3. Hwy 93 South Cost RecoveryMEMORANDUM
April 7, 1999
To: Al Thelen, Interim City Manager
From: Jim Hansz, Director of Public
io
Subject: US 93 Cost Recovery Meeting, Monday
I spoke with Forsgren Associates, project
2,1999
engineer for our utilities and the
highway improvements. Regrettably, Mr. Dyer's schedule prevents him from supporting this
meeting. In his absence, City staff is prepared to deal with the issue of alternative scenarios for
cost recovery as had originally been planned.
In addition, I spoke with Larry Brazda of MDT regarding MDT's potential participation
in the meeting to deal with questions regarding their portion of the project design. He informed
me that this would normally be by the Engineering Services division in Missoula, not him, and
would require the support and presence of Forsgren who designed the highway improvements.
The required personnel are not available; therefore MDT will not be represented at this meeting.
Post Office Box 1997 • Kalispell, Montana 59903-1997
Telephone (406) 758-7700 • FAX (406)758-7758MEMIEM
MEMORANDUM
April 9, 1999
To: Al Thelen, Interim City Manager /
From: Jim Hansz, Director of Public W rks
Subject: US 93 Cost Recovery
Additional information concerning cost breakdowns for US 93 South utilities has been
developed. We have separated costs for replacement facilities, which can be funded from water
and sewer replacement accounts without the need for special reimbursement, and the cost of new
facilities that would require a cost recovery formula. We have also estimated the present cost of
the future upgrade of the sewer lift station in order to permit the recovery of these costs now
rather than at some future point.
BREAKDOWN OF COSTS
TABLE 1, COST OF IMPROVEMENTS
Improvement
Water
Sewer
Future Sewer Lift Station Upgrade
Storm Drain*
Replacement
$291,000
New Total
$539,000 $830,000
$125,000 $1,165,000 $1,290,000
$170,500 $170,500
$37,000 $358,000 $395,000
* Storm Drain costs are not proposed to be recovered from property abutting this project
because the majority of storm water flows originates from beyond the project area. This total
reflects a $20,000 increase due to needed changes identified during Plan -In -Hand review.
BREAKDOWN OF SERVICE AREA
The service area for water and sewer has been equalized to the same boundary in order to
ensure that all who receive services are the same. (Staff recommends that any parcel served by
Post Office Box 1997 • Kalispell, Montana 59903-1997
Telephone (406) 758-7700 • FAX (406) 758-7758
these facilities be required to have both water and sewer service.) Details of the service area are
as follows:
TABLE 2, AREAS AND FRONTAGE
Service area: 7,977,219 square feet 183.1 acres
Front Footage: East = 5,432 L.F. West = 5,290 L.F.
The area amount shown has been adjusted to remove all road rights of way so that the net
amount is for only the privately held properties. Front footage amounts have likewise been
adjusted to remove the footage attributable to road crossings. Attached is a copy of Exhibit C
from previous work session packages. This exhibit shows the correct boundary.
With the costs and areas now better defined, we believe there are four ways to recover the
cost of improvements:
1. Recovery based on surcharge by area, per square foot or per acre.
2. Recovery based on surcharge per linear foot of frontage on US 93.
3. Recovery based on a proportional surcharge on City connection fees.
4. Recovery that combines the preceding three methods.
COST RECOVERY SURCHARGE - BASE CALCULATIONS
Recovery by Area Served:
Formula = Area / Facilities Cost = Facilities Cost Recovery Fee / per unit
Cost of New Water Facilities = $539,000.00, from Table 1
Service Area = 7,977,219 square feet, = 183.1 acres, from Table 2
Water Recovery Fee = $539,000 / 7,977,219 S.F. _ $0.0676 / S.F. _ $Z 944 66 / acre
Cost of New Sewer Facilities = $1,165,000 + 170,500 = $1,335,500, from Table 1
Sewer Recovery Fee = $1,335,500 / 7,977,219 S.F. _ $01674 / S.F.,= $7 291 94 / acre
Recovery by Front Footage:
Formula = Front Footage / Facilities Cost = Facilities Cost Recovery Fee / per unit
Front Footage = 5,290 LY + 5,432 L.F. = 10,722 L.F, from Table 2
Cost of New Water Facilities = $539,000.00
Water Recovery Fee = $539,000 / 10,722 L.F. _ $50.27 L.F.
Table 3
Cost Recovery
Based on Connection Fees
Cost recovery can be based on a proportional recovery of the capital investment through the
City's existing connection fee schedule. This schedule utilizes the size of metered water service
as the basis of fees. Surcharge Fees are based on current estimated construction costs for new
facilities only. For water this total is $539,000.00. For sewer this total is $1,335,500.00 and
includes the cost to upgrade the lift station to its final design capacity of 750,000 gallons per day.
Meter
1999 Water
Surcharge*
1999 Sewer
Surcharge*
Increase Factor**
5/8"
$618
$216
$1434
$534
1.0
3/a"
$890
$313
$2064
$774
1.44
1"
$1582
$553
$3670
$1367
2.56
1 V2"
$3560
$1244
$8259
$3076
5.76
2"
$6328
$2212
$14683
$5468
10.24
3"
$14239
$4977
$33038
$12383
23.04
4" or larger
$25313
$8845
$58736
$21867
40.96
* The capacity of the constructed sewer system governs the number of potential users for both
water and sewer. For Kalispell, the design for a residential sewer user is 300 gallons per capita
day per household. The overall capacity of sewer facilities to be constructed is 750,000 GPD.
This capacity limits total residential connections to 2,500 or the equivalent commercial usage
based on the larger size water meters used by commercial development. This number is used for
the calculation of the both the water and sewer surcharges shown above.
** The increase factor is the amount of increase in utility service provided by the larger size
connection. It is the basis for the increased cost of the connection and is consistent for water and
sewer connection charge.
Cost of New Sewer Facilities = $974,000 + $191,000 + 170,500 = $1,335,500
Sewer Recovery Fee = $1,335,500 / 10,722 L.F. _ $124.57 L.F.
Recovery by a Surcharge on Water and Sewer Connection Fees:
Table 3 lists the 1999 connection fee for water and sewer for the year 1999 and the
calculated cost recovery surcharge for each connection. The following extract from Table 3
summarizes and totals this surcharge.
Meter Size
1999 Water
Surcharge
1999 Sewer
Surcharge
Total Surcharge
5/8"
$618
$216
$1434
$534
$750
3/4"
$890
$313
$2064
$774
$1087
1"
$1582
$553
$3670
$1367
$1920
1 %"
$3560
$1244
$8259
$3076
$4320
2"
$6328
$2212
$14683
$5468
$7680
3"
$14239
$4977
$33038
$12383
$17360
4" or larger
$25313
$8845
$58736
$21867
$30712
EXAMPLES OF COST RECOVERY
Four typical properties were selected to illustrate the application of the various methods
of cost recovery. The four properties are two residential parcels, one with US 93 frontage and
one without, and two larger parcels of approximately equal size size, again, one with frontage
and one without frontage on US 93. The four parcels selected are:
Parcel 11-EG, 2.69 acres, 410.0 feet of frontage
Parcel 12-BA, 2.57 acres, 0.0 feet of frontage
Parcel 11-2, 0.55 acres, 157.75 feet of frontage
Parcel 11-C, 0.48 acres, 0.0 feet of frontage
Cost Recovery Based on Area:
Formula = Area x (Facilities Cost Recovery Fee / per unit) = Recovery Fee
Parcel 11-EG, 2.69 acres: water = 2.69 x $2,944.66 = $7,921.14
sewer = 2.69 x $7,291.94 = $19,615.32
Total = $27,536.46
Parcel 12-BA, 2.57 acres: water = 2.57 x $2,944.66 = $7,567.78
sewer = 2.57 x $7,291.94 = $18,740.29
Total = $26,308.07
Parcel 11-2, 0.55 acres: water = 0.55 x $2,944.66 = $1,619.56
sewer = 0.55 x $7,291.94 = $4,010.57
Total = $5,630.13
Parcel 11-C, 0.48 acres: water = 0.48 x $2,944.66 = $1,413.44
sewer = 0.48 x $7,291.94 = $3,500.13
Total = $4,913.57
This example shows that for parcels of nearly equal size, recovery costs are virtually the
same, as would be expected. It also shows that parcels with difficult access to the utility, i.e.
those having no front footage, pay the same recovery charge even though development costs are
higher.
Recovery Based on Front Footage:
Formula = Front Footage x (Facilities Cost Recovery Fee / per unit) = Recovery Fee
Parcel 11-EG, 410 L.F.: water = 410 x $50.27 = $20,610.70
sewer = 410 x $124.57 = $51,073.70
Total = $71,684.40
Parcel 12-BA, 0.0 L.F.: water = 0.0 x $50.27 = $00
sewer = 0.0 x $124. = $00
Total = $00
Parcel 11-2, 157.75 L.F.: water = 157.75 x $50.27 = $7,930.09
sewer = 157.75 x $124.57 = $19,650.92
Total = $27,581.01
Parcel 11-C, 0.0 L.F.: water = 0.0 x $50.27 = $00
sewer = 0.0 x $124.57 = $00
Total = $00
This example shows that for parcels of nearly equal size, recovery costs differ widely.
Those parcels with front footage on US 93 have a cost; those without have none. In addition, a
parcel five times the size of another would pay a recovery fee about two and one-half times that
of the smaller parcel.
Recovery Based on Connection Fees:
This example assumes the residential parcels will remain residential and the larger parcels
will be developed commercially with a 2-inch water meter size. Connection fees are not included
in the total shown. Surcharge amounts are from Table 3.
Formula = Recovery Fee = Table 3 Surcharge Amount for Utility Connection Size
Parcel 11-EG, 2 inch water connection, water surcharge = $2,212.00
sewer surcharge = $5,468.00
Total = $7,680.00
Parcel 12-BA, 2 inch water connection, water surcharge = $2,212.00
sewer surcharge = $5,468.00
Total = $7,680.00
Parcel 11-2, 518 inch water connection, water surcharge = $216.00
sewer surcharge = $534.00
Total = $750.00
Parcel 11-C, 5/8 inch water connection, water surcharge = $216.00
sewer surcharge = $534.00
Total = $750.00
In this example fees are exactly the same for identical uses. There is no consideration for
the degree of difficulty to obtain service and nothing related to the size of the parcel. Cost
recovery is based solely on the demand from the system. This is the premise supporting the
City's present system of water and sewer connection charges. However, the present connection
fee schedule fails to account for installations larger than a four -inch water meter size.
Requirements greater than the capability of a four -inch meter are charged a four -inch fee
regardless of the actual size. Cost recovery based on this method alone could allow very large
commercial or industrial users to be subsidized by other ratepayers. A blended system that
combines all three of the preceding examples may solve this problem and provide greater equity.
The following example is based a system for recovering one-third the capital costs by each of the
three preceding methods.
BLENDED COST RECOVERY
Formula = 1/3 [(Area Recovery Fee x Area)+(Front Footage Recovery Fee x Front
footage)+(Table 3 Surcharge Amount for Utility Connection Size)] = Blended Recovery Fee
Area Method: Water = $2,944.66 acre
Sewer = $7,291.14 acre
Total = $10,235.80 acre
Front Foot Method: Water = $50.27 L.F. x 1/3
Sewer = $124.57 L.F. x 1/3
Total = $ 174.84 L.F.
Connection Fee Method: (2-inch) Water = $2,212.00
Sewer = $5,468.00
Total = $7,680.00, 2-inch
(5/8-inch) Water = $216.00 x 1/3
Sewer = $534.00 x 1/3
Total = $750.00, 5/8-inch
For each parcel the recovery fee is as follows.
Parcel 11-EG, 2.69 acres, 410.0 feet of frontage:
1/3[(2.69 x10,235.80)+(410.0 xl74.84)+(7,680.00)] = 9,168.91+23,870.90+2,557.44
_ $35,597.25
Parcel 12-BA, 2.57 acres, 0.0 feet of frontage:
1/3[(2.57 x10,235.80)+(0.0 xl74.84)+(7,680.00)] = 8,759.89 + 00.00 + 2,557.44 = $11,317.33
Parcel 11-2, 0.55 acres, 157.75 feet of frontage:
1/3[(0.55 x10,235.80)+(157.75 xl74.84)+(750.00)] = 1,874.69 + 9,184.48 + 249.75
_ $11,308.92
Parcel 11-C, 0.48 acres, 0.0 feet of frontage:
1/3[(0.48 x $10,235.80)+(0.0 x $174.84)+(750.00)] = 1,636.09 + 00.00 + 249.75 = $1,885.84
Method 4 does not eliminate the disparities between parcels of similar size, but does
provide a rational basis for the distinction by assessing a recovery fee based on several relevant
parameters and providing for consideration of the availability of and ease of access to service.
Residential parcel 11-2 has a higher recovery fee than 11-C because 11-C has the added burden
extending sewer main to the parcel, a cost not imposed on parcel 11-2. The same situation exists
for parcels 11-EG and 12-BA.
SUMMARY OF METHODS
The Table 4 summarizes and compares the results of each of the four methods outlined in
the preceding sections.
Table 4
Comparison of Recovery Methods
Parcel
Method 1
Method 2
Method 3
Method 4
11-EG
$27,536.46
$71,684.40
$7,680.00
$35,597.25
12-BA
$26,308.07
$ 00.00
$7,680.00
$11,317.33
11-2
$5,630.13
$27,581.01
$750.00
$11,308.92
11-C
$4,913.57
$ 00.00
$750.00
$1,885.84
RECOMMENDATION
Staff recommends that recovery of capital costs for utilities extended south on US 93
should be based upon the fourth method outlined; a blended recovery of the costs that uses parcel
size, front footage on US 93, and utility demand, as reflected by service connection size, appears
to be most equitable for the service area. The differences that exist in the application of the
recovery fees between parcels of similar size are due to the clear differences in the ease of access
to the utility service that exists between parcels.
April 12, 1999
From: Wm. Boharski, Mayor
N
Subject: US 93 Highway and Utility Improvements
PROJECT BACKGROUND
The Montana Department of Transportation, in approximately 1992, began planning for the
improvement of US 93 from Somers to Whitefish. Portions of the improvements north of
Kalispell have been completed. Design of the Somers to Kalispell project has been on -going
since the fall of 1996. The project from Somers to Kalispell has been divided into two parts.
Design of these two sections is essentially complete and MDT has begun right of way
negotiations for the southern part from Somers to Ashley Creek. Work on the northern part from
Ashley Creek to Kalispell is continuing. This section will involve 2.9 miles of improvements.
Our understanding of the present construction schedule is that the first phase of the southern
section from Somers to Ashley Creek will begin summer of 1999. The Ashley Creek to Kalispell
section will begin in summer of 2000.
The roadway design provides five lanes from Somers to Ashley Creek. This design will continue
from Ashley Creek into Kalispell. The last four blocks into Kalispell will be a four lane urban
section. Within Kalispell the project will reconstruct the roadway to just north of the courthouse.
The project will include drainage improvements, a bike path, landscaping and sidewalks for
much of its length. Most of the roadway, except for a small part at the south end, will be
concrete from Somers into Kalispell. The City has also asked that additional storm drainage
improvements be built as part of the project. In conjunction with this project, the City is
planning for the construction of water and sewer extensions south to the Four -Corners
intersection.
Forsgren Associates of West Yellowstone began the design of these City utilities in June of
1997. The preliminary design report was delivered in August of 1997 and design of the
recommended alternative was begun immediately thereafter. This design is also essentially
complete. The City utility portion of the work is intended to be part of the overall project.
The pro ect from Ashley Creek into Kalispell is estimated to cost approximately $10.5 million.
The CZ designed utilities are included in this total and are approximately $2.6 million.
The purpose of this meeting tonight is to discuss the possible methods available to the City to
recover this investment.
Post Office Box 1997 • Kalispell, Montana 59903-1997
Telephone (406) 758-7700 • FAX (406) 758-7758