Policy Applicable to Water and Sewer Service Extensions to Existing Unnerved Neighborhoods. " The Council will consider financing options for sewer extensions during development of the 1999-2000 budget. The Council also discussed the possibility of renegotiating or clarifying language contained in the OWASA -Chapel Hill sewer purchase and sale agreement. The Council sent four items forward: • Clarifying the "benefiting parties" language contained in Section 6; • The development of a subsidy of fees for low income customers; • The interpretation of the sewer extension policy to not allow sewer extensions into the rural buffer; • A review of the exemption of the University from the availability charge on the central campus. Thank you for your work on the sewer assessment policy. Please let us know how else we can help. Sincerely, ... ~ os Rosemary I. Waldorf Mayor A RESOLUTION MAKING RECOMMENDATIONS ON OWASA'S SEWER ASSESSMENT POLICY (98-9-9/R 'n BE IT RESOLVED by the Council of the Town of Chapel Hill that the Town provide a 20% subsidy to sewer projects for existing neighborhoods with private systems by providing a line item in the Capital Improvements Program budget with a cap of $4,500 per lot based on the total number of lots in the project which is being subsidized. This cap will be adjusted annually to account for inflation, and; BE IT FURTHER RESOLVED by the Council of the Town of Chapel Hill that OWASA reinstate the past policy of adsorbing engineering and legal costs up to the 15% limit for engineering costs and 5% limit for legal costs, and; BE IT FURTHER RESOLVED by the Council of the Town of Chapel Hill that OWASA provide preliminary cost estimates so that residents signing a petition know what to expect, and; BE IT FURTHER RESOLVED by the Council of the Town of Chapel Hill that OWASA clarify with the University and appropriate government entities the phrase: `benefiting party" in the Sales and Purchase Agreements. This the 9~' day of September, 1998. _• w~-_. ... - --- ~ .. To: Mayor Waldorf and Members of the Town Council From: ~ Juiic McClintock sad Flicks Bateman Subject: Recommendations regarding sewer assessments q ~~/~ S . ~`-, ~~,,,w2. AGENnA #9a ~~~V The Council and the OWASA Board of Directors have been dealing for some tune with the issue of how sewers in older neighborhoods should be financed. In~January of this year a Mayor's committee was appointed to examine the issues related to establishing a sewer subsidy fund sad to make recommendations to the Council, In June the 4WASA $oard asked the Council for feedback oa its March 12 discussion gaper entitled "Assessment Policy Applicable to. Water and Sewer Extensions to Existing Unnerved Neighborhood" (Set Attachment A). The request was rcfcrreci to our committee for tentative recommendations. This report presents our majority recommendations along with a brief history. Majority Report Recommendations to the Mayor and Council Connca Members McClintock and Bateman recommend that the Town provide a 20% subsidy to sewer projects for ezisting neighborhoods with private systems by providing a line item iu the CIP budget. Rationale We support this recommendation for three reasons. First, municipalities must respond the public health, safety, and welfare concerns of their citizens. Providing municipal sewer prevents septic system failures which can cause serious health problems. The Comprehensive Plan discourages the use of septic systems within Town limits for this reason. Second, a subsidy is needed to sewer in Town neighborhoods. In a Town budget of $44 million, it seems reasonable that we could allocate an annual amount for public sewers, one of the most basic needs generally provided by a town or city. All but one ~of the Chapel Hill neighborhoods in the OWASA study found in Attachment B would fact assessments over $10,000, as well as availability fees and plumber costs. Third sad most important, if vve arc to accomplish the objective of sewcriag most in-?'own neighborhoods, thin Chape! Hill must take the lead in setting a policy to accomplish this objective. Neighborhoods require a predictable policy to gain the majority support needed to petition OWASA for service. Z OWASA's cost estimates for sewers in Chapel Igill and neighborhoods in future annexation areas total about $14 million (See Attachment B). Sewer costs for neighborhoods currently in Town limits total approximately $5.7 million. Xn terms of future annexation areas, there is no State law. which requires us to annex Say or all of the potential annexation leads and clearly no requirement to do so when it would be financially unfeasible. It is likely that many non-municipal systems in the neighborhoods wfil be able to continue with their existing systems for several years. This means that the Town would not need to have all of the potential contrsbution money on hand immediately, but could acccmulate it .over a decade oz more. Rcsnonse to the O WASA Board of I}irectors We are appreciative of the OWASA Board's request for fcedba,ck on the discussion paper on sewer assessments and for the opportunity to make suggestions. We also appreciate the amount of time and thought Board members are giving to this complex issue. Our specific recommendations . follow. Reinstate the past policy of absorbing eugineering,and Legal costs tip to the f5% and 5% limits noted above. Rationale OWASA's enginecrin~ costs for the 5 projects to which the policy was applied came to roughly 8%, well within the 15% limit; and 4% for legal costs. If OWASA continues its 15% and 5% policy fo,~ engineering and legal costs, there is the potential for approximate. parity with the Town if a 20% policy is adopted. We believe that that the OWASA Board has the airthority to make its service affordable, a service that is critical when septic systems fail and the public health andlor the cnvironmcnt is threatened. We think that accountability to the electorate is present, because Board members arc appointed by elected officials. Board members arc called upon routinely to make financial decisions, e.g. setting . fees, approving budgets . Proride preliminary cost estimates so that residents signing a petition lmow what to expect. Rationale The request for sewer is initiated by a neighborhood whose residMtC must sign a petition for that service. The petition must contain signatures from at least 50% of the property owners, the majority of whom are must likely not experiencing problems. Revising OWASA's petition form to allow a place to show as estimated cost per lot would be helpful in persuading people to sign the petition. - _^.. _ _. _r-_. ... - --- Clarify with the University. and appropriate government entities the phrase "benefiting party" is the Sales and Purchase Agreements. Rationale The Sales and Purchase Agreements aze over twenty years old. Circumstances have changed and the climate is different from that which e.Yisted at the time of the agreements. We await the staff report before commenting on.whcther or not to recommend revision of the agreements. However, we believe the phrase "benefiting party" is used to both justify subsidies or• deny them, depending on how the teen is defined. We agree with OVtrASA's counsel Robert Epting, who has suggested that the pbuasc could be construed to include the community in general which benefits when thc• public water supply and the environment are protected (Sec Attachment C). Backgronad Infarmatian Retrofitting existing neighborhoods for sewers has always been expensive; historically homeowners in Chapel 1:~ill have been very reluctant. to~ petition for sewers until there was a crisis, because of prohibitive costs. From OWASA's inception in 1977 until 1993, only 6 retrofitting projects occurred, 5 of which received subsidies from either Clean Water Bond money or Community Development grants. In the 1980's, the General Assembly authorized two additional half percent local sales taxes with a requirement that municipalities use part of ~e revenue for water and scwer.ptuposcs. The . legislature also provided in the sales tax law that the NC Local Government Commission could exempt a city from that requirement if its water and sewer needs had beta met. The Town, by virtue of OWASA's ownczship and operation~of the water and sewer utilities, requested and received exemptions from the early 1980's through 2992-93. As a result of the Town s requcsi and . receipt of the exemption, about $5:3 million dollars was available for general fund purposes. In 1993 the Town did not receive as exemption and allocated about $350,000 of 1993-94 sales taxes to help pay for sewers in the Mount Bolus, Glen Heights, North Forest Hills, and Sherwood Forest neighborhoods. The ratio of this amount, i.e. 5350,000, to the total construction eosu for those neighborhoods became the basis of the Town's policy of contributing approximately 16% of sewer project costs to OwASA to~reduce assessments. Again in 1994-95 and 2995-96, the Town received a partial exemption from the Local Government Commission. Those funds were earmarked by the Council for sewer projects for Markham Drive, Morgan Creek/Mason Farm, and Patterson Place.. (The amount designated for Markham Drive was 16% of project costs; Morgan Crcck less than 16%, and Patterson Place more thaw 16%). The NC legislature allowed the 112 cent sales tax required allocation for water and sewer needs to expire in 3une,199fi. Concuaent with the Town's action to reduce sewer assessments in 1493, the OWASA Board of Directors adopted a policy of assessing property owners for construction costs at a-charge of S50 4 per linear foot of installed sewer line. In addition, the OWASA $oard policy called for excluding from assessment charges engineering fees up to 15% of project costs and legal, expenses up to 5°!0. Further discounts were o$cred to assessed owners who connected to the OWASA system within 90 days of sewer becoming available. As shown in the attached Resolution (Attachment D) of this agenda item, the Council adopted a resolution in March 1995.to limit participation in future sewer projects, and has not provided. additional funds to support subsidies. OWASA then allowed its 1993 policy to expire, wrote a discussion paper on the subject, and invited local governments to make rccornmendations. As a consequence of Chapel I Till's and OWASA's, decisions, twa of the three neighborhoods petitioning OWASA for sewers since then have either withdrawn or put their petitions on hold because of high costs and the Iack of a predictable policy by O WASA and the Town Council. (Please note that the Council did offer one neighborhood the remains of the sewer subsidy fund which amounted to $3200 a lot at the time of their petition, but it fell short of previous subsidies offered to other neighborhoods.). . MEMORANDUM TO: Mayor and Town Council FRAM: W. Calvin Hortoq Town Manager SUBJECT: Options for Changes to OWASA Purchase and Sale Agreements DATE: September 9, 1998 AGENDA #96 The purpose of this memorandum is to suggest options far changes to the OWASA Ptu+chast and Sale agreements. This memorandum is related to the upon from the Cottacii Comaiittcc on Sewer Asscssmeat Policy. . BACKGROUND The Orange Water and Sewer Authority (OWASA) was farmed~in 197b after the State of North CaroLina~ decided to divest the University of its public utilities. (water, wastewater, electricity, and telephone). The elsezrie and phone utilities. were sold to Deice Power and BellSouth. Prior to divcsriturc, tkae. Universiry,..owned all of the water utility far the Chapel Hill-Carriwro arcs, and shared the ownership of the Mason Farm wastewater trsamncnt pleat with the Town of Chapel Hill. Chapel Hill and Carrboro separately owned wastewater collection systems. Although formed is 1976, OWASA did not begin operations until February, 1477, whca tt~ University, Town of Chapel Hill, and Town of Caaboro closed the sale of their water and. sewer assets to the Authority. ~Ihcre are four distinct. but very simalar purchase and ~ sale agreements iavvIviag OWASA, the Town of Chapel HiII, the Town of Carrboro, and the University. Each agr~rameaat except the ?own of Carrboro's agreement with the University is attached. In January of I996, OWASA and the University catered into a Memorandum of Agreement to clarify language regarding the gayazettt of availability fees by the University ~ on the central campus. (Please see Attachment 1). The agrxments have not otherwise beta amended. or interpreted. ~ _ At the June 8, 1998 mating of the Council, OWASA pteseated .a dis~vssion paptr entitled, "Assessme~rt Polity ,4pplicahle to Water ~ Sewer Service .Ezterfs~a~ts..ta: Existing~L-Inrervad- Neighborhoods". (Please see Attachment 2). The Chair of the ~?WASA board requested feedback from the Council on this policy before September 18, 1998. The Cauacil appointed Council Members Batcmaq Capowski, and McClintock to serve as a review committee and make rccommcndations to the full Council on the discussion papa artd the 1976 OWASA purchase and sale agreements. The Council also requested that the staff review the 1976 OWASA purchase and sale agreements and suggest any changes that might be desirable. F DLSCUSSION Based an the Council's previous discussion and our review of the purchase and sale agrccmrnt, we suggest eonsideratioa of three areas of posse-ble change: I _ Brne$ting p:tress -Section 6 (Special Terms and Conditions) of the sewer purchase and sale agreement between OW ASA and the Town of Chapel FIilI includes the key language, "Orange Water and Sewer Authority hereby agrees that it will adopt and maintain, as long as the Authority supplies sewer services to citizens of the Tawas of Chapel F~II and the surrounding oratory, a basic policy with respect to the cxtcnsivn of sever mains which provides, to the extent possible, that the ultimate cost of any such extension will be borne by those primarily benefiting from such extension." (Please sec Attachment 3, p. 26). A strict iatcrprctation of this provision might require that individual property owners pay all of the costs of the extensions of sewer suvice to their properties. OWASA bas made such an interpretation in the past. ~ - The University has responded to~ the sewer assessment policy discussion paper by restating their position the OWASA general' rate bast should not be used to fund water and sewer extetision,prolcei.~, (PIcasc~see. Dr -EL4on Flayd's letter, Attarlimetit ~. ~ Included on tonight's Council agenda is a report from.the Council committee on sewer assessment policy.. 2. Subsidy of fees for lvw income 'customers -Section 7 (Special Terms and Conditions) of the OWASA -Chapel Hill sewer purchase and sale agreement outlines the rates .that customers will pay for service. This. section state's asst the Authority agrees, "to serve and charge reasonable rates, based on cost of strvicc to all classes of users of the water and sewer system impartially and without unjust discrinziaation." (Please sec. Amt 3, p. 29). This language can be iatcrgreted to allow no flexibility in the rates OWASA charges to customers. It can be argued. that u~sder the ewrent agreement, O'iNASA cannot allow Iower rates for low income families as de5acd by the Federal poverty level, waiver of .tap fees for public housing developments, special paym~at schedules for customers with financial difficulties, or other public assistance programs. We believe that it would be desirable w amend or interpret the OWASA -Chapel Bill sewix purchase and sale agrecmc~ to allow such subsidies far low incotnt people. 3. Sewer szteasian policy -Section 6 (Special Terms and Conditions) of the OWASA . - Chapel Hill sewer purchase and sale ~: states, `"The Authority agrees that it will not impede or bar the resideati8l or industrial growth and development of the Town of Chapel Hill by arbitrary oz capricious duzriminatioa against the Town in its sewer utility expansion policies". (Please see Attachment 3, p. 27) ~ ~ . We believe that the above language makes clear that the parties intended for OWASA to provide sccvvvcr service is areas as desired by tht Towzz, or is newly annexed areas. However, it can be argued that the language does nat clearly prohibit OWASA from providing sewer service is an area where tlu Town does not desire such service, e.g. rural buffers. We believe clarification would be desirable. CONCLUSIQN VEIe recommend the above changes for the Council's caasideration. ATTACIiMENTS 1. Memorandwa of Agretmcat betwaa OWASA and the University regarding availability charge (begin new page I). 2. ~Discussioa paper from OWASA oa sewer assessment policy (p. 4). 3. The Town of Chapel H1I and OWASA sewer put,chasc and sale agreement (p. 17) 4. The University and OWASA water purchase and sale agreement (p. 41) - ~ _ - 5. ~ The University and OWASA~ sewer purchase and salt agreement (p~. 6.1 j 6. May 12,199$ letter from Dr. Elson Floyd to ;Ed Kerwin (p. 72). 7. Januuy.2, 1998 letter from Robert Epting to Bury Jacobs gyp: 73). 8. Information on the percentage of water use by the Urri~rtzsity as requested by a Council ltilemEicr (p. 8). AGEI~IDA #9c To: Mayor and Town Counal . From: 3oe Capowski Re: ~~iinority reeornmsndation about sewer subsidies ' Date: August 24, 1998 SUMMARX I agree with conned members Bateman and NicClintoclc that the Town of Chapel Dill should subsidize the installation of new scYrex. Imes in eaasting neighborhoods. I di$er on the araount of the subsidy and whether O~IASA should also subsidize. I reco~nead a Iowa subsidy of ZS percent with a cag of 54,500 per lot. I recommend that OWASA not subsidize. Tlst Amount: While there is a public benefit for each home~sn Chapel Fall to access a public sewn line,. the primary beneficiary is the owner of the propexty, whether owner-occupies of remal. . The anxouut of public subsidy should reflect the amount of public beatfit from eaclr privaLe~'~ . sewer installation. I believe that a town subsidy equal to ZS percr~at of the cost~of the sewer installation is reasonable, with apes-lot cap of S4,,SOq that imereases affiually vrith -inflation. This cap is generous; it is tyro and one-half times the targrst previous town subsidy. -- . - .. _-.. Why OWASA s6unid not subsidize sewer assessments: Subsidies traas:fer foods iavol~mxan~y from osbe gaup of people to another. I believe that taus is the domain of electtd officials who are directly regpos~s'ble to the peogte.from whom~they are tatcnag the money.. A town is so structured; flWASA is not. I believt that OWASA should be a utility that provides excellent quality water and severer services within its area, at true cost. Double taxation of Chapel HIl residents also argues against OWASA provided subsidies. . The OWASA service area includes Chapel F~II, Carrbaro, and portions of unincorporated Orange Cauntp..I guess, that about 70 percecR ~af 4WA5A re~tenues are paid by Chapel 1~il1 residents. ~ If OWASA subsidizes the instaltariost of sewers, complex equity issuts abound.