SUBJECT:
Title
PUBLIC HEARING: An Ordinance of the Town Council of the Town of Erie Amending Section 8-1-3 of the Erie Municipal Code to Update the Town's Fee in Lieu of Water Dedication and Water Tap Fee
Body
DEPARTMENT: Finance Department
Utilities Department
Department
PRESENTER(S): Sara Hancock, Finance Director
Todd Fessenden, Utilities Director
First Name Last Name, Title
TIME ESTIMATE: 10 minutes
only required for non-consent items
POLICY ISSUES:
Based on detailed study, the proposed rates are needed to provide sufficient revenue to operate and maintain the Town’s existing water, wastewater, and stormwater systems and increase the tap and water dedication fees to generate sufficient revenue to expand the system to serve new development.
STAFF RECOMMENDATION:
Recommendation
Staff recommends approving the updated tap and dedication fees.
End
SUMMARY AND BACKGROUND OF SUBJECT MATTER:
The Town of Erie Financial Policies require the Town to have a formal rate study performed on the utility fund (water, wastewater, and storm drainage) charges at least every five years. Bond indentures also require the Town to ensure that its fees are adequate to ensure compliance with all bond covenants. Staff conducted the last formal rate study for these funds in 2020. In 2020, the Council reviewed and adopted the results of those rate studies, setting rates and fees for the period 2020-2024.
The Town began the current rate study process in late 2023. The Town contracted with Raftelis Financial Consultants (Raftelis) in August 2023 to perform the formal rate study for water, wastewater, and storm drainage monthly customer charges, water and wastewater tap fees, raw water dedication fees, and storm drainage impact fees.
Summary of Rate Study
The goals of the rate study are to determine the revenue needed to cover annual operations and maintenance costs and capital improvement projects, meet debt service requirements, provide for sufficient operating reserves and maintain the utility’s self-sufficiency over a 5-year period. Moving forward, staff recommends evaluating fees every two years, with a more in depth study every 4-5 years to address capital projects and rapid growth.
The key assumptions used in the rate study are as follows:
• Residential growth: 650 taps per year
• Target Reserves: 90 days of operations plus one year’s depreciation expense
• Debt Service Coverage: As required by the respective debt covenants
Permit-Related Fees
Water and wastewater tap fees, water dedication fees, and storm drainage impact fees (among other fees) are paid at the time of issuance of a building permit. The following discussion presents the proposed changes to these fees.
Water Tap Fee and Fee in Lieu of Water Dedication
These fees are collected on all new residential and non-residential construction that requires connection to the water system. These fees are a one-time charge to the customer for their proportional share of capacity of the system infrastructure in the case of the water tap fee and annual water requirements in the case of the fee in lieu of water dedication. These fees are used to defray the capital costs of expanding the system facilities and to recover the cost of growth to the system.
Below is a schedule of current and proposed water tap fee and fee in lieu of water dedication.
|
Meter Size |
Water Tap Fee |
Fee in Lieu of Water Dedication |
|
|
Current |
Proposed |
Current |
Proposed |
|
3/4 inch |
12,050 |
17,290 |
16,243 |
31,400 |
|
1 inch |
20,080 |
28,820 |
(a) |
(a) |
|
1.5 inch |
40,170 |
57,630 |
(a) |
(a) |
|
2 inch |
64,270 |
92,210 |
(a) |
(a) |
|
3 inch |
120,500 |
172,900 |
(a) |
(a) |
|
4 inch |
200,730 |
288,170 |
(a) |
(a) |
|
6 inch |
401,670 |
576,340 |
(a) |
(a) |
(a) Section 8-1-9 of this Code as it may be amended, defines the manner in which the Town determines the amount of fee in lieu of water dedication.
Wastewater Tap Fee
The wastewater tap fee is collected on all new residential and non-residential construction that requires connection to the wastewater system. The fee is a one-time charge to the customer for their proportional share of capacity of the system infrastructure. The fee is used to defray the capital costs of expanding the system facilities and to recover the cost of growth to the system, including a significant expansion of the Town’s North Water Reclamation Facility. No changes to the Wastewater Tap Fees are proposed at this time.
|
Meter Size |
Wastewater Tap Fee |
|
|
Current |
Proposed |
|
3/4 inch |
8,860 |
8,860 |
|
1 inch |
14,797 |
14,797 |
|
1.5 inch |
29,533 |
29,533 |
|
2 inch |
47,253 |
47,253 |
|
3 inch |
88,600 |
88,600 |
|
4 inch |
147,667 |
147,667 |
|
6 inch |
295,333 |
295,333 |
Storm Drainage Impact Fee
The storm drainage impact fee is collected on all new residential and non-residential construction that requires connection to the storm drainage system. No change in these fees is proposed at this time.
COUNCIL PRIORITY(S) ADDRESSED:
ü Prosperous Economy
ü Effective Governance
ü Fiscally Responsible
ATTACHMENTS:
• Ordinance
• Presentation