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HomeMy WebLinkAboutAgenda - 05-06-1998 -10aORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No /O -Q ACTION AGENDA ITEM ABSTRACT Meeting Date: May 6, 1998 SUBJECT: OWASA'S ASSESSMENT POLICY - DISCUSSION PAPER I -------------------------- - - - - -- ------------------------------- DEPARTMENT County Commissioners PUBLIC HEARING YES NO x -------------------------- - - - - -- ------------------------------- BUDGET AMENDMENT: _YES NO ATTACHMENT(S): INFORMATION CONTACT Discussion Paper 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 OWASA Board would like to receive feedback from the County Commissioners. BACKGROUND: The OWASA 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 OWASA board would like to receive feedback from its constituent governments. RECOMMENDATION: Receive report as information and give guidance to County staff for feedback to the OWASA Board. r 2 OWASA ORANGE WATER & SEWER AUTHORITY Quality Service Since 1977 D 0 3 19 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. 1 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 Equal Opportunity Employer Voice (919) 968 -4421 PO Box 366 Printed on Recycled Paper FAX (919) 968 -4464 Carrboro, NC 27510 -0366 wwty. owasa. org OWASA 3 ORANGE WATER & SEWER AUTHORITY Quality Service Since 1977 DISCUSSION PAPER Assessment Policy Applicable To Water And Sewer Service Extensions To Existing Unserved Neighborhoods March 12, 1998 400 Jones Ferry Road Equal Opportunity Employer. Voice (919) 968 -4421 PO Box 366 Printed on Recycled Paper FAX (919) 968 -4464 Carrboro, NC 27510 -0366 wwwowasa. ot'o Discussion Paper March 12, 1998 Page 3 4 Public water supply is considered to be more reliable than private wells in urban areas. 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 prepare 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 marginally 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 lack of documented problems with private wells, OWASA has not commenced a comprehensive study of the areas without public water service. jbrC:Uotsuite\ mipro\dm\reporu \wspol_I0.sam 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 a long -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 Board of Directors with input from OWASA's customers, constituent governments, the University of North Carolina 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 ofthis issue in a joint workshop with OWASA's constituent governments to discuss the Assessment Policy before the OWASA Board 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 parcels 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. jbr f.\lotsuite\amiproWd \repons \wspol_lo.sam Discussion Paper March 12, 1998 4 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. OWASA 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. jbr t.VomicelamiproWocs4eports\w pol_1 O.sam 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 Board'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. Staffs review of the six sewer assessment projects undertaken 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 ibr f.. Nobuitc \wnipto\dm\repom \wsWl_IO.. Discussion Paper March 12, 1998 Page 6 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. I. Benefiting 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 f:VawiW\amiprold= \reports \w pol_lo. a Discussion Paper March 12, 1998 Page 7 9 2. OWASA Reduces Assessment By An Amount Commensurate With Expected Benefits To The Entire OWASA Customer Base To Eliminate A Threat Or Potential Threat To OWASA's Drinking Water Supply + 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. 0 Impact on Agreements of Sale and Purchase may need further review. 0 Under some circumstances, precise estimates of the benefit may be difficult to determine. - 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 Protect 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:Votsuite\amiproW=\fepocuk\ pol_lo.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 clearly restrict OWASA's provision of financial assistance to parties benefited by the extension of water and sewer services. 3. Assessment costs are a primary deterrent to the more timely extension of public water and sewer services to existing unserved neighborhoods. 4. All existing and new developments should have economically and environmentally acceptable provisions for water and 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 around the OWASA service area. Such a program is needed for the OWASA service area and for OWASA'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 FUoauite\smipro\docs keports\wspol_losam Discussion Paper March 12, 1998 Page 8 11 4. Town(s), 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 Third -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 V otsuitel amiproldocs\reports\wspol_10.sam 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 unserved 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 Policy Applicable To Water And Sewer Service Extension To Existing Unserved 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 unserved 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:Uotsuite\amipro\d=Vcpo u \wspol_IO.sam Discussion Paper March 12, 1998 Page 11 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 charges for assessed parties; and C) consolidating the design and construction of improvements to various unserved 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 Board of Commissioners, The University of North Carolina at Chapel Hill, and the general public with regard to these issues. The OWASA Board 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 Carolina at Chapel Hill, and OWASA. jbr f. VotsuitelamiproWmVeports kwspol_IO.sam