revising water and wastewater impact fees in a time of...

Revising Water and Wastewater Impact Fees in a Time of Rapid Change in the West

National Impact Fee Conference October 11, 2007

Presented by:Fred McVey, Engineering Service Manager, City of EugeneDouglas Frost, Principal Planner, City of PhoenixCil Pierce, HDR, Inc., Senior Project Manager

Introduction

Many NIFR sessions focus on calculation methodology & legal/political constraintsThis session focuses on broader forces that are affecting fee development This session focuses on water, water resource, & wastewaterThis session draws on experiences from rapidly-growing communities in northwest and southwest US

Context

Calculation of impact fees often requires a diverse range of inputs & assumptionsThese inputs and assumptions often must be updated to reflect changing economic, environmental, social & technological factorsUnderstanding trends that affect these inputs & assumptions can be critical for preparing & implementing fees that are realistic and appropriate

Trends Affecting Utility Impact Fees

Global market driving material costs up

Changing development characteristics

Housing size changes and fees

Environmental considerations and fees

Reclaimed water and impact fees

Wastewater Trends & Implications

Fred McVey

Categories of Trends

Trends change the costs of infrastructure

Trends change development’s demand on infrastructure capacity

Trends affect the way we measure capacity demand (units of measure)

Three Trends & Wastewater Fees

Changes in the characteristics of housing

Emerging emphasis on mixed use development

Changes in restaurant types affecting wastewater discharge characteristics

Characteristics of Housing

Square Feet of Single Family Dwellings

1,0001,5002,0002,5003,000

United StatesWest

Bedrooms in Single Family Dwellings - West

2 bedrooms or less

3 bedrooms

4 bedrooms or more

Bedrooms in Single Family Dwellings - US

YearPe

2 bedrooms or less

3 bedrooms

4 bedrooms or more

Number of Bathrooms in Single Family Dwellings - U.S.

YearPe

1 1/2 baths or less

2 baths

2 1/2 baths1

3 baths or more

Number of Bathrooms in Single-Family Dwellings West

0102030405060

1 1/2 baths or less

2 baths

2 1/2 baths1

3 baths or more

US Persons per Household

Persons per household

Implications / Issues

8161195

15851977

23822780

32804000

010002000300040005000600070008000

ProjectedSampled Actual Data

Total Area Living Space

Mixed Use Development

Not a New Concept – New Emphasis in New Locations

Challenges for Impact Fees?

Mixed Use Development

Only in Eugene?

Mixed Use Implications

New Restaurant Types

Example of market and business trends

New Restaurant Types

Modified Rate Schedule

Wastewater Conclusions

Trends affect:

- Capacity demand

- The way we measure demand

- The categories of development recognized in rates

Monitoring trends and making adjustments helps ensure adequate and equitable cost recovery

Select Trends in Phoenix Area

Facility Construction Costs

Per Unit Water Demand

Water Resource Options & Costs

Tremendous spike in construction costs in past four years

‘Perfect storm’ related to real estate boom and international economy

Housing boom so extreme difficult to even get contractors to bid

Demand from Middle East, East Asia & elsewhere pressuring commodity prices

Both City and developers unable to predict what cost of projects would be

Costs rising as much as 60% in two year period for some types of facilities

Cost basis for impact fees no longer valid

City CIP revenues (rates & fees) stable but expenditures rising rapidly

Water Main Cost per Foot (2003 & 2006) - Construction OnlyBased on Black & Veatch Studies Done for City of Phoenix

16" 36" 54"

2003 2006

Booster Station Costs by Max Capacity (2003 & 2006) - Construction OnlyBased on Black & Veatch Studies Done for City of Phoenix

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

$5,000,000

5 MGD 15 MGD 30 MGD

2003 2006

Reservoir Costs Based on Capacity (2003 & 2006) - Construction OnlyBased on Black & Veatch Studies Done for City of Phoenix

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

5 MG 15 MG 30 MG

2003 2006

2003 B&V study underpinning fees no longer useful for projecting costs

Water & ww fees too low

Developers demand credit based on actual cost, not plan cost

City revises fees in 2006

New fees increase significantly in 2006, even with somewhat smaller networks

Gravity Sewer Cost per Foot (2003 & 2006) - Construction OnlyBased on Black & Veatch Studies for City of Phoenix

18" 30" 42"

2003 2006

Lift Station Cost by Max Capacity (2003 & 2006) - Construction OnlyBased on Black & Veatch Studies Done for City of Phoenix

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

3 MGD 5 MGD 8 MGD

2003 2006

Costs appear to be stabilizing

Contractors more eager to bid

Housing downturn affecting some costs

Commodity costs remain high

Zone 5 watermain project originally estimated at $5 million, then $10 million

Project now bid at about $7 million

Water demand for virtually all types of users is declining

Existing households and businesses showing gradual decline in water use

New homes & commercial space show marked reduction in water use

Decline affects sizing of facilities and need for additional water resources

Single family water use - FY 1996 to 2007

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Decline in demand is coming from multiple sources

Landscaping is changing to desert or to mixed – grass & exotics more rare

Lot sizes are declining; HOA pools more common

Internal fixtures & irrigation more efficient

Businesses more conscious of use

Data indicated major shift in 1997-2003 for new home use

Average use by all SF down to 400 GPD in 2006

New SF subdivisions show average use of only 300-350 GPD in 2006

New base used for 2006 update – only 315 GPD

3076,7771999-20042006Laveen

3111,6211999-20042006North Gateway -

Tramonto

3361,222Built in 90's2006Desert View - SB 7

3591,375Built in 90's2006Desert View -

Basin H05

Basin H07

Basin H08

31547,5131999 and Later2003-05City of Phoenix

401345,833All SF2006City of Phoenix

Average Demand (GPD)

Approximate

Number of Units

Type of Units

Time PeriodArea

Single Family Water Use Data - Annual Average Day

Decline rate in new home water use will slow

Average SF use (all) will continue to fall with structural changes & higher rates

Decline will probably slow, then stop, as easy changes done

Trend will contribute to lower water fees, other things being equal

Assumed Acre Feet per Single Family Unit: Water Resource Acquisition Fee Studies

Arthur Young - 1988 Red Oak - 2006

Phoenix, like many other western communities, initially was dependent on nearby surface suppliesSalt River Project brings water from Verde & Salt river systems – series of reservoirsGroundwater also used but not sustainable; rapidly declining sourceColorado (CAP) water increasingly important

INFRASTRUCTURE PLANNING AREA

CURRENT CITY LIMITS

SURFACE WATER SYSTEMS

WATER TREATMENT PLANTWATER RECLAMATION PLANT

ACTIVE WELLS

Phoenix Water Planning Boundaries

SALT RIVER PROJECT "MEMBER” LANDS

City divided into two areas for supply purposes

On-project – areas served by SRP

Off-project – areas served by CAP & other

Most new growth in off-project areas

CAP allocations limited

Two more major CAP allocations

Phoenix Water SourcesTypical Year

Groundwater (from Phoenix wells) - 3%

Reclaimed Water - 7%

Salt/Verde Surface Water - 54%

Colorado River – 36%

SRP and CAP surface waters cost $600 to $2,000 per acre foot (capital cost)

Other options cost considerably more

Water Resource Acquisition Fee Update identified several alternatives

McMullen Valley

Northern rec plants and recharge

Agua Fria (rec water recharge)

SRP and CAP surface waters cost $600 to $2,000 per acre foot (capital cost)

Other options cost considerably more

Water Resource Acquisition Fee Update identified several alternatives

McMullen Valley

Northern rec plants and recharge

Agua Fria (rec water recharge)

Current and Future Water SuppliesGeneral Plan (Moderate Shortage Conditions)

100,000

200,000

300,000

400,000

500,000

600,000

SRP (On-Project only)

Groundwater

Additional CAP

ExistingReclaimed

System

McMullen Groundwater Future

Supplies

Additional SRP

Additional Reclaimed

Current

Supplies

100,000

200,000

300,000

400,000

500,000

600,000

100,000

200,000

300,000

400,000

500,000

600,000

SRP (On-Project only)

Groundwater

Additional CAP

ExistingReclaimed

System

McMullen Groundwater Future

Supplies

Additional SRP

Additional Reclaimed

Current

Supplies

Estimated Capital Costs Associated with Various Potential Water Resources ($2007 Dollars)Malcolm Pirnie/Red Oak Associates Report

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

CAP Reallocation GRIC Lease McMullen Valley Northern Rec Plants Agua Fria

WRAF Update (Malcolm Pirnie/Red Oak) projected alternative sources at $3,000 acre/foot or more

Other options not priced by update are greater than $5,000 acre/foot

Initial internal cost estimates of reclaimed non-potable irrigation at $5,000+ acre/ft.

As cheap, easy surface water sources are used up, cost of water acquisition will rise dramaticallyIn some western areas costs rising to $20,000 acre/foot.Reclaim/recharge, desalination, etc. are pricey – conservation is still good optionCurrent fees based on average weighted costs – as CAP is used up, fee will rise

Water Fee Implementation Options

Meter size – > 2-inch on actual projected usage

Fixture count

Percent usage

Meter Size < 2-inch Meter Example

Source of Supply $2,379 Storage 393 Distribution 1,416 General Plant 191 Debt Service Credit 0 Total $4,378

Net Allowable Water SDC $4,380

Sample SDC by Meter Size (inches)System

Meter SizeWeighting Factor

[1]Development

Charge

5/8" X 3/4" 1.00 $4,3803/4" 1.00 4,380

1 1.67 7,3151 1/2 3.33 14,585

2 5.33 23,345----------------------- ----------------------- -----------------------

3 10.00 43,8004 16.67 73,0156 33.33 145,9858 53.33 233,585

10 76.67 335,81512 112.50 492,750

Notes:[1] Weighting factor based on AWWA meter equivalencies

Water System Development Charge Calculation Results

Fixture Count Approach

Source of Supply/Treatment $850Storage 217Transmission/Distribution 509General Plant 14Debt Service Credit (26)Total $1,563 Plus: Administrative Cost (5%) 78Net Allowable Water Impact Fee $1,641

Water Impact Fee Calculation Results

Weighting Base Cost PerMeter Size Factor [1] Fee Fixture

5/8" 1.00 $1,641 0 - 203/4" 1.00 1,641 21 - 35 $54.70

1 1.50 2,462 36 - 65 54.70 1 1/2 2.50 4,103 66 - 180 35.67

2 5.00 8,205 181 - 360 27.35 3 8.00 13,128 361 - 800 26.11 4 15.00 24,615 801 - 1800 16.41 6 25.00 41,025 1800 - 4600 14.65

[1] Weighting factor based on AWWA 5/8" meter equivalencies.

Fee Implementation Method by Meter Size (inches) and Fixture CNumber of

Fixtures

Contract Meters: Monitoring Percent Usage

Economic and Housing Trend Impacts

Increase in condo dwellingsCreates challenges to fee implementation

Metered separatelyUsage differs from single familyWW flows may be more similar

Second/third/vacation homesSimilar demand by fixturesLess annual usageCreates larger peak on system

Environmental Trends: Sustainability

Green Development:

Grey water systems

Rainwater harvesting

Others

Some of the challenges

Desire to support sustainability

CreditsEquity to the few vs. ease of administration

Longevity/functionality of improvements

QUESTIONS

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