AGENDA #4k
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Comments on OWASA’s Policy on Utility Extensions
DATE: November 21, 2005
The attached resolution would authorize the Manager to transmit comments to the Orange Water and Sewer Authority’s Board of Directors concerning the Board’s consideration of a policy on credits for utility line extensions.
BACKGROUND
During planning for the Town Operations Center project, our engineering consultants learned from the OWASA staff that the utility would require that we install oversized water lines and an oversized sanitary sewer pump station to meet the needs of potential future customers in the general service area of the Town Operations Center.
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.
We contacted OWASA to request that they reconsider the policy to allow the Town to potentially recoup some of the cost of our investment in the oversized infrastructure. OWASA initially declined and the Council formally requested that they pay for the additional costs associated with the oversized installations (see Attachment 1).
The OWASA staff has now presented a policy for discussion by the Board (see Attachment 2). The Board discussed the matter at its November 10 meeting and agreed to defer action until receipt of comments by the Town.
DISCUSSION
The OWASA staff report (Discussion of Excess Capacity Credit Policy) discusses water and sewer line requirements, ways to calculate benefited areas, collection and disbursement of funds for oversized facilities and the possible financial impact on the utility of adopting the policy.
We believe that the following are key issues that are raised by the policy and suggest comments on them for the Council’s consideration.
Water and sewer line requirements
The policy states “for the purposes of an excess capacity credit, the base or minimum size main would be eight inches in diameter or the main size required to meet the capacity needs of the development.”
Comment: We concur with the calculation of main size. We believe the policy should also apply to related facilities such as pump stations that may be oversized to serve additional future users.
Benefited area
The policy states that water main extensions provide benefits to the entire system, thus the benefited parties are all customers (old and new).
Sewer main extensions could be interpreted in two ways. They serve a defined area, and thus the policy states that benefited parties can be interpreted as those connecting to a main within a given drainage basin or subbasin. The report also says, though, that new sewer extensions provide benefits to the entire system by phasing out septic systems and pump stations and could therefore be considered to benefit all customers.
Comment: Both interpretations have merit. We believe that a system-wide benefit would be easier to administer, but agree with the OWASA staff that system-wide, downstream benefits are harder to identify for some sewer installations.
Collection of funds
The policy states that, given the system-wide benefit of water main extensions, costs associated with the oversized extensions should be borne by the OWASA Capital Improvements Program (CIP).
For sewer lines the costs would not be borne by the CIP. Rather, OWASA staff would calculate the total area of all basins without sewerage with the service area and the expected credit for all oversized mains within those basins. A proportional fee surcharge would then be developed, that could be applied either to all new connections to the system regardless of where they are, or only to those connections that directly benefit from a specific oversized extension. The application of the fee would depend upon the decision whether or not to apply the policy to the entire system or only to directly benefited drainage basins.
Comment: We concur with the possible approaches to funding the reimbursements.
Disbursement of credits
The policy discusses different methods of repayment, including lump sum payments, annual payments and other periodic disbursements. The OWASA staff proposes that oversized water main extensions be repaid in a lump sum at the completion of the project. Funds would be collected by all system customers through accumulation of fee revenue for the CIP.
Sewer main extensions would be paid via a “pass-through” of collected sewer connection surcharges to those benefiting from the extension over the term of an agreed upon period. The payments would be made annually.
Comment: We concur with the staff recommendation.
Financial Impact
The OWASA staff has calculated the possible impact on the utility of oversized mains associated with existing projects. The water main estimate is $645,000 and the sewer main estimate is $1,525,000. These figures represent the potential credits, not the full cost of the projects.
Comment: We do not have any way to determine the accuracy of the estimates. We do not believe, though, that the list is inclusive if it is intended to include the mains associated with the Town Operations Center, nor do we necessarily agree with the cost estimates shown that, in part would relate to the Operations Center project. We suggest that, if the Council concurs, these matters could be discussed and negotiated with the OWASA staff.
SUMMARY AND RECOMMENDATION
The proposed policy for reimbursing costs associated with oversized utility main extensions addresses a policy concern previously raised by the Council. We believe that the proposed policy addresses most of our concerns and would, as structured, provide some relief to the Town for a portion of the capital expense associated with the Town Operations Center project.
We recommend that the Council adopt the attached resolution that would authorize the Manager to transmit these comments to the OWASA Board.
ATTACHMENTS