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HomeMy WebLinkAboutAgenda - 04-28-2005-1a27( ](( 'r ® Y7M~/"R Mat°ch 23, 2005 ORANGE WATER AND SEWER AiITHORITY (luality Service Since 1977 Mr. W.. Calvin I-Lorton Mr. John M. Linlc, .Ir. Mt° Steven Stewart Town Manager County Manager Town Manager Town of Chapel Hill Orange County Town of Carrboro 306 North Colmnbia Street Post Office Box 8181 301 West Main Sheet Chapel Hill, NC 27516 Hillsborough, NC 27278 Carrboro, NC 27510 SUBJECT: REIMBURSEMENT POLICY Gentlemen: At the request of the Chapel Hill Town Council and the Orange County Board of Commissioners, the OWASA Board of Directors has, during the past several months, considered the possibility of t°e-establishing a policy to reimburse developers or other parties for the additional costs they incur to install water and sewer infi`ashuctttre improvements with capacity in excess of their own development or facility needs.. This issue is a very complex one. The OWASA Board and staff clearly recognize the importance and benefits of the projects proposed by Chapel Hill and Orange Cowtty for which water and sewer utility cost reimbursements would be requested if a reimbursement policy were in place. We also recognize that due to the proximity of those projects to OWASA's existing water and sewer systems, the cost of water and sewer extensions to these projects will be substantial. While we are sensitive to these importanC considerations, we trust carefully consider The implications of establishing a reintbursemeut policy, since such a policy would have to apply equally to both public and private entities and developers, and could not be instituted to benefit the Towns and County alone. As previously reported, the Schedule of Rates and Fees approved by the OWASA Board in 1999 eliminated developer reimbw°sements. At that time, the connection fee structure was also revised to eliminate fi`ont footage and acreage charges, which had previously been used to fund developer reimbursement payments. In 1999 the Board also approved a tiered availability fee structure fot` residential customers that pt°ovided for a more equitable match between water use patterns and housing finished floor area (larger' homes have a higher connection fee than smaller homes). 400 Jones Ferry Road Lyual Opportuniq~ Lmplo~~er Voice (919) 965-4421 PO Bos 366 Painted on Recycled Paper FAX (919) 965-4464 Carrboro, NC 27510-0366 irmm omasa orgy Reimbursement Policy March 23, 2005 Page 2 The previous policy reimbursed a portion of water and sewer infrastructure extension costs based on the conshuction cost difference between the minimum required extension (8-inch water and/or sewer mains) and the oversized infiastructure required to support future development approved by the Towns and County. Reimbursement payments were limited to a 10-year payUaclc period from the date of OWASA's acceptance of the new infrastruchire, rending for reimbursements was derived solely from footage and acreage fees paid by new customers connecting to the oversized water and/or sewer infastruchrre constructed by the developer within 10 years of construction of the improvements for which the reimbursement applied. The primary reasons for the elimination of developer reimbursements in 1999 were as follows: 1) Lregrrity of conrrectiou fires -Since the reimbursement collected was based on footage and acreage, a 1-acre lot with 100 feet of frontage would pay twice as much as a 1-acre lot with 50 feet of frontage even though both lots might have similar demand paitenrs 2) "Dorrble dipping" Gy applicants -Because the applicant had no assurance that they would recover the full reimbursable amount, and that it might take as long as 10 years before any or all of that reimhursement were received, we believe that applicants typically included the full cost of the utility line extensions in the original sales price, lease, or rental rates of the lot or property in question. Therefore, any reimbursements subsequently received would arguably represent a "double" receipt by the developer; which we believe represents a "suUsidy" for new development. 3) Limited rrse arrd payback -During the 20 year period between 1980 and 1999, approximately $1,000,000 in eligible reimbursements were approved by OWASA. Over that same period, less than $200,000 was reimbursed to eligible applicants. During the OWASA Board's ,June 10, 2004 and February 5, 2005 discussions, these was general consensus that a reimbursement policy should not he re-instated.. The Board concluded that there is no way for OWASA to provide reimbursements to public entities, such as the Towns, County, or University, without also providing reimbursements for private developers. The Board also expressed concern that providing an incentive to developers though the availability of reimhursements for water and sewer infrastructure extensions may contribute to accelerated growth within the community and a certain degree of "leapfrog" growth patterns by providing a disincentive for the more orderly expansion outward from the central service area. As an alternative, it was noted in the Board discussions that the North Carolina General Statutes provide the Towns and County the authority to recover line extension costs through the adoption of Special Assessments for water and sewer improvements. This alternative would provide a method for recovery of a portion of the water and sewer utility costs for public projects, from property owners actually benefited by such extensions, without reopening the policy questions surrounding the reimbursement of utility extension costs to any and all parties. Reimbursement Policy March 23, 2005 Page .3 The assessment option also provides for the following additional Uenefits: 1) Because assessments nmst Ue fully repaid over a period not to exceed 10 years, the Towns and County would Ue assured firll recovery of their costs for oversizing the water and sewer infrastructure. (Under OWASA's previous reimbursement policy, an individual could wait until the 10 year reimUursement period expired Uefore connecting, thereUy avoiding any rimUursement contriUution.) 2) The Towns and County could determine what portion of the costs of the water and sewer improvements should be assessed (only the oversized cost versus some other portion). Similarly, the Towns and County could require that assessments Ue fully repaid sooner than the maximum of 10 years 3) The Towns and County would determine who Che Uenefited properties are and how the assessment of costs would Ue applied. 4) Because an assessment by the Towns or County would Ue separate fiom any OWASA connection fees, the inequities of OWASA's previous reimbursement policy would Ue eliminated. All properties connecting to the OWASA water and/or sewer system would pay comrection/availaUility fees based fundamentally on the demands that they would place on the system(s). 5) Reimbursement through assessment is more consistent with the principles of "Uenefited parties pay" and "growth pays for growth". I will Ue glad to meet with you to discuss the Board's deliUerations and to provide any further detail required. Sincerely, Ed Kerwin Executive Director c: OWASA Board of Directors RoUert E.pting