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01. Resolution 5548 - Resolution of Intent & Call for Public Hearing - Impact Fees - WaterCharles A. Harball Office of City Attorney City Attorney 201 First Avenue East P.O. Box 1997 Kalispell, NIT 59903-1997 TO: FROM: SUBJECT: MEETING DATE: Mayor Tammi Fisher and Kalispell City Council Charles Harball, Interim City Manager Tel 406.758.7709 Fax 406.758.7771 charball@kalispell.com Resolution No. 5548 and 5549 — Resolutions of Intent and Call for a Public Hearing on Adjustments to the Water and Sewer Impact Fees. February 21, 2012 — Regular Council Meeting BACKGROUND: Section 7-6-1602(2)(k)(4), MCA requires that impact fees be reviewed every two years. Following the two year anniversary of the inauguration of the water and sewer impact fees, the Kalispell Impact Fee Committee met a number of times with the City's consultant HDR/EES, and reviewed an updated Water and Wastewater Systems Impact Fee Report generated by that consultant. Following that review the Impact Fee Committee submitted its approval of the report and its recommendations to the City Manager for submission to the City Council on August 27, 2010. At that time the City Manager was studying the rate system for the water and sewer utilities and determined to hold the report until the Council had considered and acted upon the rates. Although the consultant's report and the Impact Fee Committee's recommendation remain valid, there have been a number of minor changes that have occurred related to the water and sewer systems that are disclosed in the accompanying memo from the Public Works Department. RECOMMENDATION: City Council should pass Resolutions No. 5548 and 5549 so that public hearings on March 19, 2012 may be held regarding to adjustments to the Water and Sewer impact fees as required by law. FISCAL IM]PACTS: Action on this legislation does not have a fiscal impact on the City's budget beyond the costs of publication of notice. Respectfully submitted, - Charles Harball, Interim City Manager 1 ,, WHEREAS, pursuant to authority granted by Section 69-7-101, MCA to municipalities operating utility services, and the authority granted by 7-6-1601 to 7-6-1604, MCA to municipalities to charge impact fees to fund capital improvements, the City of Kalispell considers it proper and necessary to amend the fees, schedules, charges and classifications imposed for water utility services to its inhabitants and other persons served by the City of Kalispell Water Utility; and WHEREAS, pursuant to Section 7-6-1602(2)(k)(4), MCA that impact fees be reviewed every two years, the Kalispell Impact Fee Committee met in noticed public meetings, reviewed its report and recommendations on the water utility facilities and issued its recommendations for a change to the impact fee schedule based upon adjustments to the water utility capital improvement plan and updated cost analysis; and WHEREAS, it is the intent of the City Council to consider the recommendations of the Kalispell Impact Fee Committee and to possibly adjust the water utility impact fees imposed on users creating an additional demand on the water facilities in order to capture the water system development costs attributable to such new users; and WHEREAS, prior to adjusting the impact fees on the water utility system, the City is required, pursuant to MCA 69-7-111, to hold a public hearing on the matter after giving due and proper notice of said hearing. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, AS FOLLOWS: SECTION I. That there is hereby set a Public Hearing on the 19th day of March, 2012, at 7:00 o'clock p.m. in the Council Chambers, City Hall, Kalispell, Montana, to discuss a proposal to adjust the impact fees for the water system as recommended by the Kalispell Impact Fee Committee. SECTION II. The City Clerk is hereby authorized and directed to make, publish and distribute notices of said Public Hearing in conformity with Section 69-7-111, MCA. The City Clerk shall further make the report containing the recommended impact fee schedule, data sources and methodology supporting adoption and calculation of the impact fees to the public upon request. YAW Theresa White City Clerk Tammi Fisher Mayor 201 1" Avenue East, P.O. Box 1997, Kalispell, Mt. 59903 Phone (406) 758-7720 To: Charles Harball, City Manager & Mayor and Council From: William Shaw, Public Works Director Subject: Water and Waste Water Impact Fees Date: February 21, 2012 Following is a brief comment on the "Impact Fee for Water and Wastewaters System" report prepared by HDR/EES, August 13, 2010. When informed very recently that the Council would takeup this issue immediately, after a 19 month hiatus, it appeared necessary that you be provided some current comments about these recommendations. While enabling legislation for defining and permitting impact fees did not occur in Montana until 2005, many Montana cities here already had in place similar fees for water and sewer (though often much less restricted use availability). And, while new here, they had long existed elsewhere (more than 20 years) and much of what was adopted in Montana, an adaptation of successful legislation elsewhere. We hear a lot about the deadening effect that impact fees have on new or expanding business or housing; I have found no factual basis for this presumption (except possibly in areas where the community may has purposely priced themselves out of the market; innuendo - no specific example); my experience is quite the opposite. When working in Washington state, a developer of a $1 OMM project was asked why he chose our community — his response started with: availability of necessary raw material; ease of access to a heavy transportation; trained labor force in sufficient quantity; affordable land; available or upgradable infrastructure. In an unsolicited afterward, he commented that he "understood that the city had recently built a new City Hall and connected a new water well... a community investing in itself is worth investing in.." He never mentioned that his development had paid "impact fees" as an issue. We also hear that we are "pricing ourselves out of the market" (even though there is no market at this time and unlikely to resume prior to 2014). If the Council were to accept the recommendation to adopt the proposal submitted herein — set water impact fee at $1,930 and wastewater at $5,345 — the total of all then current fees (including: stormwater, police and fire) would be less than $9,000 for a single family residence (valued in the report as 1 ERU — equivalent residential unit) the cost for a home priced at about the Kalispell median (say: $187,000) would be about 5 1/2 % of the price; for the a similarly priced residence outside Kalispell (with well and septic) the cost of just water and sewer alone would likely be close to 9%. Lastly, I hope to get us all on the same spaceship (I have been watching a lot of old futurist movies lately — sounds like a paradox: old/futuristic — and a city's infrastructure could be analogous to the confines of a spaceship). Every unit of the ships population (measured in ERU) contributes on a regular basis to the upkeep and improvement of the ships infrastructure. The physical resources of the ship are neither infinitely available nor infinitely expandable, so every unit is allotted a proportional share based on the willing to pay for the privilege of use (certain limited access is considered essential and outside privilege). The community recognizes that maintaining a measurable excess capacity is highly desirable because it provides a fallback position when the unexpected occurs and a leap -ahead position when an opportunity is available. Also, the ship masters understand that sometimes its' simply more cost effective to overbuild in an ongoing project than to commence a new project to expand the recent workings (recent in some cases could easily be 20 years). The ship's rules require that parties wishing to use resources developed by the community or those that create disproportional demand on existing resources will have to either provide new resources or pay to restore the excess capacity they consumed. No matter how you look at it, you can reside on the space ship for the cost of rent (monthly fees and taxes), but if you want to develop a new unit or new demand, its' going to cost something additional. The rules are specific about how that cost is calculated' and the fee applied. These resources are assets, whether built or planned (remember, sometimes the shipmasters built more capacity because it was more economically sensible and not because there was an immediate need to replace used excess capacity). If the resource is already developed then the asset value is decreasing with time and the value is based upon the then current value divided by the total number of units it can serve (without regard to how many are currently using it); the cost to the developer a proportional share of that existing capacity. If the contemplation for new units is such that available capacity is marginally acceptable but its replacement must be planned 1 7-6-1602. Calculation of impact fees -- documentation required -- ordinance or resolution -- requirements for impact fees. (5) The amount of each impact fee imposed must be based upon the actual cost of public facility expansion or improvements or reasonable estimates of the cost to be incurred by the governmental entity as a result of new development. The calculation of each impact fee must be in accordance with generally accepted accounting principles. (7) An impact fee must meet the following requirements: (b)The impact fees imposed may not exceed a proportionate share of the costs incurred or to be incurred by the governmental entity in accommodating the development. The following factors must be considered in determining a proportionate share of public facilities capital improvements costs: W the need for public facilities capital improvements required to serve new development; and consideration of payments for system improvements reasonably anticipated to be made by or as a result of the development in the form of user fees, debt service payments, taxes, and other available sources of funding the system improvements. 7-6-1601. Definitions. As used in this part, the following definitions apply: (5) (a) "Impact fee" means any charge imposed upon development by a governmental entity as part of the development approval process to fund the additional service capacity required by the development from which it is collected. (b) The term does not include: (iv) onsite or offsite improvements necessary for new development to meet the safety, level of service, and other minimum development standards that have been adopted by the governmental entity. then the value of that asset is divided by the total number of new units that could utilize the additional asset; the cost to the developer a proportional share of that planned capacity. Charging for planned assets can be win -win for both the community and the developer. The community gains some assurance that the resource will be restored eventually at minimal additional cost to the the current users and the developer only paid a fraction share of building the resource rather than providing the entire resource before the capacity could be utilized. Back on earth - specifically Kalispell — its important to note that wastewater operating fund relies upon impact fee revenue to contribute to both bond indebtedness ($250,000 in the current fiscal year) and included among the revenue resources to meet our bond debt coverage obligation. Also, the proposed water impact fee is about 15% less than the current fee. Lastly, while the report recommends not adopting an impact in either water or wastewater that covers piping extensions, the wastewater fee for the plant does include infrastructure planned but not built. In the report executive summary Table ES-3 Wastewater Treatment is a cost item, Exhibit B-2 is a breakout of the cost associated with that item. B2 lists four phases, but it would be a false assumption that today all of Phase 1 is complete and cost about $17MM. The upgrade recently completed includes parts of the other phases and the completed project cost was about $22MM. Of the phase work yet to be completed some is not growth driven, but most will provide excess capacity. A look at the City's past use of impact fees (including some that were collected prior to 2005 and looked a lot like current impact fees) finds that impact fees totaling about $4.7MM was spent on the most recent WWTP upgrade; one could also argue that at least some of replacement account cash (totaling about $3.3MM) would not have been available had not impact fees offset at least some the past improvements that rates would have otherwise covered. The fact that the City was able to forestall wastewater rate increases until July 2012, appears more than mere innuendo that impact fees can hold consumer rates down. August 27, 2010 Jane Howington, City Manager City of Kalispell P.O. Box 1997 Kalispell, MT 59903 Re: Impact Fee Advisory Committee Recommendation - 2010 Updated Impact Fees Report for the Water, and Wastewater Systems Dear Jane: The Kalispell Impact Fee Advisory Committee has met several times with the City's consultant, HDR/EES, and reviewed an updated Water & Wastewater Systems Impact Fee Report, as required under Montana law. The committee conducted an extensive review of the updated planning documents, methodology and approach taken by the consultant. The committee raised detailed questions to receive clarification on specific items of interest and concern. On August 9, 2010 the committee voted on recommending the 2010 Water & Wastewater Systems Impact Fees Report to the City Council. The motion to recommend passed with the following results, three (3) yes, one (1) no, and one (1) abstained from voting. Following the meeting, the committee met with the City Council in a joint work session. During the work session, it was agreed that an executive summary should be included in all impact fee reports. Attached is the recommended August 2010 Water & Wastewater Systems Impact Fees Report, which includes an executive summary. Also included are the minutes from the August 9, 2010 committee meeting. The committee is available to answer questions and looks forward to continuing to work with the City Council on the important issue of impact fees. Sincerely, Merna Terry Chairperson Impact Fee Advisory Committee 201 1"Avenue East, P.O. Box 1997, Kalispell, MT 59903—Phone (406)758-7720— Fax (406)758-7831 www.katispell.com MEETING MINUTES Date: August 9, 2010 Attending: Chad Graham, Karlene Osorio-Khor, Sharon DeMeester, Rick Wills, Merna Terry Charlie Harball, Jim Hansz, Terri Loudermilk Absent: Dewey Swank Public Comment: Terry Kramer present - No comment from Public. Discussion: Discussed the July 2010 Water & Wastewater Systems Updated Impact Fee Report. Terri Loudermilk let the IFAC know three scribner changes had been made to the report since the last review by the committee. The committee reviewed the Scribner changes. Motions/Recommendations/Votes: Karlene Osorio-Khor made a motion to vote to recommend the July 2010 Impact Fee Report for the Water & Wastewater Systems. Sharon DeMeester seconded motion. The vote to recommend the July 2010 Impact Fee Report passed with the following results: (3) yes - Rick Wills, Karlene Osorio-Khor, Sharon DeMeester (1) no - Chad Graham (1) abstain - Merna Terry The IFAC meeting adjourned and was followed by a joint work session with the City Council. Date of Next Meeting: September 16, 2010 Next Steps: General Election of Officer's and Review Stormwater Impact Fees.