For City Council Meeting and Rialto Utility Authority [December 11, 2018]
TO: Honorable Mayor and City Council and Rialto Utility Authority Board
APPROVAL: Ahmad R. Ansari, Interim City Administrator
FROM: Thomas J. Crowley, P.E., Utilities Manager
Title
Request City Council/Rialto Utility Authority Conduct a Public Hearing to Consider Adoption of the Updated Water and Sewer Development Impact Fees and Following the Close of the Public Hearing, Adopt City Council Resolution No. 7436 and RUA Resolution No. 06-18 Approving the Water and Sewer Development Impact Fee Update by FG Solutions dated September 2018. POWERPOINT
(ACTION)
Body
BACKGROUND:
Development Impact Fees [DIF(s)] are charges imposed by local governmental agencies for the purpose of defraying all or a portion of the cost of public facilities needed to serve development projects. Government Code Sections 66000-66025 (the “Mitigation Fee Act”) establishes the procedural framework for adopting development impact fees.
A DIF is not a tax, special assessment or rate increase on existing development, but is only imposed upon new development as a mitigation measure. DIFs are a one-time charge to new applicants for service representing a proportionate share of the cost of facilities necessary to provide system capacity to a new development. The DIFs must be reasonably related to the demand for public services created by the development. The power to exact DIFs arises from the City’s duty to protect the community’s public health, safety and welfare.
From 1989-1990, the City of Rialto adopted Ordinances establishing DIFs for various public facilities, including but not limited to, general municipal, police, fire, park, storm drains, water and sewer. The City imposes the DIFs to mitigate the demands that new development places upon the City’s public facilities. The enacting Ordinances provide that the amount of the DIFs are to be set by Resolution, and may be increased by the City Council based upon material changes in facility needs, construction costs, or demographic trends.
The DIF schedules were last updated for a variety of facilities, including Water and Sewer, in 2011. To ensure the DIFs continue to keep pace with inflation, the City adopted an automatic inflationary adjustment to be made each July 1st. The DIFs are adjusted by the percentage change in the California Construction Cost Index (CCCI) for the preceding calendar year.
On May 9, 2017, the City Council/Rialto Utility Authority (RUA) approved Resolution 7125 temporarily reducing sewer connection fees to $393.98 per seat for full service and $204.73 per seat for fast service restaurants. On December 12, 2017, the City Council/RUA approved Resolution 7261 temporarily reducing sewer connection fees to $500.00 per hotel room with and without restaurants. On May 8, 2018, the City Council/RUA approved Resolution 7334 continuing the temporary sewer connection rate reduction until December 31, 2018.
ANALYSIS/DISCUSSION:
The City’s General Plan requires all developed areas within the City of Rialto to be adequately served with essential public services and infrastructure. New development places additional demands upon existing public facilities and often requires the construction of new or expanded facilities to maintain service standards. To ensure that the City collects sufficient funds to construct the master planned facilities, the City should periodically review and update its DIFs to adjust for demographic trends, the increased cost of construction and/or any material changes to the list of master planned facilities.
To evaluate the current DIFs for Water and Sewer services, the City retained the services of FG Solutions, which developed the proposed DIFs. The proposed DIFs are fully discussed in the Water and Sewer Development Impact Fee Update report and based on the fact that water and sewer system capacity to serve new development is provided by both existing and future infrastructure. The report is included as Attachment 1.
There are three separate fees calculated in this DIF Update.
1. Water Holding and Distribution.
2. Sewer Treatment:
Consistent with the current sewer DIF, the treatment DIF is based on the cost of the treatment plant, sewer pump stations, and pipes greater than 12” in diameter.
3. Sewer Collection:
This DIF is based on the cost of collection system pipes 12” or less in diameter. It recognizes that infill development will rely on the City’s existing small-diameter sewer mains, but new subdivisions will not.
The calculations to determine the DIFs were completed following the basic steps below. Section 2 of the attached report shows the actual calculations in greater detail.
• Determine the Cost Basis:
o The cost of existing and future infrastructure required to serve new development.
• Determine the System Capacity:
o For water, it is the demands, in units of million gallons per day, at the end of the planning period in the District’s 2012 Master Plan.
o For sewer, it is the treatment plant capacity as identified in the 2017 Basis of Design Report (“BODR”) after the upcoming Wastewater Treatment Plant Improvement Project, also known as the “S1” project.
• Calculate Unit Cost of Capacity:
o Cost Basis divided by the System Capacity
• Calculate the DIF for each customer class:
o Unit Cost of Capacity multiplied by the use of capacity for each customer class.
The Proposed Water DIF amounts are shown below in Table 1 with the current and recent fees approved by Council listed for comparison.
Table 1
DIF Proposed Sewer Treatment are shown below in Table 2 with the current and proposed listed for comparison.
Table 2
Table 2 is continued on the next page.
Table 2 (Continued)
It should be noted that for hotels/motels with restaurants, DIFs are separately calculated for the restaurant and hotel and then added together. For manufacturing, the DIF for an equivalently sized warehouse is calculated to capture domestic sewer and added to a calculation for process water discharged to sewer based on a formula that takes in to account flow, Biochemical Oxygen Demand (BOD) loading, and Total Suspended Solids (TDS) loading.
Proposed Sewer Collection DIF is shown below in Table 3 with the current and proposed fees listed for comparison.
Table 3
Overall, the biggest changes to the City’s DIFs are:
• In just about every category, proposed DIFs are lower than current DIFs.
• Proposed DIFs are reflective of the water and sewer infrastructure required to serve new development.
• Sewer Treatment customer classes have been simplified, making it easier to administer and removing the customer classifications that were redundant or no longer relevant.
The proposed DIF Fee Schedule is listed in the Resolutions and included as Attachments 2 and 3. As described in the Resolutions, the Fees will be adjusted on July 1st of each year, by the change in the California Construction Code Index (CCCI), effective upon publication of the index for the preceding calendar year as determined on March 1st of each year. This adjustment schedule will occur at the same time as the City’s other DIF Fees are adjusted.
Staff believes the proposed DIF fee schedule will be easier to use and implement, keeps pace with inflation and the cost of providing services, while still allowing the City to maintain a competitive edge in efforts to bring new development to the Community.
The proposed DIF Fee Schedule was presented to the Economic Development Committee on September 26, 2018 and the Utilities Commission on October 16, 2018, who recommended Council approval and directed staff to request City Council set a Public Hearing to consider adoption of the updated Fee Schedule. The Public Hearing was set by Council on November 11, 2018 and publicly noticed on November 21, 2018 and November 28, 2018. A copy of the proof of publication is included as Attachment 4.
ENVIRONMENTAL IMPACT:
This request is not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. According to Section 15378(b), a Project does not include: Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY:
The availability of adequate water and sewer infrastructure is an important component of the City’s economic development strategy as outlined in the General Plan. Approval of the proposed action complies with the following City of Rialto Guiding Principles, General Plan Goals and Policies:
Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
Goal 3-6: Require that all developed areas within Rialto are adequately served with essential public services and infrastructure.
Policy 3-6.1: Coordinate all development proposals with other affected public entities to ensure the provision of adequate public facilities and infrastructure services.
Policy 3-6.3: Require an increasing level of public safety infrastructure and service capability tied to population increase and increasing service demand.
Goal 3-8: Promote affordable and quality water service capable of adequately meeting normal and emergency water demands to all areas in Rialto.
Policy 3-8.1: Require that all new development or expansion of existing facilities bear the cost of expanding the water system to handle the increased demands which they are expected to generate.
Policy 3-8.5: Upgrade outdated and undersized water service facilities to prevent unnecessary system failures in the City’s water system.
Goal 3-9: Upgrade and maintain an improved wastewater system with adequate plant efficiency and capacity to protect the health and safety of all Rialto residents, businesses, and institutions.
Policy 3-9.1: Require that all new development or expansion of existing facilities bear the cost of expanding the wastewater disposal system to handle the increased loads which they are expected to generate.
LEGAL REVIEW:
The City Attorney has reviewed and approved the staff report
FINANCIAL IMPACT:
Operating Budget Impact
A projection of the total reduction in DIF revenues is not made because development levels vary considerably from year to year. The proposed fees for water and sewer categories are listed in the fee resolutions/ordinances and represents an approximate fifty percent reduction in fees and although this could be a considerable impact to development revenue, staff believes it will make the City more competitive in attracting businesses to the City and thereby making up any loss in revenue by an increase in number of businesses. The actual fees will vary for each new customer, depending on customer specific parameters such as customer type, water meter size, and lineal front footage.
Capital Improvement Budget Impact
The City and RUA will need to develop a plan for mitigating impacts to the Water and Sewer facilities resulting from new development projects and the cost to serve them.
Licensing
There is no business license requirement with the proposed action.
RECOMMENDATION:
Staff recommends that the City Council:
1. Conduct the Public Hearing to receive all written and oral testimony regarding the proposed Development Impact Fees imposed upon new development within the City of Rialto.
2. Adopt the City Council Resolution Approving the Water and Sewer Development Impact Fee Update by FG Solutions dated September 2018, and making certain findings in connection therewith.
3. Adopt the Rialto Utility Authority Resolution Approving the Water and Sewer Development Impact Fee Update by FG Solutions dated September 2018, and making certain findings in connection therewith.