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HomeMy WebLinkAboutAgenda - 08-28-2006-4ORANGE COUNTY BOARD OF COMMISSIONERS WORK SESSION AGENDA ITEM ABSTRACT Meeting Date: August 28, 2006 Action Agenda Item No. 4 SUBJECT: Water and Sewer Issues DEPARTMENT: County Manager/Purchasing & Central Services PUBLIC HEARING: (YIN) No ATTACHMENT(S): INFORMATION CONTACT: 8/25/06 Memo from County Engineer Rod Visser, 919-245-2308 Paul Thames, 919-245-2303 Pam Jones, 919-245-2652 PURPOSE: To discuss and provide direction to staff regarding two financial matters related to County utility services in the Efland area. BACKGROUND: Originally developed in the mid-1980s to respond to a public health emergency stemming from failing septic systems in the Efland area, the Efland Sewer System has been operated by Orange County since then with occasional tap-ons for eligible individual properties and periodic inclusion of new subdivisions or commercial enterprises. This work session provides the opportunity for the Board of Commissioners to review various background materials provided by staff and to provide policy direction regarding two financial aspects of Gounty utilities in the Efland area, as described under the subheadings that follow. Water and Sewer Assessment Policy Commissioners have raised the passibility that the County should consider recouping some portion of the costs of constructing water and sewer lines that have been installed to provide utility service to the new Gravelly Hill Middle School. Those lines will also provide an economic benefit to various individual properties adjacent to those utility lines (in and around the Buckhorn Economic Development District) that may be eligible for connection to the lines. An approach that the Board may wish to consider for recouping a portion of the capital cost of the utility lines is an assessment project. Accompanying this abstract are a variety of background materials compiled by the County Engineer that may assist the BOCG in discussion of this topic. These include: o a summary of the step-by-step process established in the North Carolina General Statutes o a fact sheet on assessments, including: o the bases upon which an assessment may be made, and o a note on properties that may be exempt from the assessment o a timeline showing the minimum required time to go through all the steps involved Efland Sewer Rate Structure When the Efland Sewer System was placed into operation in the mid-1980s, many of the original customers (and many who remain customers to this day) were individuals of limited means for whom a monthly sewer bill would become a challenging new expense, as sewer service replaced a previous septic system. Sewer rates have not changed since the inception of the system. Approximately 60% of the Efland Sewer System customers pay the minimum monthly bill (based on 3,000 gallons) of $15.20. As operating expenses have increased over the years, and rates have not been increased to keep revenues apace, the Efland Sewer System has experienced operating deficits that generally increase from year to year,. The County's General Fund has provided operational subsidies to keep the Efland Sewer Enterprise Fund balanced. By way of example, the General Fund transfers for FY 2004-05 and 2005-06 were approximately $77,000 and $85,000, respectively, Over the years, in addition to occasional tap-ons to properties identified as eligible during the original Efland Sewer System development, the County has allowed connections to the sewer system for several residential subdivisions and several commercial enterprises, A result has been that the General Fund has effectively begun to subsidize sewer rates for certain properties where the ability of the property owner to pay market rates for the true cost of sewer service is not an issue. Staff recommend that the County retain the services of a technical consultant to:1) examine the true costs of providing sewer service throughout the entire Efland Sewer System; and 2) provide recommendations regarding a sewer rate structure that would produce sufficient revenue to make the Efland Sewer Fund operationally self-sustaining, Specifically, the Manager recommends that the Board authorize staff to solicit proposals from qualified firmslindividuals to carry out an Efland Sewer System rate structure study, to retain the services of the best consultant for the job, and to report back to the Board later this fall with recommendations regarding changes to the system rate structure. The contemplated scope of the study would include staff and/or the consultant conducting a market survey of the existing customer base -original and continuing system users -and modeling alternative rate structures, and their administration, that would lessen the anticipated economic hardship of likely higher sewer rates for customers who present limited financial means, FINANCIAL IMPACT: There is no immediate financial impact associated with the discussion of these policy matters at this work session, However, decisions the BOCC may make regarding utility assessments and possible future adjustments in sewer rates have the potential to lead to recouping of significant capital expenditures on utility expansions and to solidify the financial position of the Efland Sewer System Enterprise Fund, Funding for consulting services associated with the recommended sewer system rate study would come from the General Fund transfer to the Efland Sewer System included in the BOCC's approved 2006-07 Orange County Budget. RECOMMENDATION(S): The Manager recommends that the Board: 1) discuss the issues related to a possible assessment program and provide appropriate direction to staff; 2) direct staff to retain the services of a qualified consultant to provide technical assistance in the conduct of an Efland Sewer System rate study; 3) authorize the Purchasing Director to carry out all actions and execute all paperwork associated with soliciting and retaining the services of a qualified consultant; and 4) direct staff to bring back recommendations in Fall 2006 for the Board's consideration regarding a revised Efland Sewer System rate structure and an assistance program to help Efland Sewer System customers of limited financial means. 3 MEMORANDUM TO: County Commissioners COPIES: John Link, County Manager Rod Visser, Assistant County Manager Geof Gledhill, County Attorney Pam Jones, Purchasing/Central Services Director Donna Coffey, Budget Director Craig Benedict, Planning Director Ken Chavious, Finance Director FROM: Paul Thames, PE, County Engineer DATE: August 25, 2006 SUBJECT: Utility Extension Financing by Means of Utility Assessment Process -West Ten Middle School/Buckhorn EDD-Community Utility Extension Assessment Over the years, there have been BOCC questions and discussion about strategies for recovering all or some porticn of County funds expended in utility extensicn projects.. One such strategy is the utility assessment process, which involves calculating the pro rata share of project costs for each property benefiting from a utility project and billing the property owners for those costs. Commissioners have expressed a specific interest in evaluating a utility assessment scenario for the Buckhorn Economic Development District (EDD)/Gravelly Hill Middle School water and sewer utility extension project. The purpose of this memorandum is to provide information for BOCC review by means of: • an overview of the administrative process for typical utility assessment projects (pages 4-7); and • a utility assessment facts summary, (pages 8-9); and • a minimum timeline required to initiate a typical utility assessment process (pages 10-11) The NC General Statutes specify many of the requirements related to assessment generated funding of utility extension projects, particularly insofar as scheduling public hearings, means (bases) of apportioning costs and which casts can be assessed, are concerned, In the following pages, a comprehensive generic summary of the step-by-step assessment process as specified in the North Carolina General Statutes is provided for BOGC review. Also provided is a fact sheet outlining: a) the statutory bases for determining the pro rata share of costs applicable to each property owner included in an assessment project; b) the types of properties or property owners that are statutorily exempted from an assessment process; and c) the project casts that can be recovered by an assessment process. 4 The following assessment issues are generally applicable to assessment projects: all properties that can be served by the utilities financed by an assessment project must be assessed on the same basis. For example, one property cannot be assessed on the basis of acreage while another property is assessed on the basis of front footage, and the calculated amount of an assessment for a parcel is based solely on the assessment basis and the characteristics of the property, The status or financial circumstances of the property owner are immaterial except in the case of owners/ properties that are statutorily exempt from such assessments (for example, undeveloped land belonging to a railroad). • the maximum period over which an assessment can be amortized or collected is ten years.. For example, the collection of an assessment on a particular property can be held in abeyance (perhaps until the property is sold), but the assessment must be collected in full within the ten year period, and • the full cost of the project in terms of construction, engineering, surveying, etc,, costs is subject to the assessment calculation although any of these individual cost centers may be deleted from the project cost calculations; and • a property that has physical access, by virtue of frontage on a utility service line, to utility service is subject to assessment, providing that extension of such utility service to that property is not otherwise prohibited; and • properties cannot be assessed for the cost of utility that is not directly accessible to that property. The following assessment issues are specifically applicable to a Buckhorn EDD assessment project: the properties within the Buckhorn EDD lying between the middle school property and those properties immediately adjacent to the east side of Buckhorn Road lack any means of direct access to sewer service by way of either the gravity portion of the system along Buckhorn Road or to the pumping station at the Gravelly Hill Middle School, These properties cannot be assessed sewer costs unless some means of accessing sewer service can be provided. Providing sewer service to the properties between the school site and Buckhorn Road will ultimately require the extension of gravity sewer mains to the properties from the Gravelly HiII pumping station. These mains would be routed along the creeks and drainage channels that are located internal to the properties. The County Attorney has indicated that if the County acquires sewer easements in the locations necessary to extend sewer mains to the internal portions of the EDD, the properties fronting on those easements may be subject to an assessment for the prorated share of costs for the pumping station and force main, 5 • the properties having road frontage along the southern side of West Ten Road have physical access to the water main along West Ten Road, however these properties are not permitted by zoning and the County Land Use Plan to receive utility service and are thus not subject to assessment; Insofar as Orange County is concerned, there are few out-of-pocket costs associated with evaluating the financial aspects of assessment projects. Other than staff costs (unless the BOCC elects to use a consultant to carry out the assessment process), expenses are generally limited to those associated with mailings, public hearings, etc. Generally, undertaking an assessment project benefits the County to the extent that a significant portion of a construction project's casts can be recovered. In terms of an assessment for the Buckhorn EDD/Gravelly Hill Middle School utility project, a large portion of the costs (all of the +/-$700,000 in pumping station/farce main costs and a large share of the water main costs, subject to BOCC decisions on acquiring addition sewer easements as noted above) are associated directly with Gravelly Hill Middle School. Assessment projects may have a short or long term negative financial impact on those individuals whose property is assessed, depending on haw the property is utilized/developed (i.e., large lot residential property converted to commercial use or more dense residential use) and how long it takes to recover costs through a development process. There are a number of properties in the Buckhorn area that are owned and occupied by individuals of limited means. If these individuals elect to remain as residents of the community (as opposed to converting or selling their properties for commercial use), they may have difficulties meeting an assessment payment schedule. Depending on the assessment calculation strategy adapted and decisions the County makes relative to acquiring sewer easements internal to the EDD, it appears that a utility assessment could recover approximately 50-75% of the Buckhorn EDD/Gravelly Hill Middle School utility extension project costs. The March 1, 2004 Utility Service Agreement between Orange County and The City of Mebane, in its delineation of "Service Standards" contains provisions detailing fees that can and cannot be charged to connected properties. In pertinent part, Section 4 of the Agreement provides: "Connected properties may be charged normal hook up or tapping fees, and connection or impact fees but will not be charged any assessment or fees in lieu of assessment designed or intended to recoup construction costs." The context of this provision indicates that it authorizes and limits the fees that the City of Mebane can charge and does not pertain to an Orange County assessment project. Clarification on this point should be a part of any decision the Board makes to do an assessment project involving the Service Area prescribed in the Utility Service Agreement between the County and Mebane. If I may provide additional information on this issue or clarification of the information provided herein, please advise. 3 Summary of the Administrative Process for Water and Sewer Assessment Projects When the Board of Commissioners (BOC) decides to finance all or part of a project by special assessment, it must adopt a Preliminary Assessment Resolution which contains the following information: a.) A statement of intent to undertake the project; b,) A general description of the nature and location of the project; c,) A statement as to the proposed basis for making assessments. Several bases for assessment are allowed by General Statute (GS) 153A-186. These available bases will be listed on the "Facts Sheet" following this Summary. If the basis of assessment is either area or valuation, the Board shall include a general description of the boundaries of the area benefited; d.) The percentage of the cost of the work that is to be specially assessed.. The BOCC can choose to finance the full cost or any portion of the full cost of the project through special assessment; e,) Which, if any, assessments shall be held in abeyance and for how long. The BOCC has the authority to hold assessments in abeyance. Water or sewer assessments may be held in abeyance until improvements on the assessed property are connected to the water or sewer system for which the assessment was made, or until a date certain not more than 10 years from the date of confirmation of the assessment roll, whichever event occurs first; f.) The proposed terms of payment of the assessment and g,) An order setting a time and place for a public hearing on all matters covered by the preliminary assessment resolution. The hearing shall be not earlier than three weeks and not later than 10 weeks from the day on which the preliminary resolution is adopted. At least ten days before the date set for the public hearing, the BOCC shall publish a notice that a preliminary assessment resolution has been adopted and that a public hearing on it will be held. The notice should generally describe the nature and location of the improvement, 3. Also, at least ten days before the date set for the public hearing, the BOCC shall cause a copy of the preliminary assessment resolution to be mailed by first-class mail to each owner of property subject to assessment,. 4, Fallowing the public hearing, the BOCC may adopt a Final Assessment Resolution. This assessment shall generally describe the nature of the project and the boundary of the assessed area, In addition, the percentage of the cost of the project to be 4 specially assessed and the terms of payment should be set forth, including any conditions under which assessments might be held in abeyance. NOTE: If the BOCC decides that the percentage of the project assessed should be different than the percentage set forth in the preliminary assessment resolution, or that the scope of the project should be greater in scope than that described in the preliminary resolution, then a new preliminary assessment resolution shall be adopted and advertised as described in steps 1-4 above. When the BOCC has determined the total cost of the project, a preliminary assessment roll shall be prepared, This roll should include a brief description of each lot or parcel to be assessed, along with the basis for the assessment, the amount assessed against each, the terms of payment and the name of the owner. 6. This roll should be filed in the clerk's office and be made available for public inspection. The BOCC shall schedule a time and place for a public hearing on the roll. At least 10 days before the date of the hearing, the BOCC shall publish a notice that the preliminary assessment roll has been completed, The notice shall describe the project, note that the preliminary roll is available for inspection in the clerk's ofFice, and give the date and time of the hearing on the roll. 8. Also, at least ten days before the date set for the public hearing, the BOCC shall cause a copy of the preliminary assessment roll to be mailed by first-class mail to each owner of property listed on the roll. The mailed notice should include information about the hearing on the roll and note that the roll is available for public inspection at the clerk's office. After the hearing, the BOCC shall either confirm the preliminary assessment roll, or, based on information brought forth in the hearing, shall modify the preliminary assessment roll as may be proper in compliance with the basis of the assessment. Once the assessment roll has been confirmed, each assessment is a lien on the property assessed of the same nature and to the same extent as the lien far county or city property taxes. 10, No earlier than 20 days from the date the assessment roll is confirmed, the county tax collector shall publish once a notice that the roll has been confirmed. The notice shall also state that assessments may be paid without interest at any time before the expiration of 30 days from the date that the notice is published and that if they are not paid within this time, all installments thereof shall bear interest as determined by the BOCC (not to exceed 8% per annum). 8 11, Once the assessment roll has been confirmed, an owner may appeal the amount of the assessment, but not the assessment itself, An appeal must be made within 10 days of the confirmation of the assessment roll. The appeal is made to the appropriate division of the General Court of Justice, The owner will then have 20 days from the date the assessment roll is confirmed to present the BOCC or clerk a statement of facts upon which the appeal is based. The appeal shall be tried like other actions at law. 12, Within 30 days after the day that notice of confirmation of the assessment roll is published, each owner of assessed property shall pay his assessment in full, unless the BOGC has provided that assessments may be paid in annual installments, If payment by installments is permitted, any portion of an assessment not paid within the 30-day period shall be paid in annual installments, The BOCC shall in the assessment resolution determine whether payment may be made by annual installments and set the number of installments, which may not be more than 10.. With respect to payment by installment, the board may provide a,) That the first installment with interest is due on the date when property taxes are due, and one installment with interest is due on the same date in each successive year until the assessment is paid in full, or b,) That the first installment with interest is due 60 days after the date that the assessment roll is confirmed, and one installment with interest is due on that same day in each successive year until the assessment is paid in full, 13. If an installment is not paid on or before the due date, all of the installments remaining unpaid immediately become due, unless the BOCG waives acceleration, The board may waive acceleration and permit the property owner to pay all installments in arrears together with interest due thereon and the cost to the county of attempting to obtain payment.. If this is done, any remaining installments shall be reinstated so that they fall due as if there had been no default, The board may waive acceleration and reinstate further installments at any time before foreclosure proceedings have been instituted. 14, The BOCC may foreclose assessment liens under any procedure provided by law for the foreclosure of property tax liens, except that lien sales and lien sale certificates are not required and foreclosure may be begun at any time after 30 days after the due date, The County is not entitled to a deficiency judgment in an action to foreclose an assessment lien, The lien of special assessments is inferior to all prior and subsequent liens for State, local and federal taxes, and superior to all other liens. 15. There is a 10-year time limit to begin foreclosure proceedings, starting from the due date of the earliest installment included in the foreclosure action. Acceleration of installments does not have the effect of shortening the time within which foreclosure may be begun; in that event the statute of limitations continues to run as to each installment as if acceleration had not occurred. 6 Fact Sheet on Special Assessments Bases for making assessments For water and sewer projects, assessments may be made on the basis of: 1.) The frontage abutting on the project, at an equal rate per foot of frontage; or 2,) The street frontage of the lots served, or subject to being served, by the project, at an equal rate per foot of frontage; or 3,) The area of land served, or subject to being served, by the project, at an equal rate per unit of area; or 4.) The valuation of land served, or subject to being served, by the project being the value of the land without improvements as shown on the tax records of the county, at an equal rate per dollar of valuation; or 5.) The number of lots served, or subject to being served, by the project when the project involves extension of an existing system to a residential or commercial subdivision, at an equal rate per lot; or 6.) A combination of two or more of these bases. If either area or valuation is chosen as a basis for assessment, the BOCC shall lay out one or more benefit zones according to the distance of property from the project being undertaken. If more than one benefit zone is established, the BOCC shall establish differing rates of assessment to apply uniformly throughout each benefit zone, Lands exempt from assessment No land within a county is exempt from special assessments except 1,) land belonging to the United States that is exempt under the provisions of federal statutes and land within any floodway delineated by a local government, or land owned, leased, or controlled by a railroad company, except that if there is a building on the land, the portion of railroad property subject to assessment shall be a lot whose frontage equals the actual front footage occupied by the building plus 25 feet on each side thereof, but not more than the amount of land owned, leased or controlled by the railroad. If a building is placed on land that would have been subject to assessment after the water or sewer project has been completed, then the railroad company shall be subject to an assessment without interest on the same basis as if the building had been on the property when the improvement was made. If the project would benefit property awned by the State, or an agency, board, commission or institution of the State, the County may request that the Council of State authorize the State to pay its part of the assessment, The Council of State may authorize the Secretary of Administration to approve or disapprove requests from counties far payment, but the County may appeal to the Council of State if the Secretary disapproves, If the Council of State does not authorize the payments of the assessment, then the State is exempt from payment. 10 Determination of Projects Costs The BOCC may include in the determination of the cost of the project • Construction costs (including engineering and construction administration services) • Cost of necessary legal services, • The amount of interest paid during construction, • The cost of rights-of-way, and • The cost of publishing and mailing notices and resolutions. Timeline for a Utility Assessment Project This timeline is meant to show the minimum time required for the assessment process, according to the North Carolina General Statutes 153A-185 to 153A-205, The start date for the process will be "0" and subsequent steps in the process will be labeled "0 + n weeks" to show the total elapsed time from the start date.. Time Description of Activity 0 weeks Adopt a Preliminary Assessment Resolution (PAR) 0 + 1 week Publish a notice that a PAR has been adopted and that a public hearing of the PAR will be held. Mail a copy of the PAR to each owner of property subject to assessment, 0 + 3 weeks Public hearing of the PAR is held, Following the public hearing, the Final Assessment Resolution may be adopted. NOTE: Once the final costs of the project are known, the procedure may continue, There is a possibility that the final cost of the project will be known by the time the Final Assessment Resolution is adopted. This would represent the minimum time frame possible, so the timeline will assume that the costs are known and no time will elapse for this step. 0 + 3 weeks Prepare a preliminary assessment roll and determine a time and place for a public hearing on the roll. 0 + 5 weeks Publish notice of the public hearing on the preliminary assessment roll. Mail a copy of the preliminary assessment roll and notice of the hearing to each owner of property listed on the roll.. 9 ~a 0 + 7 weeks Public hearing of the preliminary assessment roll is held, The preliminary assessment roll is either confirmed or modified based on information obtained in the hearing and in compliance with the bases set forth in the roll. 0 + 10 weeks County Tax Collector shall publish a notice that the roll has been confirmed. The notice shall also give details on how to go about paying the assessment. 0 + 12 weeks Owners may appeal the amount of the assessment, 0 + 14 weeks Owners present a statement of facts upon which the appeal is based to the Board of County Commissioners (BOCC) or the Clerk. Owners of assessed property must make pay the full amount of the assessment, unless the BOCC has provisions in the assessment resolution to allow annual installment payments. 10