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HomeMy WebLinkAbout2008-03-11 - MinutesCity Council Water & Sewer Meeting Minutes March 11, 2008 Page I of 5 Member Aldermen Mayor Dan Coady Ward 1 Position 1 — Adella Gray V10 Ward 2 Position l - Kyle rt Cook CityAttorney Kit Williams � 1 Ward 3 Position 2—Robert Ferrell Ward 4 Position 2 - Lioneld Jordan City Clerk Sondra Smith ARKANSAS City of Fayetteville Arkansas City Council Water & Sewer Committee Meeting Minutes March 11, 2008 A meeting of the Fayetteville City Council Water & Sewer Committee was held on March 11, 2008 at 5:15 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. MEMBERS PRESENT: Alderman Kyle Cook, Chair; Alderman Lioneld Jordan; Alderman Robert Ferrell; Alderwoman Adella Gray STAFF PRESENT: David Jurgens (first part of meeting); Gary Dumas; Tim Conklin; Paul Becker David Jurgens briefly reviewed the items on the agenda and asked if there were any questions. He suggested that in the interest of saving time, a detailed discussion on these items be deferred. 2. Water & Sewer Impact Fee Study Tim Conklin gave a little background on the Impact Fee Study. In 2006 the City of Fayetteville, along with the cities of Elkins, Farmington and Greenland contracted with Duncan & Associates to update the water and sewer impact fees and also to calculate fees within those jurisdictions. Clancy Mullen with Duncan & Associates is present to go over this study. He asked the Committee to keep in mind that the study calculates the maximum fee that can be adopted, not necessarily what has to be adopted. He explained the differences in this study and the one done in 2002. He said the impact fee is a one-time charge to new development and it has to be used for expanding capacity. He said this was a joint effort between the four cities with Fayetteville paying $55,000, Elkins paying $25,000, Greenland and Farmington paying $15,000. Clancy Mullen presented the Water and Wastewater Impact Fee Study. He also explained the differences between this study and the one done in 2002. He talked about the consultant team and their experience and qualifications for doing this study and explained what impact fees are. He explained the types of impact fees for both water and wastewater. He said three different fees for water were calculated: system costs (14" lines and greater) which all customers will pay; and two local costs (10-14" lines) — one for Elkins customers and one for the rest of the water customers. For wastewater all new customers will pay system costs (limited to the WSIP) and then there are the local costs (all other major improvements) which are calculated for each of the four cities. He talked about the impact fee formula, which he said is the number of services units times the net cost per service unit. He said the net cost is the cost minus the revenue credit. He said they have provided revenue credit for outstanding debt and for future sales tax funding for 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes March 11, 2008 Page 2 of 5 the WSIP. He explained that the reason for revenue credits is that you don't want to charge new development more than its fair share. They will be paying for the facilities required to serve them through their impact fee and possibly through their rate payments and you don't want them to pay twice for the same thing. Mr. Mullen reviewed the four methodologies (recoupment; incremental expansion; plan -based; end state) used in the different components of the fee calculation to determine the cost per service unit and explained how cost per service unit is calculated with each methodology. He talked about the methodology used on each portion of the study. He then talked about single-family fees and said Fayetteville's current fee ($308 for water and $835 for wastewater) is quite low compared to the national average ($3,232 for water and $2,885 for wastewater). He also reviewed the proposed fees for each city. He said the proposed fee for water for Fayetteville, Farmington and Greenland would be the same ($2,954). All three will pay the same system and local costs because the facilities are all owned by the City of Fayetteville. Elkins would have a little higher fee ($3,500). For wastewater each of the cities would be charging a different fee because all four cities own their local facilities. He pointed out again that the fees presented are the maximum that could be charged and the cities don't have to charge the maximum. He said in Farmington, Elkins and Greenland if the maximum fee is charged, Fayetteville would be getting $1247 of that fee to recover the cost of the system improvements. He reviewed the potential revenue over ten years for each city based on projections made a year or so ago. Tim Conklin said some of this depends on development. If development goes down, the revenue will go down. Clancy Mullen continued by discussing alternatives, which included residential flat rate or variable fees, cost recovery (adopt the total maximum fees, adopt maximum fees for system costs, or adopt a percentage of the maximum fees), phase-in (90 -day grace period or half of ultimate increase in first year) and indexing (annual inflation adjustment). He then reviewed what the impact fees would be for Fayetteville based on 50% of the system cost, 100% of the system cost or 100% of system and local cost. Alderman Cook opened the floor for public comment. Steve Davis asked what process Duncan & Associates used to match up the capital that is funded through rates versus the capital that is proposed to be funded with an impact fee. Clancy Mullen said they did not reduce the fee to account for the fact that some rate revenue might be used for capital improvements. In response to a further question from Steve Davis, Mr. Mullen said he doesn't think there is a potential for double dipping. He said historically the City has been paying for growth -related capital improvements with rates. When you shift to impact fees, you are changing the system and saying you are going to pay at least a portion of growth -related improvements with impact fees. To the extent that you begin paying for these capital improvements with impact fees, you will no longer use the rate revenue. Jeremy Stevens, Elkins City Council member asked if there is a commensurate rate reduction. In other words, will the rates be reduced in proportion to what is now being funded through the impact fees? 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes March 11, 2008 Page 3 of 5 Clancy Mullen said everything else being equal, rates could go down. Paul Becker said we did factor in (current) impact fees in the rate study. If we generate more through the impact fees, there are a lot of deferred capital projects to be addressed. In response to a question from Alderman Ferrell, Clancy Mullen explained that in an impact fee study they look at what the capital cost is to serve a new customer. The data for that cost comes from the city. Tim Conklin said he coordinated with David Jurgens with regard to the capital projects with the HDR study and the impact fee study. They wanted to make sure we were all on the same page with regard to current and deferred improvements. He said with 2 and 3% growth in Fayetteville he has never seen a time when there hasn't been a project for which we need to expand capacity. Once again these fees can only be used for capacity -expanding improvements. There is always a need out there to build out the water system or lift stations to expand capacity. Alderman Ferrell asked what our mandate is on revising impact fees. Alderman Cook said it isn't like our rates which we revisit every three years. Alderman Ferrell said he liked the idea of indexing. In response to a question from Bobby McGarrah, (Elkins), Clancy Mullen explained that the additional costs to Elkins for water is based on the cost to get the water to Elkins. He then further explained the system costs versus client costs. He said part of the fee will go to the City of Elkins for their local system. Tim Conklin said the City of Elkins provided information of what improvements were needed for future capacity within that community. The local costs were based on what it takes to create that capacity. Alderman Jordan said he needs some more information. Tim Conklin said he put a copy of the executive summary of the study in the Council member's boxes and provided it to the mayors and elected officials of all the other three cities. The full report and appendices are on the City website. He said he will provide a copy of the full report to the Committee. In response to a question Jeremy Stevens, Gary Dumas said client communities will set their impact fee with the fees discussed tonight being the maximum. The Elkins City Council will make the decision for Elkins. The system fee will be a Fayetteville Council decision. In answer to a question from John Gray (Greenland), Gary Dumas said with the availability of rural water, there is very little control of urban sprawl. Jeremy Stevens asked if anyone knows of any research regarding growth rates and how they may be affected by impact fees, especially during economic down times. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes March 11, 2008 Page 4 of 5 Clancy Mullen discussed some situations in several Florida communities, and particularly one town that has very low impact fees compared to others in Florida. He said that if impact fees were going to have any affect on growth, you would think growth would go where there are low impact fees. That doesn't appear to be the case in this particular situation because this town is having no growth just like everyone else. Tim Conklin said he had a staff member look at the years we have been collecting impact fees versus the years prior to that to see if there is any statistical difference in growth. There was no statistical difference in growth prior to or after the adoption of impact fees. Alderman Cook said we now have the maximum numbers of what can be legally defended for impact fees. He said he strongly doubts that the City Council will support the maximum fees. He said these maximum numbers are what we would need if we take into account all capital projects out there and funding for the capacity needs we predict in the future. However, we have to balance this with what the citizens want and what is happening in communities around us. Alderman Ferrell said the current economy is also a mitigating factor to look at. Alderman Cook said we all want to keep up with the infrastructure needs of the city and he would argue that the years of growth that we have experienced without collecting the revenue to cover the capacity needs is why we are now seeing these numbers for these fees. Alderman Jordan said he agrees with this. We are now in a position to react instead of being proactive. Clancy Mullen said in figuring these impact fee numbers, they did not include the backlog of projects from the past. We would not charge new development to pay for the past. He said the City has enough capacity to serve its existing customers. Alderman Ferrell asked for an example of how another community might have implemented indexing to the CPI or something similar. Clancy Mullen said this is typically done with some index more appropriate for construction, rather than the CPI. In response to a further question from Alderman Ferrell, Clancy Mullen said in the City's water CIP, we factor in something like 6% per year inflation factor. He said for impact fees, you typically look backwards. After a year you see what that particular index has done and base the change on that. Alderman Cook advised the Committee members to get a copy of the full report and review it before the meeting scheduled in April. 3. Consideration of Stopping Water Bill Payments at Local Banks Paul Becker said one of the current options for payment of water and sewer bills is through Arvest Bank and the Bank of Fayetteville. Only about 400 customers per month use this option (out of an excess of 35,000 accounts). He said we have been experiencing some problems matching up the payments and sometimes the data doesn't come across correctly. He said some 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes March 11, 2008 Page 5 of 5 people have been cut off when they have paid their bills because of mistakes made. He talked about the alternative methods of payment and said he recommends that we no longer accept payments through the banks. In response to a question from Alderwoman Allen, Paul Becker assured her that this would not affect those customers using automatic bank draft. He said that method of payment is picking up in usage. In response to a question from Alderman Cook, Paul Becker said these 400 customers are all residential but he has no idea of the demographics. He said to implement this a notice would be sent in the customer bills to let them know we would no longer be accepting payments in this way after the next 90 days. Alderman Cook said he is in favor of cutting this off if it is creating problems. Alderman Ferrell agreed. He said we have an office where they can make payment, as well as a night depository and a drive -up option. The Committee agreed to eliminate this option for payment of water and sewer bills. 4. WSIP Audit Accounting TrackinE Information Paul Becker said at the Audit Committee meeting the staff people working on WSIP presented information regarding internal controls in effect currently and how the bills for this project are processed. Mr. Becker said this was informative for the Committee and they were satisfied with that information. Alderman Ferrell said he was also at this meeting. He said there were two CPA's at the meeting and they agreed that there were plenty of safeguards built in to the process. There being no further business, the meeting was adjourned. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org