Bob Hafferman Comments - Definitions for Extension of Services PlanTo: Mayor and Council members thru City Manager
From. Bob Hafferman
Subject: Definitions for Extension of ,Services Plan
For: Discussion at Council workshop on August 12, 2013
The attachment consists of three parts related to the water and sewer utilities: a brief
history, results and goals; definitions and explanations and anticipated questions. The objective is
to adopt definitions that are EASILY understood by all entities using the Extension of Services
Plan. If the definitions are not easily understood, they probably should be revised.
There seems to have been developing considerable confusion as to the roles of all entities
involved with new developments on guiding the financing of (1) new extension and oversizing if
required and (2) replacement and upsizing of the City's infrastructure. The guiding document is
the Extension of Services Plan. The latest amendment is dated September 2004. It can be found
on the City website under City Clerk, Resolution 4937.
While there are references to water and sewer utilities in other parts of the "Plan ", the
confusion primarily relates to Chapter 6, Policies for the Extension of City Services on
Utilities on pages 22 through 30. It is urged that each Council member review these pages. Item
# 1 on page 22 is the time-honored City policy which, briefly stated: Developers, extend the
City's infrastructure and dedicates it to the City, the City operates ands maintains the extension.
Like any utility, the City residents own the existing utilities and they have the
responsibility it operate and maintain them in perpetuity. Likewise, if new customers want to
connect to these utilities the new customers have to pay for their connection. Just like if someone
builds a house: that someone puts in the service lines. It must also be understood that when the
City annexes a new area, the City has the obligation, under State law, to have the ability for that
annexation to be served by the City's infrastructure the same as all city residents are served.
The confusion seems to be mainly attributed to item #8 on page 23 which seems to imply
that THE CITY extends "certain critical facilities" . This would be true if the water reservoir on
Sheepherder Hill and the water main related thereto was considered an "extension". Actually, it
was a "siting" problem. Reservoir location is always a problem. A costly elevated tank would
have been required if located within the City limits, and strong objection and delays would
undoubtedly result to an urgently needed facility. Sheepherders Hill provided the elevation
needed
Item #8 on page 23 was included in the "Plan " with the 2004 revision perhaps in an
endeavor to legitimizing using City finds to extend utilities to Four Corners under the pretext of
the necessity because of Highway 93 reconstruction. There had been objections to using rate and
tax payers fiends to finance such endeavor.
The objective of having clear definitions is that (1) whether the extension is for 10 lots or
1000 lots all developments are viewed on an equal basis in Council decisions and (2) the
taxpayers and ratepayers DO NOT extend the City's utility infrastructure. Fairness requires an
understanding of the words used in the discussion.
During the workshop I do not plan on going over the enclosures as I believe reading the
material is the responsibility of the members. I will try to answer questions. The enclosure
"Anticipated questions" was included as these questions have already been asked, but may also,
with other question, require further explanation.
Water and Sewer Impact Fees, Rates and Agreements
History (Sheet I of 4, Rev 7/22/13)
In the early 1980s Kalispell, in conjunction with the then existing Flathead Regional
Development Office, had a system in place for "growth to pay for growth". The precepts were
documented in the Extension of Services Plan. There was also put into place a document called
Standards for Design and Construction that was developed by the City in consultation with
people engaged in the construction and development in the Kalispell area. At that time, by State
law, parcels of land could not be annexed unless they were contiguous to the City, but they could
use City owned utility systems that were then regulated by the Public Service Commission.
The first "Developer Extension Agreement" was written for the Greenacres development
outside the City limits southeast of Kalispell. It was written to allow connection of the area's
sewerage system to the City's waste water treatment plant in case Kalispell's boundary ever
extended southerly so that the expansion was not blocked by a large -lot subdivision due to the
large area needed for each home's wastewater system. Such large area would be forever costly to
maintain the infrastructure. i.e. it would have to be subsidized by the existing tax and rate payers.
The document is recorded in Book 726 beginning on page 900.
The first O&M/annexation agreement for an area northeast of Kalispell abutting
Whitefish Stage Road was entered into with North Village Sewer District (NVSD) in 1982. This
document allowed NVSD to connect to the Kalispell sewerage system at the top of the hill above
Lawrence Park. But NVSD had to operate and maintain the system to the point of connection and
provide pretreatment,, if necessary, so that the sewage entering the Kalispell system was equal to
the same type of flows from Kalispell homes. (There was also an annexation stipulation).
In the late 1990s (1) State legislation was enacted that allowed annexation of non-
contiguous parcels and (2) the City staff began amending these two rather simple documents -
Extension of Services Plan and ,Standards for Design and Construction - to morph them into
what exists today under the same titles. In the early 2000s a Growth Policy was adopted and the
"planning area" was extended west to Sheepherders Hill, east to the Flathead River, north to
Church Drive and south almost to Somers. Two subdivisions were actually annexed, one near the
northerly boundary and one near the southerly boundary of this huge Growth Policy area. The
water and sewerage system extensions had to be oversized to serve the lands economically
capable to connect to the extended utilities serving these remote areas.
Results and Goals
Apparently no planning went into setting aside replacement of these oversized utility lines
in accordance with Policies of Meeting the Cost of Services in the Extension of Services Plan.
The cost of O&M of large, nearly empty sewer lines; underused water mains and an oversized
waste water treatment plant are now the City's "albatross".
Currently there is confusion among users as to how the various regulations are being
interpreted. The first step in bringing sanity to growth was to pull in the "growth" boundary lines.
The Council accomplished this in March 7, 2011. The next step is to be sure the staff, Planning
Board, Impact Fee Committee and Council are familiar with the terminology and function of
each term.
After terminologies are discussed by the Council, but before adoption, it is suggested that
the definitions be posted on the website and noted with a news release. The final step would be
Council approval and incorporating them into the Extension of Services Plan.
Definitions with Explanations Pertaining to Water and Sewer Systems
GENERAL
The i ne person who submits a proposal to subdivide and provide all the required
infrastructure on a parcel of land. The developer pays all fees for plan review and
infrastructure installation and constructs all infrastructure in accordance with two
documents: Standards for Design and Construction and Extension of Services Plan. The
developer does NOT pay "impact- fees
Builder: The person who submits a set of plan to construct a structure requiring utilities,
anywhere in the City. The builder pays all Council approved building fees, including
impact fees before the permit to build can be issued.
Impact fees: a one time City-wide fee paid by the builder before construction can begin on a
structure. The fees must be recommended by an appointed Impact Fee Committee of
which recommendation the Council can approve, reject or adjust downward. State law
prohibits the Council from establishing a higher fee than recommended by the Impact
Fee Committee.
Impact fee expenditure: By State law, the Impact Fee Committee is charged with the
responsibility of recommending to the Council projects for which impact fees may be
spent. By State law, the Council has the responsibility of placing projects on a Capital
Improvement Program (CIP) with a 5-year specific time schedule for Council deemed
urgent projects. The CIP needs updating annually.
Replacement costs: All infrastructure has to be replaced due to wear, obsolescence,, increased
maintenance,, changed conditions, etc. The Extension of Services Plan sets forth an
estimated average time period for monies to be set aside for replacement of
infrastructure elements. Some infrastructure must be replaced in 10 years while others,
having the same characteristics, may not need replacing for 80 or more years. The amount
to be set aside into a replacement account is included in the bi-monthlycustomer
billies
Rates: A varying bi-monthly charges to consumers for water and sewer volumes used. The
varying is based on water meter readings which includes replacement costs ". The rates
also include certain fixed charges as well as a seasonal "water sprinkling" rate adjusted
from the meter readings during the irrigation season. If no adjustments were made, water
that did not enter the sewerage system would be added to the bill at the sewer rate.
Extension ofServices Plan: A "Plan7.5 originally written by the Flathead Regional Development
Office for how services were to be provided by developers to extend municipal
infrastructure to their proposed development. Kalispell was consulted and adopted the
"Plan"
Oversizing: A requirement by the City to increase the infrastructure installed by the developer
to be larger that the size required to serve the development in order to accommodate
future growth. The oversizing cost is determined by the difference of the in -place cost of
the larger item required by the City less the in -place cost of the item the developer must
bear that serves the development. Oversizing is paid to the developer from impact fees as
impact fees become available.
Upsizing: Within the City's existing infrastructure, some elements of the system must be
replaced to a larger size due to growth expected. The difference of the in -place cost of an
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upsized element less the estimated in -place cost of existing element is paid from impact
fees as iMpact Lees become available. (If the existing element is newer than the time
period stipulated in the Extension of ,Services Plan, a developer, if capsizing is needed,
may have to pay for a proportional share of the in -place cost estimated for the existing
element and a proportional share of the M*-place cost of the upsized element).
In -place costs: means all items shown on a typical cross-section which includes trenching,
bedding, piping and backfilling
SEWER SYSTEMS
Late -comer: Coined in 1981 to define persons or developers who connected to a sewer system,
installed by a developer. When initially installed, ALL sewer systems have "excess
capacity" available that can be used by others than the original developer. The minimum
sizing of the infrastructure is related to manpower and equipment needed to maintain the
system. (In the 1980s this term became "latecomer" — no hyphen).
Excess capacity: The ideal economical situation is the a sewer system operate near capacity.
Very low usage, particularly on initial installations can be costly to maintain due to
deposition of solids if the velocity is below two feet per second. Hence "latecomers"
connecting to the systems not only brings in usage funds, but it can reduce the cost of
maintenance if some of this excess capacity is utilized. Developers can never expect a full
return on the "excess capacity in the system they install" f
Developer Extension Agreement (DEA): The initial DEA in July 1981 is recorded in Book
726,, beginning on Page 900 in the records of Flathead County. It was written because
State law required any entity needing a sewer and treatment, situated within a certain
distant of a municipal sewer, MUST connect to the sewer. This also applied to failed
septic system. There was no stipulation in State law that required persons connecting to a
municipal system to -pay their proportion share of that system. Hence, the DEA was
written so they did pay for their proportional share if they connect to a new developer
installed extension. The DEA expired in 10 years which period was deemed a reasonable
length to eliminate potential (sometimes called) free loaders. Because the connection
also had mutual benefits to the City, the City accepted the professional engineers
certificate of completion to the State Department of Health and began the maintenance of
the system
Plat Encumbrance: Used for special situations. As an example: because the initial DEA was to
serve property outside the City limits, the DEA stipulated that any properties connecting
to the system had to have the Final Plat encumbered with a statement that all properties
shown shall be assessed their proportional share for any assessment that properties inside
the City limits had to pay for "improvements, modification and/or enlargement of the City
sewerage system". (There were no impact fees at that time).
Waiver of Right to Protest Annexation: Because the initial DEA was not contiguous to the
City limits, by State law the property could not be annexed to the City. That law was
changed in the 1990s to allow direct annexation even though the property was not
contiguous to the City limits, i.e., it was a "remote area connection".
Remote area connection: In 1982 there was a large area being developed that was in a rural
special improvement district (RSID) known as the North Village Sewer District. The
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developer approached the City about connecting to the City sewerage system, particularly
the wastewater treatment plant (W'VTP). Because of the physical barrier of the Stillwater
River, a cost analysis made this request very uneconomical for the City to maintain. Thus,
a Sewer District Connection Agreement (SDCA) ensued which allowed the developer to
connect to the City system at a point within the City limits and "waiver the right to
protest annexation". The developer had to maintain the entire sewerage system installed
to the point of connection within the City limits. This SDCA also contained other
stipulation that the developer and the City must do at specified times and flows.
WATER SYSTEM
Insurance Service Organization (ISO)* The City has adopted the ISO's fire flow requirements
which stipulates the volume of flow required for various size, type of construction,
separation of structures,, etc. Many years ago the City began designation AREAS,
generally by zoning and other requirements of the zone. code, and the volume of , in
gallons per minute (gpm), being provided or will be provided to said designated areas
Fire flow: It is the responsibility of the City to designate areas with the ISO required fire flow. It
is the responsibility of a developer to insure that the area a builder may chose to erect a
structure has the required infrastructure available to meet the ISO code. The builder
installs the infrastructure from the City main to and into the structure. ALL lots
must have infrastructure necessary to meet a flow of 1000 gpm. Commercial and
industrial areas will probably require greater than 1000 gpm. (Note: the minimum fire
flow rate was once 500 gpm so there are areas within the City which may not meet the
City's responsibility today, but the upsizing is being done as finds permit).
Equivalent Residential Units (ERUs) for non-residential structure's fire flow: This item has
not been determined. It is suggested the Extension of Services Plan provide a method of
determining the ERUs required for a non-residential area to be adopted by the Council.
(See statement below).
OTHER (intended as a suggestion, not a definition)
Fire flow determination: A non-residential structure likely will require greater than 1000 gpm
fire flow. There are many, many, many variables related to water system sizing to serve
non-residential areas,, chief among which is the location of a high fire flow area with
relationship to the water supply sources. Common planning was water reservoirs
located centrally in the use area and wells on the periphery so (1) water could flow both
ways thereby reducing the pipe sizes, (2) there was a second supply source if one source
had problems and (3) if more than one well was needed for growth the other well(s) were
far enough apart so one did not influence another during pumping. By the City staff
designating "area fire flow" and best judgement being made upon annexation,, an
individual structure impact fee formula can then be determined. ((With one ERU fire flow
equal 1000 gpm: (ISO required fire flow)/1000 = structure's ERUs)).
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Anticipated questions
(1) Water and sewer impact fee account —how will it be administrated?
Both the water and sewer impact fee accounts should have a reserve amount, much like
the General Fund reserve. The amount of average reserve would be established based on an
average annual amount since 2006. That period has included average, rapid and slow growth.
The range of the reserve would vary from zero to twice the average growth. (See upsizing
definition about available impact fees).
(2) What would happen if a sizable development should occur that exceeds the capacity of
the existing City sewerage system anywhere along the route from the developers extension
beginning to the waste water treatment plant?
There is still available a back log of approved subdivisions and lots which will generate
impact fees for which the City's infrastructure is already adequately in place. There are some
areas within the existing City infrastructure where upsizing may be necessary. If the City's
infrastructure needing upsizing is over 30 years, the City installs the upsized piping that will
accommodate the development proposed. A contractor, which may or may not be the developer,
is paid by the City (a) for the estimated in -place cost of the replaced pipe from the replacement
account plus (b) the extra amount to cover the next -size -larger upsizing from impact fees. It must
be noted that any new development (a) takes at least two years from the time of developer's
application to the filing of the Final Plat plus (2) at least another year or more until there is a
significant amount of build -out to need upsizing.
(3) If an existing pipe is over 30 years old and needs upsizing due to anticipated growth,
who pays for the upsizing if there is no project pending?
If the existing infrastructure is already near capacity, as determined by actual
measurements,, a one -size -larger pipe should be installed. The replacement account pays for the
estimated in -place cost of the existing pipage and impact fees pays the remaining cost of the
next -size -larger in -place pipage. With no pending project for a line nearing capacity, judgement
of the staff has to be the criteria used for timing of such replacement/upsizing projects on the CIP
listing.
(4) If a very large phased development is proposed that will (a) exceed the City's existing
infrastructure and (b) the City's infrastructure must be extended to the development, who
pays the costs involved?
Three different sources are involved: (al) the City's replacement account pays to replace
the existing City pipage, (a2) the City's impact fee pays for the remaining upsized pipage and (b)
the developer pays the cost of the extended pipe sized for the development. If the City requires
the extension to have pipage larger than needed for the development, the City's impact fees pay
for the oversized portion. Again it must be noted that large developments are usually phased. The
ClP for replacement and upsizing must be geared to the time of need of the upsized pipage. It
also is essential that the developer is aware of the definition of oversizing and upsizing geared to
the availability of impact fees.