Water Committee Agenda and Packet 2011 03 04

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THE FOLLOWING IS EXCERTED FROM "THE APACHE' JUNCTION WATER COMPANY'S "WATER SYSTEM CONNECTION FEES" DATED AUGUST 27, 2008, PREPARED BY TISCHLERBISE, FISCAL, ECONOMIC PLANNING CONSULTANTS: System Connection Fee Methodology The basic steps in a conceptual fee formula are illustrated below (see Figure 2). The first step (see the left box) is to determine an appropriate demand indicator, for a particular type of infrastructure. The demand indicator measures the number of demand units for each unit of development. For example, an appropriate indicator of the residential demand for water capacity is population growth and the increase in population can be estimated from the average number of persons per housing unit. The second step in the conceptual formula is shown in the middle box below. Infrastructure units per demand unit are typically called Level -Of- Service (LOS) or infrastructure standards. In keeping with the water capacity example, a common infrastructure standard is average day gallons of water treatment plant capacity per person. The third step in the conceptual formula, as illustrated in the right box, is the cost of various infrastructure units. To complete the water capacity example, this part of the formula establishes the cost per average day gallon of capacity for a new water treatment plant. Figure 2 Conceptual Formula Demand Units per Development Unit Infrastructure Units per Demand Unit Dollars per Infrastructure Unit When applied to specific types of infrastructure, the conceptual fee formula is customized using three common methods that focus on different timeframes. The first approach is the cost recovery method. To the extent that new growth and development is served by previously constructed improvements, jurisdictions may seek reimbursement for the previously incurred public facility costs. This method is used for facilities that have adequate capacity to accommodate new development, at least for the next five years. The rationale for the cost recovery approach is that new development is paying for its share of the useful life or remaining capacity of an existing facility that was constructed in anticipation of additional development. The second basic approach used to calculate system connection fees is the incremental expansion cost method. This method documents the current LOS for a public facility in both quantitative and qualitative measures. The jurisdiction uses fee revenue to incrementally expand infrastructure as needed to accommodate new development. A third approach is the plan -based method. This method is best suited for public facilities that have commonly accepted engineering and /or planning standards, or specific capital improvement plans approved by the governing body.