AGENDA #9
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Request for Reimbursement from OWASA for Oversized Utility Lines
DATE: May 23, 2005
The attached resolution would authorize the Manager to formally request that Orange Water and Sewer Authority pay part of the cost of utility lines and related infrastructure related to the construction of the Town Operations Center. The lines and sewerage involved have been specified to be larger than would be needed by the Operations Center per the direction of OWASA. The request would be for payment of the portion of the cost that exceeds that required for the facility’s operation.
BACKGROUND
During the development of the design for the Town Operations Center, the Town’s engineering consultants learned that OWASA would require that utility lines and a sewage pumping station would need to be installed at a size greater than that necessary to serve the facility. OWASA’s policy in such matters is that utility lines and related facilities must be sized such that they can serve future development that could eventually connect to those facilities.
In the case of the Operations Center, the differences in size related to the water main in Eubanks Road, the water line in Millhouse Road and the sanitary sewer pump station on the southern edge of the Town’s property.
OWASA previously had a policy that required the developer of utility infrastructure to build facilities to their eventually required size, but that allowed reimbursement by subsequent developers for the marginal cost that would have been borne by later builders for additions to the utility system. This policy was changed in 1999 to eliminate the reimbursement.
DISCUSSION
Our engineering consultants estimate that the cost of the upgrade of utility infrastructure will be substantial (dollar values are the difference in cost):
Water Lines
4330 linear feet of 16” line on Eubanks Road, vs. 8” line $216,500
2825 linear feet of 12” line on Millhouse Road, vs. 8” line 70,625
Sewage Pump Station
Increased size for future wet well and associated equipment 100,000
Total: $387,125
These are estimates and could change once final bids are received and accepted.
Reimbursement Policy
We believe that it makes sense for OWASA to require developers, whether public or private, to construct utility infrastructure to the eventual size required for a given area.
We do not believe, though, that it makes sense for the Town as first developer to have to bear all of the cost of the upgraded facilities, while the benefit of the additional size will fall to private developers who subsequently add their projects to the water lines and sewerage. The public will bear the cost of the Town’s installation, while private developers will reap the benefit of the avoided cost of installing utility infrastructure.
We contacted OWASA in March 2004, about this matter and requested that they consider either reinstituting their old policy or developing a new one that would relieve the Town of some of the cost burden associated with the oversized lines (Attachment 1). The Town Manager and staff met with Ed Kerwin, OWASA’s Executive Director and staff to discuss the matter and what options there might be for a mutually satisfactory resolution. We understand that Carrboro and Orange County also expressed interest in this issue related to upcoming public projects they are considering. The OWASA staff subsequently discussed the issue with the OWASA Board of Directors. The Board declined to change the policy, as communicated by Mr. Kerwin’s March 23, 2005 letter (Attachment 2).
The OWASA Board cited several reasons for their decision, and some of those are noted below, with staff comments where appropriate:
Comment: We understand the difficulty as noted, but believe there may be other means of calculating the repayment that could address the problem.
Comment: We understand the concern, but believe that as a public entity serving a public interest, OWASA could make a distinction between those costs that are borne by for-profit developers and entities also serving the public interest with public funds. Private developers can recover their costs through sales and rents from purchasers and leaseholders who make voluntary decisions. In our case, taxpayers do not have a choice.
Comment: The Town Attorney looked into this option and believes that it is not an option for the Town Operations Center, because assessments by the Town are only possible within the municipal boundaries of a city or town. All of the Town Operations Center property currently lies outside of Town limits, as does most of the property that could benefit from the installation of the lines and pump station (see map, Attachment 3).
Alternative Request
As an alternative to the request that OWASA institute a reimbursement policy that depends on some form of calculated and delayed reimbursement by subsequent developers, we believe OWASA could simply pay the Town for the marginal costs associated with installing the utility infrastructure. This approach would allow OWASA to recover the cost of the infrastructure through whatever means they chose, such as through overall capital budgeting, or through connection fees from developers and property owners. We recognize that all OWASA ratepayers would be affected in the end.
The Town would then not be contributing taxpayer support to private developers and OWASA would not necessarily have to develop a policy that would apply to all situations.
If the Council wishes to pursue this alternative, we suggest that the Town Manager could be authorized to make a request of OWASA for the reimbursement and subsequently report to the Council as appropriate.
RECOMMENDATION
We recommend that the Council authorize the Town Manager to request that OWASA reimburse the Town for the marginal costs associated with the installation of water and sewer utilities that exceed those needed for the operation of the Town Operations Center.
ATTACHMENTS
A RESOLUTION AUTHORIZING THE TOWN MANAGER TO REQUEST THAT ORANGE WATER AND SEWER AUTHORITY PAY PART OF THE COST OF UTILITY LINES AND RELATED INFRASTRUCTURE RELATED TO THE CONSTRUCTION OF THE TOWN OPERATIONS CENTER (2005-05-23/R-10)
WHEREAS, The Town of Chapel Hill is constructing a new Operations Center on Millhouse Road to house the Public Works and Transportation Departments; and
WHEREAS, as part of the that construction the Town will install water lines, sanitary sewer lines and a sewage pump station; and
WHEREAS, the utility infrastructure to serve the facility will need to be built to a size greater than that required by the needs of the facility itself, in order to meet the future needs of OWASA customers in the surrounding service area; and
WHEREAS, the Town of Chapel Hill believes that the benefits of the oversized utility facilities will be realized by private developers and property owners at the expense of the taxpayers supporting the funding of the Operations Center; and
WHEREAS, the Council of the Town of Chapel Hill believes the additional costs related to the oversized facilities should be borne by OWASA, with recovery of those costs through other means available to the utility;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Town Manager is authorized to communicate with OWASA to inform them of the Town’s position on this matter and to request payment of the additional costs.
This the 23rd day of May, 2005.