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HomeMy WebLinkAboutAgenda - 12-13-2005-7aORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: December 13, 2005 Action Agenda Item No. ~- 4 SUBJECT: OWASA Policy for Reimbursing Costs for Building-in Excess Capacity in Utility Line Extensions DEPARTMENT: County Manager PUBLIC HEARING: (Y/N) No ATTACHMENT(S): November 3, 2005 OWASA Staff Memorandum INFORMATION CONTACT: Paul Thames, 919-245-2303 PURPOSE: 1) To present the BOCC with the latest information on OWASA's discussions relative to revising its policy far reimbursing costs related to building in excess capacity in utility line extensions (as requested by the BOCC and the elected boards of Chapel Hill and Carrboro); and 2) to allow the BOCC to provide comments that can be transmitted to the OWASA board for its discussion of this issue at its meeting of December 15, 2005. BACKGROUND: By a December 20, 2004 letter to Mark Marcoplos and Bernadette Pelissier, Orange County s representatives on the OWASA Board of Directors, BOCC Chair Moses Carey requested that the County representatives make a report on OWASA activities and issues at one of the BOCC's February 2005 meetings, Commissioner Carey specifically asked that Mr, Marcoplos and Ms. Pelissier be prepared to discuss "a reconsideration of OWASA's policy for reimbursement of public entities that pay to extend water and sewer lines, as has been requested by Chapel Hill", Mc Marcoplos and Ms, Pelissier did, in fact, report on the OWASA Reimbursement Policy at the February 15, 2005 BOCC meeting, According to Mr. Marcoplos and Ms, Pelissier, OWASA, until 1999, had a reimbursement policy that essentially provided for a reimbursement over aten-year period to an applicant/ developer for the incremental costs of upsizing water and sewer lines (to a size larger that the industry standard 8" line") necessary to provide for additional and orderly development of the utility systems, The source of funding for these reimbursements was front footage (fronting on the utility line[s]) and acreage assessment fees applied to other utility customers who connected to the utility systems extended and financed by the applicant /developer. This policy did not allow the applicant/developer to recover any costs for the minimally sized 8" water or sewer line extensions. In 1999, OWASA stopped calculating assessment fees based on acreage and front footage and began basing its fees on home size (square footage) or water meter size (non-residential use),. z This fee calculation process was based on findings that larger water meters and larger homes represented greater water use and wastewater generation than that of smaller meters and homes and thus represented a correspondingly greater portion of the demand on and capacity of the infrastructure.. During approximately the same period, OWASA found that there was a relatively low demand for reimbursements under its then current reimbursement policy, As the primary tool far generating reimbursement funds was eliminated with the adoption of the meter and home size based fee policy, OWASA also eliminated its reimbursement policy, After same discussion, the BOCC requested that OWASA reconsider its reimbursement policy to allow at least public entities to recover costs associated with utility extensions required to serve public facilities, Since that time, OWASA staff has worked to develop potential strategies and policies that would allow any utility developer (both commercial developers and public entities) to recover the portion of the casts of utility extensions that were related to a regtired upsizing of lines to meet overall utility system needs as opposed to needs of just the development or project requiring the utility extension. These strategies and proposals were discussed by the OWASA board at its September 22, 2005 and November 10, 2005 meetings and are scheduled to be discussed again at its December 15, 2005 meeting, OWASA has requested comment on this issue by the elected boards of Chapel Hill and Carrboro as well as by the BOCC sa that this input can be considered along with that of OWASA staff. The OWASA staff recommendation relative to reimbursement has atwo-phase approach, It recommends that the OWASA board consider reimbursing the incremental cost (difference in cost between a nominally sized line and a required over-sizing of a line) of over-sizing a waterline extension as an immediate credit from OWASA (and financed through OWASA's rate structure). The rationale for the immediate credit is that the inclusion of an oversized waterline into the water distribution system can provide immediate benefits (generally improved pressure, water quality and system reliability) to the existing water distribution network. The OWASA staff recommendation relative to sewer lines is that reimbursement of incremental casts of aver- sizing the lines be provided as new customer's begin using the sewer line. Assessments or connection fees charged to those new users would finance this reimbursement. The rationale for this strategy is that oversized sewer lines generally do not provide an immediate benefit to the existing system.. Benefits accrue only by means of sewer availability for and to new users. FINANCIAL IMPACT: There is no immediate financial impact associated with this item, However, potential financial impacts related to the extension of water and sewer utilities to the Twin Creeks Park and adjoining school and other future County funded projects could be substantiate RECOMMENDATION(S): The Manager recommends that the Board consider the information provided above and in the attached OWASA memorandum and direct staff as to how the Board wishes to have its input, if any, to the OWASA board. 3 MEMORANDUM TO: Board of Directors THROUGH: Ed Kerwin FROM: Jahn Greene DATE: November 3, 2Q05 SUBJECT: Discussion of Excess Capacity Credit Policy At the September 22, 2QQ5 Board meeting, staff presented additional information to the Board on the potential establishment of a policy to allocate the cost for the excess capacity that may be provided through the extension of oversized water and sewer mains. This information included detail on the basic components found in almost all policies where there is a cost share arrangement (credit) between the party installing the oversized main(s) and the utility. These components include the following. • a minimum or base size for water and sewer mains extensions; • a definition of benefited parties; • a specified term in which a developer is eligible for the credit; • a method far determining the amount to be credited; • a method for the collection of funds for the credits; and • a procedure for disbursement of the credits. Utilizing the above components staff presented a concept for establishment of a cost share program for the excess capacity made available by the oversized main extensions, This plan deemed any oversized water or sewer extension a benefit to the entire OWASA service area. Because of this benefit any new water or sewer connection, regardless of its location within the service area, was to be assessed a water and/or sewer availability fee surcharge. It was estimated that the proposed surcharge added tc the current availability fees would be less than 5% and the funds collected would be disbursed to the developers on an annual basis. After discussing the conceptual cost share program, the Board had several questions related to: 1) cost of service; 2) capacity related allocation of cost; and 3) benefited area determination. To address the outstanding questions an Ad Hoc Committee of the Board was Memorandum Excess Capacity Credit Policy November 3, 2005 Page 2 formed (Terri Buckner, Mac Clarke, Randy Kabrick, Mark Marcoplos) and met with staff on October 13, 2005 (meeting summary attached). From this meeting there was general agreement that any proposed excess capacity credit policy would include the following principles. COMPONENT WATER SEWER 8" minimum or size 8" minimum or size Base Size required to meet required to meet develo ment demands develo ment demands a) Undeveloped drainage Entire OWASA service basins and subbasins, Benefited Area or area b) Entire OWASA service area Determination of Differential construction Differential construction amount to be cost as determined by cost as determined by credited OWASA OWASA Oversized water main Oversized sewer main projects eligible for a credit credits would be funded Funding Source would be funded through through the collection of a the capital program sewer availability fee surchar e Sewer availability fee Water service fees, surcharge collected from: Collection of commodity fees and water a) only new customers funds for credits availability fee collected located within the from the general ratebase undeveloped basins, or b all new customers Annual payment based on Disbursement of Lump sum at the time fees collected and number funds facilities are dedicated to of active projects where OWASA excess capacity is being rovided. Further detail on the basis for these principles is discussed below. Base Size: The Town of Chapel Hill has a requirement stating that the minimum water main size for all mains providing service to fire hydrants is 8 inches ar larger in diameter unless approved otherwise by the Town Manager and OWASA The North Carolina Division of Water Quality (DWO) considers an 8 inch diameter sewer main as the minimum reasonable size for providing public sewer service s Memorandum Excess Capacity Credit Policy November 3, 2005 Page 3 Water. Far the purposes of an excess capacity credit, the base or minimum size main would be 8 inches in diameter or the main size required to meet the capacity needs of the development.. Sewer. Same as water Benefited Area: The benefited area or parties receiving a benefit from a water or sewer main extension can be defined as follows: 1) Properties that connect directly to the water or sewer main extension; and 2) Properties located within a geographical area or boundary that receive a benefit from the water or sewer main extension. Water. Since water main extensions can provide an overall system benefit by improving system flow and pressure, enhancing fire protection, improving system reliability, and improving water quality, the benefited parties would be defined as all customers (new or existing) that connect to or are connected to any water main within the QWASA service area. Sewer: Sewer main extensions serve a defined drainage basin or geographic area making it relatively easy to determine the benefited parties, For sewer the benefited parties would be defined as all customers or properties connecting to a public sewer main within a drainage basin or subbasin where an oversized sewer main has been extended or benefit is derived from an oversized sewer main extension. An advantage of this benefited area definition is that those customers or properties that receive a direct benefit from the oversized sewer extension participate in the cost of the facilities, Disadvantages of this approach include 1) staff will have to evaluate and track each sewer connection request to determine if it is located within an identified credit area; 2) there is a potential for inequities in the connection fees assessed if lots within a development are served by an oversized sewer main and an existing sewer main; and 3) those downstream customers that receive an indirect benefit from sewer mains being extended into an area without public sewer service will not share in the cost of the facilities. An alternate approach may consider that, in addition to the direct benefit received, any sewer extension into a drainage basin without public sewer service could benefit the existing customer base (system) and the community by allowing the phase-out of pump stations and septic systems thereby having the potential to improve downstream water quality which benefits the entire service area. The advantages of this benefited area definition include: 1) those customers or properties that receive a direct benefit from the oversized sewer extension participate in the cost of the facilities; 2) those customers that receive an indirect benefit from the oversized sewer main extension participate in the cost of the ~o Memorandum Excess Capacity Credit Policy November 3, 2005 Page 4 facilities; 3) all sewer connections with similar demands would pay the same availability fee and surcharge; and 4) minimal tracking or review by staff is required because all sewer connections are treated the same throughout the service area. A disadvantage of this approach is that the indirect downstream benefit from sewers being extended into an undeveloped area may be small and difficult to quantify. Determination of the credit: OWASA's engineering staff wculd develop unit construction costs considering recent bid information and developer construction cost reports for the various water and sewer main sizes that could be required to he installed in the OWASA system. These unit cost numbers would become an addition to the OWASA Rates and Fees Schedule, revised on an annual basis and forwarded to the Board for consideration and adoption along with the other OWASA service fees. Water: The amount of the excess capacity credit for an oversized main extension would be determined from the incremental increase in construction cost due to the requirement to install a larger main on a cost per foot basis. For example if the base cost far an 8" main was $105.00 per foot and the developer extended a 16" main which has been determined to cost $150.00 per foot, the excess capacity credit would be calculated as $45.00 times the length of the 16" main extension. Sewer. Same as water Collection of funds for providing excess capacity credits: Funds would be collected from properties that receive a benefit or availability of service from the oversized main or improvement. Water. As noted previously, water main extensions can provide an overall system benefit to all customers connected to the water distribution system, Most of the remaining oversized water main extensions would be constructed at some point in time by OWASA as a capital project in order to meet system demands, increase system reliability, or improve water quality. For the reasons noted, the allowable credit for oversized water main extensions is to be included in the OWASA Capital Improvements Program (CIP). By including the oversized extension projects in the CIP they will be included in any analysis far setting or establishing the water availability and water service fees which are collected from all water customers within the OWASA service area. Sewer: Since sewer main extensions do not normally provide a system benefit, the oversized sewer mains would not be included as part of the capital program. For oversized sewer main extensions, staff would determine the total area of all unsewered drainage basins within the OWASA service area along with the Memorandum Excess Capacity Credit Policy November 3, 2005 Page 5 expected credit that would be allowed for the oversized sewer main extensions within these basins. This cost information would be used to develop a proportional sewer availability fee surcharge based on the capacity needs ar demands of the connecting party. This sewer availability fee surcharge could be applied as follows: 1) to all new connections to the public sewer system regardless of where those connections are located in the service area, or 2) only to new sewer connections made directly to or benefiting from sewer mains extended within identified unsewered sewer basins. The same advantages and disadvantages noted in the benefited area section of this memorandum also apply to the application of the sewer availability fee surcharge.. Disbursement of credits: Distribution of funds to developers that have approved excess capacity agreements could be made in a single lump sum or on a regular schedule such as yearly. In the case of a single lump sum payment the utility would be incurring the expense upfront with the expectation that the expended funds would be recovered as connections are made to the system, With periodic credits to the party providing the excess capacity, funds would be disbursed only after fees are collected from individuals connecting to the main extensions.. An administrative fee based on the cost of service would be collected for tracking and processing the capacity credits. Water: Any credit for the portion of a water main extension where excess capacity is made available would be disbursed in a lump sum payment at the completion of the project and after all required as-built drawings, easements, dedication letters, etc. have been submitted and approved by OWASA. OWASA would recover this upfront expenditure of funds through a minimal increase in the general water rates and fees (service and availability) paid by all new and existing customers within the OWASA service area. Sewer. On an annual basis OWASA would pass-through funds received from an increase or surcharge to the sewer availability fees paid for all new sewer connections (subject to the defined benefited area) over the term of the excess capacity agreement. The amount to be disbursed would be based on the ratio of the project's eligible credit to the total credits for all approved projects. Financial considerations: Staff has completed a review of the locations within the OWASA service area where oversized water or sewer mains would be required. The following table provides a listing of the project areas, the approximate extension length and 8 Memorandum Excess Capacity Credit Policy November 3, 2005 Page 6 estimated construction cost and capacity credit. (Attachments A through G) show the existing water location where oversized extensions would be required. The attached maps or sewer mains and the Water Main Extensions ESTIMATED ESTIMATED ATTACHMENT LOCATION LENGTH COST CREDIT A Eubanks 13 825' $2,075,000 $415,000 Road , B 15-501 5 225' $785,000 $175,000 South , Mt, Carmel C Church 6,300' $785,000 $55,000 Road TOTALS: $3,645,000 $645,000 Sewer Main Extensions ATTACHMENT LOCATION LENGTH ESTIMATED COST ESTIMATED CREDIT D Upper Bolin Creek 21,200' $4,255,000 $1,100,000 E Crow Branch 4,650' $835,000 $140,000 F Fan Branch 8,650' $1,550,000 $160,000 G Wilson Creek 4,100' $735,000 $125,000 TOTALS. $7,375,000 $1,525,000 Summary The Ad Hoc Committee on Developer Reimbursement was in general agreement that for water extension projects where excess capacity is provided, any credit would be paid out in a lump sum based on the differential cost of the extension.. Funding for the water excess capacity credits would be included in the capital program and recovered through the general water fees (availability and service) paid by all new and existing OWASA customers. This approach is simple to administer and requires minimal tracking by staff. Credits for oversized sewer mains would require staff to spend more time tracking which projects have been approved for an excess capacity credit, where Memorandum Excess Capacity Credit Palicy November 3, 2005 Page 7 the availability fee surcharge applies, the balance of any credits to be disbursed, and the term of the excess capacity credit remaining. Options available far addressing the sewer excess capacity issue include: i) the sewer availability fee surcharge applies anly to cannections made to or benefiting from sewer mains extended within the undeveloped basins, 2) the sewer availability fee surcharge applies to all new sewer cannections made to the public sewer system regardless of where in the system those connections are made, or 3) na credits will be provided for any oversized sewer extension, Upon completion of the Board discussian and concurrence with the principles to be applied, staff will develop an excess capacity credit policy document for the Board's review and adoption. Should there be any questions about the information presented, please do nat hesitate to contact me. John W. Greene, P.E. General Manager of Operations Attachments ~o FXAMPL)/ OF AN iuXC];SS CAPACITY CR1i;DIT PROGRAM The Project: A developer proposes to construct a 200 unit single family development on a 100 acre parcel within the Urban Services Boundary (Project B). Each unit will contain .3 bedrooms. Based on potential growth of the area OWASA's Master Plan identified the need fora 16" water main and a 16" sewer main to be installed in the area of this development. The developer will be required to install 2,000 feet of off-site 16" water main and 4,000 feet of off-site 16" sewer 177a1i7. Base Size: Based on a review of the development, it is determined that an 8 inch water main would support the domestic water and fire flow requirements of this development. Sewer service could be provided through an 8 inch sewer main. Since an 8" water and sewer main would support the development and OWASA's Master Plan indicates the need fora 16" water and sewer main in this area, the developer would be eligible for a credit on a portion of the cost for the t 6" water and sewer main extensions, Determination of the Credit: The amount of the credit world be based on the difference between the cost of extending an 8 inch water and/or sewer main and the cost of extending a 16 inch water and/or sewer main. Based on bid documents and developer construction cost documents, staff has developed the following unit cost(s) for determining the eligible credits. Water Main Cost Main Size ---------- Cost er• Foot 8" $105.00 12" $12s.oo 16" $150.00 24" $200.00 Determination of Cost Differential: Water: 8 inch cost = $IOS.00/ft. 16 inch cost = $150.00/ft. Cost Differential = $ 45.00/ft. Elii;ible Credit to Developer: Water - 2,000 ft. times $45..00 = $ 90,000 Sewer - 4,000 ft times $66.00 = $260,000 Disbursement of Credits: Sewer Main Cost Main Size ..---- _ Costper Foot 8" $150.00 12" $180.00 16" $215.00 24" $250.00 Sewer: 8 inch cost = $150.00/ft. 16 inch cost = $215.00/ft. Cost Differential - $ 65.00/ft. Por the oversized water extension the developer' would be credited the entire $90,000 sum in a single lump sum upon dedication of the water main to OWASA. For the oversized sewer extension the developer would be credited a portion of the $260,000 each year for the term of the agreement based upon the total amount of sewer availability surcharge fees collected and the ratio of the project's eligible credit to the total credits for all approved excess capacity projects. Sewer Fund Disbursement Example: If there were three approved projects with total eligible credits of $1,000,000 and OWASA collected $100,000 during the year from the sewer availability fee surcharge applied to all new connections to the public sewer system, the disbursements would be calculated as follows: A B C D RATIO OP PROJECT'S FUNDS DISBURSED APPROVED ELIGIBLE CREDIT TO TOTAL TO PROJECT PROJECTS CREDIT CREDIT FOR ALL DEVELOPER PROJECTS (fees collected x Col. C) (Col. B/$1 M A $300,000 30% $30,000 B $260,000 6% $6,000 C $440,000 44% $44,000 TOTALS $1,000,000 100% $100,000 i~ Attachment A O .~ Q~ N~ !_d_ a. ~ Q c n c ~ Q ~ W [] ~ ~ = m° ~ W _ W ~ m ~ m ~~ " /~' ~ f~ ~ ~' - - w c~ o - ~ w '/ i c ~ . ? ~ . ,-. ~ `~ C W ~ , .. _ _. , _ ... L~ J ~: - ~ NC _86 5" ; 8 ', __ ~. ,. i . ~ „_:~'_ = ~~.,. ~I .. , :.;.. -. 4 ,. s:RO I MiLLHw _., ,, s _ ~ _, _ ~ _ $ - ~ , . a ~5~ ~~O ~ ~~ , b~l~~ -.~ _ oa ~ :. ~e .. : - Y B a .: - - - _. p w ¢ LL ~ _ - ~ p . c6 t~ _ _ ~_ a- ~-ti ~:.~ `. o.. ~. _ r-=' ~'. g OL UJ n !v I O h O 11.11. z~ US 15-501 Regiar~ 13 Attarhment B s,~ o~ 0 y~Ma~ ;;;, Southern Villager DDgwoocJ Acres e pa hp /^~Og '! /ten "J Jp 9 P A Heritage F-lills eOOTN RD cO~FO R N 0 750 1,500 I-ee~ 1.12 m m m ° ~~.~ RP RD o`' pv S RD e Legend ~ ~ ProposeU Water Nlains - 6zis(ing Water Mains O Urban Services Boundary 14 Attachment C fit. Carmel Church Road Regic~r~ ~\P i MaNyiNC J`~ ~~' O" c~ 2'9 SO ~F A RM RD coou~rESr ~0 vR~~oy PN'a~'v0 OOKERUR P N 5 F0(tD R9 ~ ~ '~T ~'y , G~ LaRETy ,~ a O,f, ~O _ Laurel Hills ~P p R ~ O R 4~P BA~~~R~ I'I U Il tS Reserve B~NN~~T RO ~y~ O T 4~~r ~ ~ ~ ~ ~ d ,~C ~P ~ d Z $ ~ ®~®ni 5 e0\~ O ~ ~° ~' ti ~ •~O ~ J~ A~N O P~~ERR ~®~. ~PQp,1 ~~ Q o cR~s~ ~ m @ ~ 0 00~ ~ ~ (N Legend o Proposed Water Mains - Existing Water Mains Urban Services Boundary ,. o ,bo ,.bo~ Feel 11.13 ~5 Upper Bolin Creek Region Attachment ~ ti o '~ ~' `~ U a U .._. i W O a O z J I L /` ~ ~ / i \, EUgANI(9R d J! `, I ~ }. ~ 7 r y ~: ~ \ p4d0 4~ \' ~ y d ~~~ ~ 6 r `-..,_..~~ aL p r ~ ii U ! Z 'W ~ m p _ e ~ ~ _ ~~ t{f Q ~ a .?- n '~. 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Urban Services Boundary ~ ~ J - ~~-«.y°_.,.w o-.~., ~®...~.~'"~a~~ 1 N Q A 0 500 '}'~i0~ -- - E` et Fan Branch Region i~ Attachment F ~~ d Yee ~~ a pp1' an d Flu aa``"" Yb 5outliern Village s"~, ~o G~ ~J~ G ~GJ~ ~P QP 0 w w J Vy Legend Exisliny Pump Slalion ----^- Proposed Sewer Line -~-~ Exisliny Sewer Line Exis(ing Force Main ---- Streams and Creeks ® Subbasins Urban Services Ooundary j~ 0 500 i,DO~~ r- i~3 Wilson Creek Region Attachment e, o /x'~ ~ ~ l `± ~ ~ ~ ~ t i a~ ,,~ 1111 ,rg,-°'' ~~ ~'TC~ I' ~ ~'2,~ ~ °Southern Village•~° o ~~, ~ ^~ yG~ I° °~,/ ~` ~l. ~~ i r' i ,t ,; f. jj(/// i J f / l /j f / J ~~p u~s~~~~~ r f Lac nd Proposed Sever Llne ,'`~t ~~ Existing Sewer Line t __.,__... Slroams and Creeks ~ ®Subbasins Urban Services ~ountlary r N ~~ 0 500 1,000 ~z1~?! fee