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TC Res. No. 2003-08TOWN OF AVON RESOLUTION NO. 03 - 08 Series of 2003 A RESOLUTION APPROVING AN INCREASE, EXCEEDING THE DENVER/BOULDER CONSUMER PRICE INDEX, FOR PLANT INVESTMENT FEES CHARGED TO NEW CUSTOMERS BY THE UPPER EAGLE REGIONAL WATER AUTHORITY IN CONFORMANCE WITH THE AMENDED AND RESTATED MASTER SERVICE CONTRACT REGARDING WATER SERVICE IN THE TOWN OF AVON, EAGLE COUNTY, COLORADO. WHEREAS, the Board of Directors for the Upper Eagle Regional Water Authority has recommended approval of adoption of a new Plant Investment Fee structure effective April 1, 2003; and WHEREAS, the recommended Plant Investment Fee structure increase exceeds the Denver/Boulder Consumer Price Index; and WHEREAS, the Amended and Restated Master Service Contract requires the consent of the Participating Members of the Upper Eagle Regional Water Authority to increase the Plant Investment Fee structure more than the Denver/Boulder Consumer Price Index. NOW, THEREFORE BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF AVON, that the-recommended Plant Investment Fee increase effective April 1, 2003, as shown on attached EXHIBIT A, is hereby approved by the Town of Avon. ADOPTED THIS DAY OF , 2003. OF q,sf TOWN COUNCIL 4 TOWN OF AVON, COLORADO S E A III Albert D. Reynol s, yor ATTEST: Pa Mc fenny, To rk IATown Clerk\Council\Resolution;\2003\Resolution No. 03-08 Fee increase by UERWA.doc EXHIBIT A Town of Avon Resolution No. 03-08 Upper Eagle Regional Water Authority Proposed Plant Investment Fee Structure (PIF) Residential - Based on Square Feet (S.F.) Effective 0 to - 2,501 to 3,501 to Date 2,500 S.F. " 3,500 S.F. 5,000 S.F. Current 01/01/03 $ 0.62 $ 0.92 $ 1.22 Proposed 04/01/03 $ 1.30 $ 1.60 $ 1.95 5,001 Minimum and MR S.F. per SFE* $ 1.53 $ 654.00 $ 2.50 $ 1,310.00 Commercial - Based on Meter Size Meter Size V 1" 1 1/2" 2" 3" 4" SFE Assigned* 1.5 2.6 5.8 10.3 23.0 40.9 Current 01/01/03. $920 - $1,598, $3,562,- - $6,325 $14,126 $25,120 Proposed 04/01/03 $6,075 $10,530 $23,490 $41,715 $93,150 $165,645 * SFE = Single Family Equivalent , I:\Town Clerk\Council\Resolutions\2003\Resolution No. 03-08 Fee increase by UERWA.doc Memo To: Honorable Mayor and Town Council Thru: Larry Brooks, Town Manager From: Norman Wood, Town Engineer Date: January 23, 2003 Re: Resolution No. 03-08 Approving Water Authority Plant Investment Fee Increase Summary: The Upper Eagle Regional Water Authority (UERWA) board of directors is recommending an increase in the currently charged Plant Investment Fee (PIF) structure that exceeds the DenverBoulder Consumer Price Index (CPI). The Amended and Restated Master Service Contract that defines the obligations and authority of the UERWA and it's participating members requires approval of the participating members for PIF increases that exceed the DenverBoulder CPL A "Request for Approval," from Becky Bultemeier, Finance Manager for the UERWA is attached. This Request summarizes the UERWA recommendation for the increased PIF schedule and the budgetary impacts of the request. We anticipate that Becky will be at the Council Work Session to present UERWA request and to answer questions regarding the proposed increase. If following this presentation, council desires to approve the proposed PIF increase; this can be accomplished by approval of Resolution No. 03-08 during the regular Council Meeting. Recommendation: If Council desires to approve the PIF increase as recommended by the UERWA board of directors; we recommend approval of Resolution 03-08, Series of 2003, A Resolution Approving an Increase, Exceeding the Denver/Boulder Consumer Price Index, for Plant Investment Fees Charged to New Customers by the Upper Eagle Regional Water Authority in Conformance with the Amended and Restated Master Service Contract Regarding Water Service in the Town of Avon, Eagle County, Colorado. L•\En&=ftgg W9aVMWA\ tw 03.M Mem.noc Proposed Motion: I move to approve Resolution 03-08, Series of 2003, A Resolution Approving an Increase, Exceeding the Denver/Boulder Consumer Price Index, for Plant Investment Fees Charged to New Customers by the Upper Eagle Regional Water Authority in Conformance with the Amended and Restated Master Service Contract Regarding Water Service in the Town of Avon, Eagle County, Colorado. Town Manager Comments: f R S -f4 js ,7,,1 0 Page 2 JAM-10-WJ 12255 FKOM•E.R.M.SS.D. ID,9704764009 FAGS 2/5 Request for Approval TO: The BOARD OF DIRECTORS or TOWN COUNCIL MEMBERS of. Arrowhead Metropolitan District Avon, Town of- Beaver Creek Metropolitan District Benny Creek Metropolitan District Eagle-Vail Metropolitan District Edwards Metropolitan District FROM: Becky Bultemmer, Finance Manager of UPPER EAGLE REGIONAL WATER AURTORITY (UERWA) DATE: January 10, 2003 SUBJECT: Plant Investment Fee (PIF) - Request for Change in St=ucbati Swm nary of Subject: UERWA has conducted a very comprehensive study of the cost to provide facilities for new customers and the PIF charge appropriate to fimd such costs. The purpose of this study was to recommend restructuring the PIF so that the funding for growth is being more fairly allocated* to the proper customers. Over the past 6 months UERWA has been working with Roger HmtmGan, Ph.D., P.E., of THC Utility Management Specialists, to determine the proper allocation of facility expansion costs. Since the first PIF charged in 1995, the UERWA has collected less in PIF than the debt service related to growth. As a result, a large portion of the growth related debt service is being fimded by existing customers through service fees. This inequity is projected to become worse in the future if PIF rates are not adjusted. In an effort to reduce the amount of debt service paid from service fees the UERWA is proposing PIF restructuring per the attached table. After much study and discussion the UERWA Board of Directors unanimously support adopting this new PEP structure effective April 1, 2003. Discussiou/Background: According to the AMENDED AND RESTATED MASTER SERVICE CONTRACT, entered into January 1998 by each Metro. District and the Town of Avon, each Member of the UERWA must approve a change in the PIF, which is greater than the Denver/Boulder Consumer Price Index (See page 3, N.). Since this restructuring is greater than this index, we are asking for your approval. JAN-2oo-e3 12.55 FROM.B.R.W.SS.D. ID.9704764099 FACE 3/6 Page 2 Plant Investment Fee (PM - Request for Change in Structure From Becky Bultemeier, January 10, 2003 Budget Implication: The UERWA has enacted a service fee rate increase for all existing customers of 21/o effective January 2003 and the long range financial. plan proposes increasing service fees 2% each year in the future. This nominal increase is anticipating the proposed PIF change effective April 1, 2003. If UERWA does not implement the new PIF, an immediate father increase in service fees of 3% in 2003 and at least 5% each year thereafter will be needed. Suggested Resolution/Motion: Authorize UERWA to implement the proposed Plant Investment Fees rate structure effective April 1, 2003. Attached Support Documentation: Proposed Plant Investment Fee Structure Growth related debt service vs PIF Revenue C_ Dennis Gelvin Roger Hardman, Ph.D., P.E JAN-10-83 12+56 FROlY1+8.R.W.SS.D. ID+9704764089 Upper Eagle Regional Water Authority Proposed Plant Investment Fee Structure (PIF) Prepared January 9, 2003 by Becky Bullemeler Plant Investment Fee= Residential - Based on Square Feet (S.F ) 0 to 2,501 to 3.501 to 5.001 M'mimum Effective Date 2,500 S.F. 3,500 S.F. 5,000 S.F. and up S.F. per SFE ` Current 01101120031 $0.62 $0.92 $1,22 $1.53 $654.00 Proposed 04101/2003 $1.30 $1.60 $1.96 $2.60 51,310.00 Commercial - Based on Meter she Meter S'llas 34' 1' SFE assigned 1.5 2.6 52 10.3 23.0 40.9 Cun d 01/012003 $920 $1,598 $3,562 $6,326 $14,126 $26.120 Proposed 04101/2003 $6,075 $10,530 $23.490 $41,715 $93,150 $165.645 Examples of Residential impact 600 S.F. 1.000 S.F. 2,000 S.F. 4,600 S.F 6,000 5.F. Unft M2 22 SFE assigned • 1 1 1 1.5 2 Current 01/01/2003 $654 $654 $1240 $3.690 $5,830 Proposed 04/01/2003 $1.310 $1.310 $2,600 $6.800 $10.VS • SFE ° Single Famay Equivalent teleuagewjtft *O-, s PAGE 4/5 4AN-20-04 a1.bb FRDN■B.B.W.&O.D. ID.9704754069 PAGE bib . S N oQv O N N ooll v h Q b N m > O a~ N a W c N p a d 8 N r.a Q Q N ' Q ~ a m c~ O O o I 0 g c c3k s o N s `NIMMAOU Ma PUN **WS ;9aa RONALD C. WOLFE 107 PRIMROSE PO BOX 1985 AVON, COLORADO 81620 (970) -845-7425 (970) 845-7460 FAX (970) 37676945 CELL 2/5/03 Board of Directors Upper Eagle Regional Water Authority Dear Members of the Board: This purpose of this letter and the attached review of Plant Investment Fees is to request and demonstrate the need to further explore how PIF's are calculated. I am also requesting the opportunity to discuss my concerns at the February 27th Board Meeting. As a member of the Avon Town Council I reviewed the request for approval of the proposed PIF structure and concluded that the fairness and reasonableness, and hence defensibility if challenged, of both the current and proposed PIF's is.questionable. My background and experience is in engineering and corporate management. I am neither a lawyer nor an authority in public utility management, but believe that there is case-law that should lead to concerns and the recently enacted Senate Bill 15 governing municipalities (only) provides evidence of the thinking of the State Legislature with respect to assessments such as PIF's. Technical approaches in the Rate Study seem to be subject to challenge. I personally support, as did the entire Avon Council, UERWA PIF's and their increase, but they should be calculated in a better way. Development , must pay its own way and Impact Fees in general are a valid and preferred way for this to be accomplished. I respectfully request that the Board revisit the calculates of 7IF's and in the process review and consider the attached review. z7 Ronald C. CC: Avon Town Council Larry Brooks, Avon Town Manager Becky Bultemeier, UERWA PLANT INVESTMENT FEES BASIS OF CONCERN: PIF's.are a sound and fair means to have development pay for itself and not have the general population unduly burdened with additional costs. Impact fees have a long history in Colorado and as Dr. Hartman has pointed out there exists somewhat limited specific guidance on exactly how an impact fee or PIF is to be calculated. Senate Bill 15, passed by the Colorado General Assembly in October 2001 demonstrates the rationale of the Legislature regarding what a fair and defendable impact fee probably has to be. Senate Bill 15 applies only to municipalities and not to special districts or any other taxing entity but it does demonstrate methodology that is probably the only defensible approach should a PIF levied by the Water Authority be challenged in court. In February 2001, the case of Krupp v. Breckenridge Sanitation District was decided by the Colorado Supreme Court and established that impact fees do not have to be "roughly proportional" nor have an "essential nexus" to a particular development. Rather the fee structure can be equally applied to any and all developments as long as the fee structure is directly related to the cumulative impacts of all development as is now required by Senate Bill 15. With Krupp and S.B. 15 as guides it is reasonable to conclude that any fee must be able to be substantiated on the basis that it directly and fairly recovers the capital costs of providing the number of units of demand required by the new development... in our case the demand is for water and the units are both peak and average gallons of flow. Both the existing and proposed PIF schedules contain a rapidly escalating fee as residence square footage increases that is not justified by the cost analysis of the Rate Study and could judged to be not be fair and nor reasonable. Also it appears that both the current and proposed PIF schedule fail to adequately recover the true cost of supplying water to new development... they are both too low in value. RATE STUDY: The Plant Investment Fee Analysis, summarized in Table III-1 of the Rate Study, demonstrates that the there are two drivers of plant capital costs ...peak and average demands. It is demonstrated that a PIF of $6.624 is required for each gallon per day of peak-daily-demand. Similarly it is demonstrated that a PIF of ($0.899), i.e. a credit, is warranted for each gallon per day of average-daily-demand. This credit is driven by recovery of debt costs through Monthly User Charges. Given the facts of costs/credits and the identity of the two drivers of plant investment costs it follows that the only fair, reasonable and defendable PIF schedule must be directly based on them. Table IV-1 plots peak monthly demand against residence size and shows, as Dr. Hartman correctly observes, that peak demand only "rises slightly" with residence size. This rise is also essentially linear with residence size. Therefore 1 the peak-demand driven portion of any proposed PIF rate per square-foot should rise no more than "slightly" with residence size. Both the current and proposed PIF rates per square-foot rise dramatically and apparently unjustifiably as residence size increases. Very concerning is that the Rate Study proposes continuing to base the PIF on residence square-footage through a line of reasoning that apparently considers mostly peak- demand, ignoring somewhat the offsetting credits of average-demand especially for very large residences. Below a more encompassing PIF calculation will be demonstrated. PIF ALTERNATIVES: Both the current and proposed PIF schedules appear to be not defendable as reasonable. The material that follows develops, at least preliminarily, other approaches that are more accurate, reasonable and defendable. At the end of this review, the different PIF's are tabulated for comparison. It is suggested that the Board review these alternative methods for validity and model each to determine any shortfalls in recovery of actual costs that may result from the adoption of the proposed PIF schedule. SFE BASED PIF: Table III-1 of the Rate Study, Plant Investment Fee Analysis, develops a peak-daily-demand PIF of $4,289 per SFE and an average- daily-demand PIF Of ($246) per SFE or a total of $4,042 per SFE or fraction thereof. -The Authority could contend that it is fair, accurate and reasonable to apply this PIF rate uniformly across all residences at $1.347 per square foot. Resulting PIF's are compared below: RESIDENCE SIZE CURRENT PIF PROPOSED PIF SFE-BASED PIF 600 $372* $780 $808 1,000 $620* $1,300'` $1,347 2,000 $1,240 $2,600 $2,694 4,500 $3,690 $6,810 $6,062 6,000 $5,830 $10,290 $8,082 10,000 $11,950 $20,290 $13,347 " SUBJECT TO MINIMUM CHARGE OF $654 SUBJECT TO MINIMUM CHARGE OF $1,310 The SFE-based PIF eliminates the non-linear escalating rate structure that could be considered not justified by the analysis and therefore not "reasonable." This alternative schedule should be very defendable. PEAK AND AVERAGE DAILY-DEMAND BASED PIF: Since the Rate Study is based on both peak-daily-demand and average-daily-demand, there should be no argument that using these two drivers will result in the most fair, accurate and reasonable PIF. Peak-monthly-demand has been related to residence size in Figure IV -1 using a sampling of actual customer data and a best-fit analytical technique. It is this figure that shows only a "slight rise" in demand with increasing size that leads to the conclusion of "unreasonableness" 2 of the current and proposed PIF schedules. However the plotted relationship' between peak demand and residence size is valid and defendable. A similar sampling, plot and, curve-fitting should be done for average-monthly-demand. Both peak-monthly-demand and average-monthly-demand must be converted to daily demands so that the results of the cost analysis can-be used to develop the appropriate PIF. With available data, Dr.Hartm'an can divide the peak-month demand by the actual days of that month and then plot this against the residence size. A plot of average-daily, demand can be created for the sampling of customer accounts and this plotted against residence size. Fora given size new residence, the appropriate peak-daily-demand and average-daily-demand can be read and each multiplied by their respective PIF factor. This conceptual approach results in a PIF calculation as follows: PIF = [{(Peak Monthly Demand, gallons per month) / (Number of Days in Peak-Demand Month, days)} x $6.624, dollars per gpd] less [(Average Daily Demand, gallons) x ($0.899, dollar of credit per average gpd)] With the data at hand in the Study and using graphical techniques it is possible to do a "first-pass" at what this PIF will look like. Using 30.42 as the average days per month and the graphical estimates of the relationship of peak-monthly- demand... 0 to 6,000 sq. ft: Peak-Daily-Demand = [(11.67) x (Residence Size, sq. ft)] / 30.42 days per average month = (0.384) x ( Residence Size) 6,001 to 10,000 sq. ft. Peak-Daily-Demand = {[(18.5) x (Residence Size)] - 50,000} / 30.42 10,001 and up Peak-Daily-Demand = {[(23.57) x (Residence Size)] -100,000} / 30.42 Multiplying these relationships by the peak-demand PIF factor of $6.624 results in peak-demand (only) portion of PIF's... 3 0 to 6,000 sq. ft: P.D. PIF = $2.541 x Residence Size 6,001 to 10,000 sq. ft. P. D. PIF = [$4.028 x Residence Size] - $10,888 10,001 and up P. D. PIF = [$5.132 x Residence Size] - $21,775 To each of these peak-demand PIF's must be added the credit PIF calculated from average-demand data. These data are not in the Rate Study but are readily available, from customer account records the resulting total PIF should be calculated and examined for, recovery of needed plant investment. The following table shows prior calculations along with the peak-demand portion of the demand-based PIF. The average-demand portion of the demand-based PIF remains TBD. RESIDENCE SIZE CURRENT PIF PROPOSED PIF SFE- BASED PIF DEMAND BASED PIF PEAK_ AVG. 600 $372 " $780 $808 $1,525 LESS $TBD 1,000 $620 * $1,300 $1,347 $2,541 LESS $TBD 2,000 $1,240 $2,600 $2,694 $5,082 LESS $TBD 4,500 '$3,690 $6,810 $6062 $11,435 LESS_$TBD 6,000 $5,830 $10,290 $8,082 _$15,246_ LESS $TBD .10,000 $11,950 $20,290 $13,347 $29,392 LESS $TBD " SUBJECT TO MINIMUM CHARGE OF $654 SUBJECT TO MINIMUM CHARGE OF $1,310 It is suggested that the average-demand driven $TBD be determined so that this approach to PIF's can be evaluated. FIXTURE DRIVEN PIF: Perhaps the ultimate in accuracy, fairness and defensibility for determining PIF's is to relate peak-demand and average-demand to an actual count and factoring of the number of water consuming/discharging points, devices and fixtures in a residence. No attempt has been made to examine this approach. COMMERCIAL PIF: Approaches similar to the above residential PIF's may prove useful in commercial accounts. 4