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Home My WebLink About10B - Trunk Water Fees 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 STAFF AGENDA REPORT MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: JANUARY 3, 2005 lOB RALPH TESCHNER, FINANCE DIRECTOR & BUD OSMUNDSON, PUBLIC WORKS DIRECTOR CONSIDER APPROVAL OF A RESOLUTION ACCEPTING A UTILITY AND TRUNK RATE ANALYSIS AND APPROVING DEVELOPMENT RELATED TRUNK WATER FEES DISCUSSION: Introduction In order for the City to complete the necessary trunk water system improvements to serve Prior Lake at community build-out it is essential that the City's trunk water fees be sufficient to recover costs of the water system that are the result of new development i.e., future wells, storage and treatment facilities and trunk water lines. The purpose for this agenda item is to consider the approval of a formal Utility and Trunk Rate Analysis study that would provide the rational nexus for an increase in the City's trunk water acreage charge, water tower fee and the water availability charge (city WAC). Current Circumstances The City Council authorized the firm Engineering Resources Inc. to provide engineering services for the update of the comprehensive water system plan. A critical component of this study is a utility and trunk rate analysis that not only established the water and sewer rates that were considered in the prior agenda item but also trunk water fees associated with new development. As stated earlier the attached Utility and Trunk Rate Analysis is based upon a community build-out assumption of 20 years. Another important distinction within the study is the separation of water system improvements and related costs that are supported by two different customer interests; 1) existing community and 2) future community. It is important that the level of fees is fair and equitable with respect to their individual share of the cost for the municipal water system. Trunk water system expenditures that are identified within the report include the following types of infrastructure: 1.) Trunk water lines 2.) Additional wells 3.) Water storage 4.) Treatment facilities H:\Water\Agenda trunk increase 200S.doc www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 To pay for these future system costs, the report recommends that the following development related fees be increased: [~:~~::~~~~:~~p.!~~~::::::::::::::::::::::::::::r:~:~~~~~!::~~:~~i.~:::I::!~?p:?:~:~~::~:~~~~~:::::l i Trunk water acreage fee i $2217.00/ac. i $4800.00/ac. I f"'W~te~'t~';~~"pemit"fe~"""'T"''''''''''''''$7'0"6":<jO''''''''''''''..T................$io.o.(jjjO..................j [~A~::p.~~~!I~:~:::::::::::::::::::::::::::I:::::::::::::::::~~9.:9.:;QQ::::::::::::::::::[:::::::::::::::::~29.:9.:;QQ::::::::::::::::::::l The trunk water acreage fee is a charge that is paid for by developers and is collected in the context of the developer's agreement when a final plat receives approval. The city WAC (water availability charge) fee is collected on the building permit and paid for by builders and homeowners at time of new construction. Both of these fees are dedicated and used to pay for trunk oversizing of watermains and new wells. The water tower fee, which is also dedicated in a separate fund, is collected on the building permit and reserved for new water towers and ground storage facilities. These fees are applied in part at the development contract stage and in part at the building permit stage because: 1. The cost of the infrastructure should be shared equitably between the developer and builder (many times they are the same). 2. Distributing the cost between the two allows these expenses to be spread over the life of the development rather than paid in full at the beginning. 3. Some of the infrastructure must be installed with the streets at the start of the project and others at the end of full development when all the houses have been built. This practice is long standing and accepted by developers and builders, both of whom ultimately represent the homebuyer. To calculate present and future fees, the study projects that for the first 10 years of rate calculations, the trunk acreage and water WAC charges will increase each year by 4% and then 5% for the for the last ten years. The water tower charge is patterned more closely to the Metropolitan Council Environmental Services (MCES) increases that the City receives every year and graduates upwards by $100 each year. These increases are required for the Trunk Fund to cash flow on a pay as you go basis. The study is modeled so it can be modified based upon changes in information and growth experience. FINANCIAL IMPACT: The underlying principle is for new development to pay its fair share as development occurs. The development community really is comprised of the builder and developer. Therefore the city has developed a cost sharing approach whereby the developer pays a trunk charge up front when utility improvements are installed and H:\Water\Agenda trunk increase 200S.doc ----.. . ......--..-.... ._.0 ...- .--r-.-.-......-... 4'.'.'._. -_.... ,. ,,_.... .".-..,. ..",,_....... '--"-'."'~"". .~'~'-'-".'" ,....... ALTERNATIVES: RECOMMENDED MOTION: REVIEWED BY: Attachments: H:\Water\Agenda trunk increase 200S.doc the builder pays a charge at time of new home construction based upon the rationale set forth above. It is important to note that at the end of the build-out time period (20 years) the balance of funds under the Tower and Trunk tabs are virtually exhausted. This scenario is appropriate and intended, as area development will have ceased along with the developer related revenue stream. At that point in time the City of Prior Lake will have reached complete development from a housing and population perspective and all municipal water and sewer system costs will then be paid by utility rates within the Enterprise Fund and/or special assessments. Conclusion The Utility and Trunk Rate Analysis comprehensively identifies the impact of new development upon Prior Lake's municipal water system and proposes a fee structure based upon a rational nexus. Therefore, Staff would recommend approval of the proposed development related trunk water fee increases included within the Utility and Trunk Rate Analysis. Costa Domitracopoulas of Engineering Resources, Inc, will give the formal presentation of the study. The following alternatives are available with respect to the study and its conclusions pending before the Council: 1. Consider approval of a Resolution Accepting A Utility And Trunk Rate Analysis And Approving Development Related Trunk Water Fees. 2. Accept the Utility and Trunk Rate Analysis study and amend the development trunk water fees to another amount based upon Council consensus. 3. Take no action at this time and direct the staff to provide additional information. ove a Resolution Accepting A Utility d Approving Development Related Ac ptin A Utility And Trunk Rate Analysis And opment Related Trunk Water Fees 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION OS-XX RESOLUTION ACCEPTING A UTILITY AND TRUNK RATE ANALYSIS AND APPROVING DEVELOPMENT RELATED TRUNK WATER FEES WHEREAS, WHEREAS, WHEREAS, WHEREAS, WHEREAS, the City of Prior Lake has determined that it is essential to provide the financial resources to complete its municipal water and sewer system at community build-out; and the City has affirmed it is financially necessary to increase the existing development trunk water charges to generate sufficient water revenues to offset the cost of future water infrastructure associated with new development; and The City Council has authorized the firm of Engineering Resources Inc. to provide engineering services for the update of the comprehensive water system plan; and The City Council recognizes that a comprehensive utility and trunk rate analysis is an integral component of the overall water system plan; and the City Council has determined that the development related trunk water fees shall be approved by reference to the Official City Fee Schedule. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, 1. The recitals set forth above are incorporated herein as if fully set forth. 2. The Utility and Trunk Rate Analysis study is hereby accepted and approved. 3. That the following development related fee amounts are hereby approved and incorporated into the Official City Fee Schedule: A) Trunk Water Acreage Fee - $4800/acre B) Water Tower Permit Fee - $1,000 C) WAC permit Fee - $900 Passed and adopted this 3rd day of January, 2005. {Seal} YES NO Haugen vacant LeMair Petersen Zieska Haugen vacant LeMair Petersen Zieska City Manager City of Prior Lake H:\Water\Agenda trunk increase 200S.doc www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245