1a. Impact Fees for Water System - 2013 Final Report2013
Impact Fees for Water System
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Final Report
City of Kalispell
3/21/2013
Contents
ExecutiveSummary.......................................................................................................................................4
Introduction..............................................................................................................................................4
Financial Objective of Impact Fees...........................................................................................................4
ImpactFee Criteria....................................................................................................................................4
TheNeed for This Study............................................................................................................................ 5
Development and Summary of the Water Impact Fee.............................................................................6
Consultant's Recommendations...............................................................................................................8
Impact Fee Advisory Committee (IFAC)....................................................................................................9
Conclusion................................................................................................................................................. 9
Section 1: Introduction and Overview........................................................................................................10
1.1 Introduction......................................................................................................................................10
1.2 Overview of the Report.....................................................................................................................12
1.3 Disclaimer..........................................................................................................................................12
1.4 Summary...........................................................................................................................................12
Section 2: Overview of Impact Fees and Generally Accepted Industry Practices.......................................14
2.1 Introduction......................................................................................................................................14
2.2 Defining Impact Fees.........................................................................................................................14
2.3 Historical Perspective........................................................................................................................14
2.4 Impact Fees and "Generally Accepted" Practices.............................................................................15
2.5 Financial Objectives of Impact Fees..................................................................................................18
2.6 Relationship of Impact Fees and New Construction Activities.........................................................19
2.7 Summary ...........................................................................................................................................
20
3.0 Overview of Impact Fee Methodologies...............................................................................................21
3.1 Introduction......................................................................................................................................
21
3.2 Impact Fee Criteria............................................................................................................................21
3.3 Growth, Risk and New Connections..................................................................................................22
3.4 Overview of the Impact Fee Methodology.......................................................................................
22
3.5 Summary ...........................................................................................................................................24
4.0 Legal Consideration in Establishing Impact Fees for the City...............................................................25
4.1 Introduction......................................................................................................................................
25
4.2 Requirements Under Montana Law..................................................................................................25
2
4.3 Summary...........................................................................................................................................25
5.0 Determination of the City's Water Impact Fees...................................................................................
26
5.1 Introduction......................................................................................................................................
26
5.2 Overview of the City's Water System...............................................................................................
26
5.3 Overview of the City's Water Facility Plan........................................................................................26
5.4 Present Impact Fees..........................................................................................................................26
5.5 Calculation of the City's Impact Fees................................................................................................27
5.5.1 System Planning.........................................................................................................................27
5.5.2 Calculation of Equivalent Residential Units...............................................................................28
5.5.3 Calculations of the Impact Fee for the Major System Components..........................................28
5.5.4 Debt Service Credits...................................................................................................................32
5.6 Net Allowable Water Impact Fees....................................................................................................33
5.7 Key Financial Assumptions................................................................................................................34
5.8 Implementation of the Impact Fees.................................................................................................34
5.9 Summary...........................................................................................................................................
35
References..................................................................................................................................................36
AppendixA: ERU Projections......................................................................................................................
37
Appendix B: Capital Improvement Plan......................................................................................................40
Appendix C: Montana Code Annotated 2011.............................................................................................42
AppendixD: Source of Supply.....................................................................................................................50
AppendixE: Pumping Plant Facility.............................................................................................................52
AppendixF: Storage....................................................................................................................................54
Appendix G: Transmission and Distribution...............................................................................................56
Appendix H: September 2012 Water Impact Fee Update Summary..........................................................
60
3
Executive Summary
Introduction
Morrison Maierle, Inc (MMI) was retained by the City of Kalispell (City) to update the current cost -based
impact fees for the City's water and wastewater systems that comply with Montana Code 7-6-1601 to 7-
6-1604 based on the new facility plan adopted by the City. This Executive Summary is intended to
provide an overview of the water study, along with a summary of the findings and conclusions from the
study. In addition, a comparison of the cost -based fees calculated within this study has been compared
to the previous water impact fee study conducted in 2006.
Impact fees are a one-time assessment against new development to pay for the cost of infrastructure
required to provide service. Impact fees provide the means of balancing the cost requirements for new
utility infrastructure between existing customers and new customers connecting to the City's water and
wastewater systems. The portion of existing plant and future capital improvements that will provide
service (capacity) to new customers is included in the impact fees. The objective of this report is to
properly place in context the purpose of water impact fees, and to determine cost -based impact fees for
the water systems that comply with Montana law.
Financial Objective of Impact Fees
An impact fee is a regulation and not a user fee or revenue raising device. To understand this
perspective, one must view new development as creating the need for new or expanded facilities. As a
result, without payment of impact fees, the utility would have insufficient revenues to provide the
facilities, and therefore, the community is unable to accommodate new development. While on the
surface it may appear as simply a means to extract revenue from new development, the reality is far
more complicated. Impact fees help utilities achieve a number of different financial objectives. These
objectives tend to lean more towards financial equity between customers as opposed to simply
producing revenue. An impact fee establishes equity between existing (old) customers and new
customers. Impact fees create equity within the system by addressing the issue of timing and the
"value" of the assets and the "value" of the capacity.
Impact Fee Criteria
In the determination and establishment of the impact fees, a number of different criteria are often
utilized. The criteria often used by utilities to establish impact fees are as follows:
■ Customer understanding
■ System planning criteria
■ Financing criteria, and
■ State/local laws
The use of system planning criteria is one of the more important aspects in the determination of impact
fees. System planning criteria provides the "rational nexus" between the amount of infrastructure
necessary to provide service and the charge to the customer. The rational nexus test requires that there
be a connection (nexus) established between new development and the existing or expanded facilities
required to accommodate new development; and appropriate apportionment of the cost to the new
development in relation to benefits reasonably received.
11
An important consideration in establishing impact fees is any legal requirements at the state or local
level. The legal requirements often establish the methodology around which the impact fees must be
calculated or how the funds must be used. The Montana law enabling legislation for impact fees was
enacted in 2005 via Senate Bill 185. The legal basis for the enactment of impact fees is found in Title 7,
Chapter 6, and Part 1601 to 1604 of the Montana Code.
The Need for This Study
The current water impact fee is based on the 2006 impact Fee Final Report and on an adjustment to the
fees by City Council Resolution No. 5273 in April 2008. The City Council has directed staff to update the
existing cost -based water impact fee based on current conditions and according to 2011 Montana Code
Annotated 7-6-16.
In 2010, the City of Kalispell received the August 2010 Impact Fee Final Report for review and
consideration by the Impact Fee Advisory Committee. No adjustments were made to the impact fee at
that time. The September 2012 Water Impact Fee Update Summary, attached for reference in Appendix
H, updates the information provided in the August 2010 impact fee report with the following
information:
1) Change to the Kalispell Growth Policy: On March 7, 2011, City Council adopted an annexation
policy that significantly revised the previous annexation policy boundary. This report accounts
for the projected water improvements within the current annexation boundary.
2) Current Water Demands: The August 2010 report used 2006 water production volumes and
projected these volumes to 2010 with a theoretical population growth rate. This current report
uses measured historical water production volumes between 2006 and 2011 as a baseline
volume, and projects future volumes based on a growth rate currently applied by the Kalispell
Planning Department.
3) Projected Population Growth Rate: This report uses a population growth rate of 2.00% as
projected by the 2011 Kalispell Growth Policy Update. This is lower than the projected
population growth rates applied in the August 2010 report and in the 2008 Facility Plan Updates.
The reduced 2011 annexation boundary also generates a lower projected population to be
served by City utilities.
4) Updated Capital Improvement Plan: The Kalispell Public Works Department has updated the
Capital Improvement Plan to reflect the current projected capital needs. The 2012/2013 Capital
Improvement Plan shows projects to be completed over the next five years and future projects
to be completed in approximately ten years. .
5) Key Financial Assumptions: In developing the impact fee for the City's water system, several key
assumptions were used. These include the following:
• The City's asset records were used to determine the existing assets and the value of
those assets.
5
The interest rate used for calculating interest on existing assets is the 10-year treasury
note rate as reported by the US Department of the Treasury at closing on November
30th of each year.
• Up to fifteen years of interest is included in the cost of the existing improvements. The
fifteen -year average interest rate is currently 4.25%. The August 2010 Impact Fee Final
Report used an interest rate of 6.00%.
6) Administrative Fees: For the August 2010 Impact Fee Final Report, and subsequent Council
workshops, the City Council directed staff to use the allowable administrative charge of 5% in
the impact fee analysis. This 2012 report follows that same guidance from the City Council.
Development and Summary of the Water Impact Fee
The City currently services a population of approximately 21,000 customers with water services. This
report uses a population growth rate of 2.00% as projected by the 2011 Kalispell Growth Policy Update.
The reduced 2011 annexation boundary also generates a lower projected population to be served by
City utilities.
The calculation of the water impact fee was based on the City's fixed asset records, future capital
improvements as identified in the City's 2012 Capital Improvement Plan, and planning criteria and
capital improvements from the master plan entitled, "City of Kalispell Water Facilities Plan Update
dated March 2008 prepared by HDR Engineering (the "Water Facility Plan"). On March 7, 2011 the City
Council adopted an annexation policy that significantly revised the previous annexation boundary. This
report uses the annexation policy boundary for the planning boundary and adjusted Capital
Improvement Projects to meet the infrastructure needs in the expanded service area.
A number of key steps in the calculation of the water impact fees included the following:
Use of System Planning Criteria: The number of equivalent residential units (ERUs) was determined
based on the planning criteria from the 2011 Kalispell Growth Policy which uses a projected growth rate
of 2.00%. This planning criterion incorporated with water usage data from Kalispell water system
establishes the average day flow and peak day flow for an ERU.
Calculation of Equivalent Residential Units: The planning horizon for the study was 2012 — 2035. The
number of current and future (additional) water ERUs was determined within this step.
Calculation of the Impact Fee For the Maior Water System Components: Each of the major functional
components of the water system (e.g. source of supply, treatment, etc.) are reviewed to consider the
existing plant assets, along with planned future capital improvements. This provides the basis for the
value of capacity and when divided by the appropriate ERUs produces a cost per ERU for each major
system component. When the cost per ERU for each major component is added together, it produces a
"gross" impact fee.
Debt Service Credits: if impact fees are insufficient to pay growth -related debt service, then a debt
service credit is provided against the "gross" water impact fees. The debt service credit is designed to
avoid the potential "double payment" of debt service (i.e. once through the payment of the impact fee
and again through rates). No water debt service credits are necessary in this current impact fee analysis.
Future Extensions: In determining the water impact fees, the City also considered significant future
extension improvements to the transmission and distribution system. The impact fees were calculated
"without future extensions" and "with future extensions." The distinction between these two
categories being that "without future extensions" the impact fees are calculated in a manner consistent
with the City's previous water impact fee analysis and include only the improvements within the City s
2012 Capital Improvement Plan. In contrast to this, "with future extensions" includes
extensions/improvements needed to serve the expanded planning area as contained within the
annexation boundary. The September 2012 Water Impact Fee Summary (Appendix H) provides a
proportional cost of these "with future extensions" improvements based on the improvements that are
shown within the 2011 Growth Policy annexation boundary. The total impact fee related to "with future
extensions" to the existing system to accommodate future growth is $17,583,247, or $3,531 per ERU.
These "with future extensions" costs may be included in or excluded from the impact fee analysis based
on recommendations from the Impact Fee Advisory Committee (IFAC) and as set by City policy. The
extension costs were provided for discussion by the Impact Fee Advisory Committee. The IFAC reviewed
the "with future extensions" costs and recommended not including the cost in the 2013 water impact
fee total. The "with future extensions" costs are not included in this report's recommended water
impact fee.
Determination of the "Net Allowable" Water Impact Fee: Based upon the steps noted above, a "net
allowable" impact fee was developed. Shown below in Table ES-1 is a summary of the net allowable
impact fee by major component for one (1) ERU.
Table ES-1
Allowable Water Impact Fees ($/ERU)
Description Total
Source of Supply
$212
Pumping Facility
$239
Storage Facility
$417
Transmission and Distribution Mains
$1,577
Administrative Cost at 5%
$122
Total Impact Fee
$2,567
It should be noted that in the 2006 impact fee study, the calculated water impact fee was $2,154.72.
The 2006 fee was adjusted in 2008 to reflect cost of construction to $2,213. Therefore, the
recommended calculated fee within this report is slightly more ($354.00) than the current fee.
7
Water Impact Fee by Meter Size (Capacity): For ease of administration, the recommended charge for
one (1) ERU is $2,567. The impact fees are then "weighted" by meter size to reflect potential capacity
use of the larger sized meters. This "weighting" by meter size is based upon the safe operating capacity
of the meter. Provided below in Table ES-2 is a comparison between the water impact fees by meter
size as developed in the 2006 water impact fee study and subsequent 2008 increase and the water
impact fee by meter size developed within this report.
Table ES-2
Allowable Water System Impact Fees By Meter Size
Comparison Between the Current Fee and the Proposed Fee
Meter Size Current Proposed Water Impact
Water Impact Fee Fee
Residential
$2,213
$2,567
1"
5,533
$6,418
1-%2"
11,066
$12,835
2"
17,705
$20,536
3"
35,411
$41,072
4"
Calculated
Calculated
[11— Commercial customers with residential type usage pay the residential fee.
The City, as a matter of policy, may charge any amount up to the allowable water impact fee, but not
over that amount. Charging an amount greater than the allowable impact fee would not meet the nexus
test of a cost -based impact fee.
Consultant's Recommendations
Consultant's recommendations on the Water Impact Fee: Based on our review and analysis of the City's
water system, MMI makes the following recommendations:
■ The City should implement impact fees for new hookups to the water system that are no greater
than the impact fees as set forth in this report. Using the current philosophy in place, the water
impact fee would be $2,567/ERU.
■ The City should update the actual calculations for the impact fees based on the methodology as
approved by the resolution or ordinance setting forth the methodology for impact fees every two
years as required by Montana law.
i
Impact Fee Advisory Committee (IFAC)
The Montana Annotated Code requires the establishment of an Impact Fee Advisory Committee (IFAC),
which serves in an advisory capacity to the governing body of the City of Kalispell. The September 2012
Water Impact Fee Update Summary was reviewed and discussed with the IFAC at various meeting since
October 2012. At the November 27, 2012 meeting the proposed methodology and impact fee as
outlined in the Update Summary was motioned and approved by the committee members. This final
report incorporates the September 2012 Water Impact Fee Update Summary, developed by MMI and
approved by the Impact Fee Advisory Committee,
Conclusion
This concludes the executive summary of the development of the water impact fee study. A more
detailed discussion of the various steps associated with the development of this fee can be found in
Section 5 of this report and the appendices.
N
Section 1: Introduction and Overview
1.1 Introduction
Morrison Maierle, Inc (MMI) was retained by the City of Kalispell; Montana (City) to update the current
cost -based impact fees for the City's water systems that comply with Montana Code 7-6-1601 to 7-6-
1604 based on the facility plan adopted by the City, the change in annexation boundary, current water
demands, newly projected growth rates and an updated Capital Improvement Plan (CIP). This final
report incorporates the September 2012 Water Impact Fee Update Summary, developed by MMI and
approved by the Impact Fee Advisory Committee and provides details of the development of cost -based
impact fees for the City's water systems.
The current water impact fee is based on the 2006 Impact Fee Final Report and on an adjustment to the
fees by City Council Resolution No. 5273 in April 2008. The City Council has directed staff to update the
existing cost -based water impact fee based on current conditions and according to 2011 Montana Code
Annotated 7-6-16.
In 2010, the City of Kalispell received the August 2010 Impact Fee Final Report for review and
consideration by the Impact Fee Advisory Committee. No adjustments were made to the impact fee at
that time. The September 2012 Water Impact Fee Update Summary, attached for reference in Appendix
H, updates the information provided in the August 2010 impact fee report with the following
information:
1) Change to the Kalispell Growth Policy: On March 7, 2011, City Council adopted an annexation
policy that significantly revised the previous annexation policy boundary. This report accounts
for the projected water improvements within the current annexation boundary. The current
annexation boundary is attached to this report and provides a comparison to the pre-2011
annexation boundary (original study area boundary). See Figure 1-6, 2011 Annexation
Boundary, at the end of Section 1.
2) Current Water Demands: The August 2010 report used 2006 water production volumes and
projected these volumes to 2010 with a theoretical population growth rate. This current report
uses measured historical water production volumes between 2006 and 2011 as a baseline
volume, and projects future volumes based on a growth rate currently applied by the Kalispell
Planning Department.
10
3) Projected Population Growth Rate: This report uses a population growth rate of 2.00% as
projected by the 2011 Kalispell Growth Policy Update. This is lower than the projected
population growth rates applied in the August 2010 report and in the 2008 Facility Plan Updates.
The reduced 2011 annexation boundary also generates a lower projected population to be
served by City utilities. For reference, historic population growth rates are listed below. The
growth calculation is shown in Appendix A.
• 1990 to 2000 1.78%
• 2000 to 2010 3.43%
• 1990 to 2010 2.60%
• 1960 to 2010 1.36%
4) Updated Capital Improvement Plan: The Kalispell Public Works Department has updated the
Capital Improvement Plan to reflect the current projected capital needs. The 2012/2013 Capital
Improvement Plan shows projects to be completed over the next five years and future projects
to be completed in approximately ten years. The updated Capital Improvement Plan is included
in Appendix B.
5) Key Financial Assumptions: In developing the impact fee for the City's water system, several key
assumptions were used. These include the following:
• The City's asset records were used to determine the existing assets and the value of
those assets.
• The interest rate used for calculating interest on existing assets is the 10-year treasury
note rate as reported by the US Department of the Treasury at closing on November
30th of each year.
• Up to fifteen years of interest is included in the cost of the existing improvements. The
fifteen -year average interest rate is currently 4.25%. The August 2010 Impact Fee Final
Report used an interest rate of 6.00%.
6) Council Direction on Administrative Fees: For the August 2010 Impact Fee Final Report, and
subsequent Council workshops, the City Council directed staff to use the allowable
administrative charge of 5% in the impact fee analysis. This 2012 report follows that same
guidance from the City Council.
Impact fees are a one-time assessment on new development to pay for the cost of infrastructure
required to provide service. Impact fees provide the means of balancing the cost requirements for new
utility infrastructure between existing customers and new customers connecting to the City's water
systems. The portion of existing facilities and future capital
improvements that will provide service (capacity) to new customers
is included in the impact fees. In contrast to this, the City has future
capital improvement projects that are related to renewal and
replacement of existing facilities in service. These infrastructure
costs are typically included within the rates charged to the City's
customers, and are not included within the impact fee. By
establishing cost -based impact fees, the City will be taking a policy
"The objective of this
report is to properly place
in context the purpose of
impact fees, and to
determine cost -based
impact fees for the water
systems that comply with
Montana law."
action of having "growth pay for growth" and help existing utility customers be sheltered from the
financial impacts of growth.
1.2 Overview of the Report
The development of cost -based water impact fees requires detailed analyses of each utility. To better
understand the approach and methodology used, along with the development of the City's impact fees,
this report has been divided into a number of sections (chapters). This report is organized in the
following manner:
• Section 1—Introduction and Overview
• Section 2 — Review of "generally accepted" practices related to impact fees
• Section 3 — Overview of the criteria and methodologies used to establish the impact fees
• Section 4 — Summary of the legal requirements for enactment of impact fees under Montana
law
• Section 5 — Review of the development of the cost -based water impact fees
1.3 Disclaimer
Morrison Maierle, Inc, in its determination of impact fees presented in the September2012 Water
Impact Fee Update Summary, has relied upon data and information provided by the City. At the same
time, Morrison Maierle, Inc used "generally accepted" engineering, accounting, and ratemaking
principles in the development of these cost -based impact fees. This should not be construed as a legal
opinion with respect to Montana law.
1.4 Summary
This section of the report has provided an overview of the water impact fee report developed by the
City in coordination with Morrison Maierle, Inc. This report provides the basis for the establishment of
cost -based impact fees by the City.
The next section of the report will discuss the "generally accepted" utility industry practices as they
relate to impact fees
12
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Section 2: Overview of Impact Fees and Generally Accepted
Industry Practices
2.1 Introduction
An important starting point in discussing the City's continued implementation of water impact fees is an
understanding of the purpose and concept of impact fees and the financial objective of those fees. This
section of the report will discuss the concept of impact fees and the "generally accepted" practices of
the industry.
2.2 Defining Impact Fees
One must first define an "impact fee" before beginning an assessment and review of the fees. Impact
fees are also often called system development charges (SDCs), capacity charges, buy -in fees, facility
expansion charges, plant investment fees, etc. Regardless of the name applied to the fee, the concept is
still the same. Simply stated, impact fees are capital recovery fees that are generally established as one-
time charges assessed on developers or new water and wastewater customers as a way to recover a
part or all of the cost of system capacity constructed for their use. Their application has generally
occurred in areas that are experiencing extensive new residential and/or commercial development.'
The main objective of an impact fee is to assess the benefiting party, their proportionate share of the
cost of infrastructure required to provide them service. Stated another way, impact fees imply that new
development creates new or additional costs on the system, and the impact fee assesses that cost in an
equitable manner to those customers creating the additional cost.
2.3 Historical Perspective
Historically, the financing of infrastructure was typically paid for via long-term debt and "pay as you go"
rates. However, over the last twenty years, the use of impact fees as a method of financing growth and
infrastructure has risen sharply. To the best of our knowledge, no clear surveys or data exists to show
this change, however, there are a number of examples within the literature that point out this
phenomena. As an example, a survey of 67 Florida communities was undertaken in 1986 and 1989. The
number of communities in 1986 using impact fees was 15. By 1989, the number of communities using
impact fees had more than doubled to 32.2 As this funding mechanism gained popularity, legislatures
across the U.S. were developing legislation to provide utilities with the authority to impose impact fees.
Typical legislation generally provides the approach to be used to develop the fees and requires that the
fees be used only for growth -related needs and not for current O&M requirements. At this time, the
State of Montana has very specific legislation related to impact fees. This specific legislation regarding
the fees provides the City with the authority to establish and collect impact fees. This authority is
provided in Montana Code Section 7-6-1601 to 7-6-1604.
1 George A. Raftelis, 2nd Edition, Comprehensive Guide to Water and Wastewater Finance and PricinE (Boca
Raton: Lewis Publishers, 1993), p. 73.
2 James C. Nicholas, Arthur C. Nelson and Julian C. Juergensmeyer, A Practitioner's Guide to Development
Impact Fees (Chicago: Planners Press, 1991) p. 3.
14
While many utility managers viewed impact fees as an important and alternative source of funding for
new capital construction, these fees were also being rationalized from a number of different
perspectives. Among these were the following:3
1. To shift the fiscal burdens from existing development to new development.
2. To synchronize the construction of new or expanded facility capacity with the arrival of new
development.
3. To subject new development decisions to pricing discipline.
Each of these different perspectives is discussed in more detail below.
Historically, existing development was often subsidized by federal or state resources. As an example, in
the early 1970s, many wastewater treatment plants in the U.S. were 90% grant funded by the
Environmental Protection Agency (EPA). Today, grants are nearly extinct, often replaced instead by low
interest state revolving fund (SRF) loans. Therefore, as existing customers were being impacted by the
cost of growth, local communities searched for methods to help minimize rates and the impacts of the
cost of growth.
Unchecked growth and sprawling expansion is very costly on a per unit basis. In response to this
dilemma, many legislative bodies created urban growth boundaries. At the same time, utilities moved
towards impact fee and extension policies that assist in managing system growth in an orderly and
coordinated manner. As a result, improved planning and cost -based fees have helped utilities manage
the costs of growth, while stabilizing rates to existing customers.
Establishing the price of a commodity equal to its cost is a basic economic and market principle. In
theory, consumers of a service will make "optimal" consumption decisions when the price of the
commodity is set equal to its price. By establishing cost -based impact fees, developers should be in a
position to make better and more rational decisions concerning new development. At the same time,
proper pricing of impact fees also encourages "right sizing" of facilities to serve new development. In
other words, given the proper price signal, the developer will properly size their service facilities to meet
their needs, e.g., installing a %-inch meter versus a 2" meter.
In summary, the use of impact fees has changed over time, as historical funding sources such as grants
have been reduced or eliminated. In response, many communities have moved towards adoption of
cost -based impact fees, particularly in areas of high growth.
2.4 Impact Fees and "Generally Accepted" Practices
Impact fees are one input into the rate setting process. Therefore, it is important to understand how,
within the context of "generally accepted" utility industry practices, impact fees may be used. In
conducting a comprehensive water rate study, three interrelated analyses are typically conducted. They
are a revenue requirement analysis, cost of service analysis and rate design analysis. Figure 2-1 provides
an overview of each of these analyses.
3 Adapted from: Arthur C. Nelson, System Development Charges for Water, Wastewater and Stormwater
Facilities (Boca Raton: Lewis Publishers, 1995) p. 6-7.
15
Figure 2-1
Overview of the Three -Interrelated Analyses to Review Rates
Revenue Requirement Analysis
Cost of Service Analysis
Rate Design Analysis
Compares the sources of funds (revenues) to
the expenses of the utility to determine the
overall adjustment to rates
Allocates the total revenue requirements to
the various customer classes of service in a
"fair and equitable" manner
Considers both the level and the structure of
the rate design to collect the appropriate
and targeted level of revenue
Impact fees are taken into account within the revenue requirement analysis. The revenue requirement
analysis determines the overall funding needs of the utility, while considering prudent financial planning
criteria, e.g., adequate reserves, meeting debt service coverage requirements, etc. For most municipal
utilities, the methodology used to establish their revenue requirements is referred to as the "cash basis"
approach. Figure 2-2, shown below, provides an overview of the key components of the "cash basis"
approach to developing revenue requirements.
16
Figure 2-2
Overview of the "Cash -Basis" Approach
+ Operation and "Intenanco Expenees
+ Taxies I Transhw Payments
+'Debt Service (Net of Applied Impact Fees)
+ Capital Improvements Funned From Elates
Total Revenue Requirements
tcytlfit-W►
Total R"i;rerd From Rates
Total Capital Improvement Projects
Lose; Outside Funding Sources
—Capital Reserves
Impact Fees
Grants
Long -Term Dahl
— Other Capital Fundina Sources
= Total Capital Improvements Funded From !Elates
As can be seen in Figure 2-2, there are two elements to establishing the "cash basis" revenue
requirements. The top or blue box shows the four basic cost components that are included within the
"cash basis" revenue requirements. In contrast, the bottom or yellow box illustrates the various
methods used to fund capital infrastructure projects.
It should be noted in Figure 2-2 that impact fees may be used (applied) in two different ways, each
having a different impact upon the utility's revenue requirements and, ultimately, the utility's rates. The
first possible use of impact fees is shown in the bottom or yellow box. In that particular case, the impact
fees are applied directly to growth or expansion related capital projects. The effect of using the funds in
this manner is it helps minimize long-term borrowing. For each dollar of impact fees applied in this
manner, one less dollar of long-term borrowing is required. Typically, total capital improvements
funded from rates is established and fixed in the financial planning process. Therefore, applying impact
fees to capital projects typically will not have a significant impact upon the amount of capital
improvements funded from rates.
The other potential use of impact fees is to apply the fees toward growth -related debt service. As
shown in Figure 2-2, debt service is shown as net of any impact fees. In contrast to applying impact fees
directly toward the capital project, in this particular case, for every dollar applied in this manner, there is
17
a corresponding dollar decrease in revenue requirements and the resulting rates. This is a very effective
method to help minimize rates, but even better at matching the cost of growth to the gradual way in
which customer growth occurs over time. In other words, a utility may build or expand a facility with
sufficient capacity to handle growth over the next ten to twenty years. That growth doesn't occur in the
first year, but rather, trickles in over a number of years. Therefore, applying the impact fees against the
debt service associated with the project creates a better matching of the cost incurrence (debt
payments) to the actual customer growth.
2.5 Financial Objectives of Impact Fees
An impact fee is a regulation and not a user fee or revenue raising "An impact fee is a
device. To understand this perspective, one must view new regulation and not a user
development as creating the need for new or expanded facilities. fee or revenue raising
As a result, without payment of impact fees, the utility would have device. To understand this
insufficient funds to provide the facilities, and therefore the perspective, one must
community is unable to accommodate new development. With this view new development as
said, impact fees do have certain financial objectives associated creating the need for new
with them. While on the surface it may appear as simply a means or expanded facilities."
to extract revenue from new development, the reality is far more
complex. Impact fees help utilities achieve a number of different financial objectives. These objectives
tend to lean more towards financial equity between customers, as opposed to simply producing
revenue.
One key financial/rate objective that is achieved from impact fees is equity. Equity is achieved in two
different ways. First, an impact fee establishes equity between existing (old) customers and new
customers. For example, assume that a water treatment plant is expanded by 5 million gallons per day
(MGD) to accommodate growth and the facility is financed over a 20-year period. Without an impact
fee, new customers connect to the system and pay for the debt service on the facility via their rates.
The customer that connects to the system in year one will contribute to the cost of that facility for 20
years. In contrast, the person who connects in year 10 will only pay for debt service on the facility for
ten years, even though the "value" of the capacity was the same for the person connecting in year 1 or
year 10. Impact fees create equity within the system by addressing the issue of timing and the "value"
of the assets and the "value" of the capacity.
U. an impact fee is also a
The second way in which impact fees help to create equity is after
, .
form of a financial a facility is paid for. Continuing with the example above, after the
reimbursement to existing debt service is fully paid off in year 20, and assuming that some
ratepayers who paid for capacity is still available, a new customer connecting to the system
those facilities in advance `Mould "in theory" receive their capacity at zero cost, because the
of the new customer debt service is paid in full. All the existing customers connected to
connecting to the system." the system, over the past twenty years, paid for that customer's
capacity. Therefore, an impact fee is also a form of a financial
reimbursement to existing ratepayers who paid for those facilities in advance of the new customer
connecting to the system.
In
Most commonly, impact fees
are adopted in high growth
areas where infrastructure
expansion has strained
existing financial resources.
Philosophically, many utilities
desire to have a policy of
"growth paying for growth."
Based upon the above example, impact fees also have an equity
perspective associated with the rate setting process. That is,
impact fees are a form of "system buy -in." A properly
established impact fee implies that a new customer connecting
to the system has bought into the system at its current cost.
Therefore, from a rate setting perspective the utility does not
need to have rates for "old" and "new" customers. Again,
existing customers have been equitably reimbursed for their
past investments.
Even with the above discussion, not all communities have impact fees. Most commonly, impact fees are
adopted in high growth areas where infrastructure expansion has strained existing financial resources.
Philosophically, many utilities desire to have a policy of "growth paying for growth." Impact fees
comport with that philosophy, and it is achieved by applying the impact fees either directly against the
capital cost of the expansion facilities or against the debt service associated with it.
2.6 Relationship of Impact Fees and New Construction Activities
There are a number of myths surrounding impact fees. In a very broad sense, some may argue that
impact fees are bad for economic development. These arguments center around two issues. These are
as follows:
• Development will occur on those parcels with lower or non-existent impact fees.
• Impact fees raise the cost of doing business and hinder development.
Of the research conducted on these topics, just the opposite has been found. Provided below is a brief
explanation of each.
Developers look at many factors before a parcel is developed. One myth concerns the selection of
parcels for development and whether impact fees are applied to the land.
"The argument goes that if a developer is choosing between two parcels of land on which to
build —where the first parcel is inside a city where SDCs (impact fees) are charged and the
second is just outside where lower or no SDCs (impact fees) are charged —the developer will
choose the second parcel.
The trouble is this means that the owner of the first parcel does not make a sale. The
landowner must lower the land price to offset the fee in order to make a sale. However, if the
landowner does not lower the price, this indicates that the value of future development may be
higher on that parcel. Thus, be wary of developers who claim they will choose the second
parcel. Chances are they would not have chosen the first parcel anyway. In the meantime, the
land market will be holding the first parcel available for higher value development. In effect
what might look like a loss in the short term may be a much higher level of development in the
long-term. "
4 Nelson. "System Development Charges for Water, Wastewater and Stormwater Facilities" P. 55.
19
The other argument and myth that one commonly hears about impact fees is that they are bad for
economic development. The argument against this position is as follows:
"The argument goes that because SDCs (impact fees) raise the price of doing business, they
frustrate economic development. However, just the opposite is really true. First, remember
that SDCs (impact fees) will be offset by reduced land prices and by enabling the community to
more easily expand the supply of buildable land relative to demand.
Now, consider what economic development really looks for: skilled labor, access to markets,
and land with adequate infrastructure. Competitiveness for economic development will be
stimulated by the new or expanded infrastructure paid in part by SDCs (impact fees). In the
competition for certain kinds of development, it will be able to show developers the dollar
value of SDCs (impact fees) waived as a solid demonstration of the local government's
commitment to such development. "5
As can be seen, at least in the opinion of Nelson, SDCs (impact fees) do not hinder growth, but in fact
may help to spur growth. It must be remembered that an important concept associated with impact
fees is that the fees are required to develop infrastructure in advance of
the actual development.
From the developer's perspective, absent impact fees (i.e. a moratorium
on new connections) no new development can occur. Therefore,
developers are generally supportive of cost -based impact fees,
particularly when it provides available capacity and opportunities for
development.
"As can be seen, at
least in the opinion of
Nelson, SDCs (impact
fees) do not hinder
growth, but in fact may
help to spur growth.
2.7 Summary
This section of the report has provided an overview of the financial objectives associated with impact
fees and some of the issues surrounding them. This section should have provided a basic understanding
of the fees such that when the City is ready to have a policy discussion concerning the continued
implementation of impact fees and the imposition of new impact fees, they can be placed in proper
perspective. The next section of the report will provide an overview of methodologies for the
application of impact fees.
Nelson, "System Development Charges for Water, Wastewater and Stormwater Facilities" P. 56.
20
3.0 Overview of Impact Fee Methodologies
3.1 Introduction
An important starting point in establishing impact fees is to have a basic understanding of the purpose
of these charges, along with criteria and general methodology that is used to establish cost -based
impact fees. Presented in the section of the report is an overview of impact fee criteria and the
"generally accepted" methodologies that are used to develop cost -based impact fees.
3.2 Impact Fee Criteria
In the determination and establishment of the impact fees, a number of different criteria are often
utilized. The criteria often used by utilities to establish impact fees are as follows:
• Customer understanding
• System planning criteria
• Financing criteria, and
• State/local laws
The component of customer understanding implies that the charge is easy to understand. This criterion
has implications on the way that the fee is implemented, administered and assessed to the customer.
Generally, for a water system, the fee is based on the size (capacity) of the meter. This makes it easy for
the customer to understand the level of fee based on the size of a meter required to provide service. In
some instances, larger meter sizes are calculated based on actual usage. While this is more
complicated, it applies to very few customers and generally more sophisticated industrial customers.
For wastewater systems, the charge can be based on meter size or the type of dwelling or business type
being assessed. For example, a school could be assessed based on a per student basis corresponding to
the sanitary sewer flow per student. The other implication of this criterion is that the methodology is
clear and concise in its determination of the amount of infrastructure necessary to provide service.
The use of system planning criteria is one of the more important
aspects in the determination of impact fees. System planning
criteria provides the "rational nexus" between the amount of
infrastructure necessary to provide service and the charge to the
customer. The rational nexus test requires that there be a
connection (nexus) established between new development and
the existing or expanded facilities required to accommodate new
development; and appropriate apportionment of the cost to the
new development in relation to benefits reasonably received. An
example of using system -planning criteria is the determination
"The use of system planning
criteria is one of the more
important aspects in the
determination of the impact
fees. System planning criteria
provides the "rational nexus"
between the amount of
infrastructure necessary to
provide service and the charge
to the customer."
that a single-family residential customer requires 415 gallons of water distribution storage. The impact
fee methodology then charges the customer for 415 gallons of water distribution storage at the per
gallon cost of storage.
21
One of the driving forces behind establishing cost -based impact fees is that "growth pays for growth."
Therefore, impact fees are typically established as a means of having new customers pay an equitable
share of the cost of their required capacity (infrastructure). The financing criteria for establishing impact
fees relates to the method used to finance growth -related infrastructure of the system and assures that
customers are not paying twice for growth -related infrastructure — once through impact fees and again
through rates. The double payment can come in through the imposition of impact fees and then the
requirement to pay debt service within a customer's rates. The financing criteria also reviews the basis
under which main line and collection line extensions were provided and addresses the issue such that
customers are not charged for infrastructure that was provided (contributed) by developers.
Many states and local communities have enacted laws which govern the calculation and imposition of
impact fees. These laws must be followed in the determination of the impact fees. Most statutes
require a "reasonable relationship" between the fee charged and the cost associated with providing
service (capacity) to the customer. The charges do not need to be mathematically exact, but must bear
a reasonable relationship to the cost burden imposed. As discussed above, the utilization of the
planning criteria and the actual costs of construction and the planned costs of construction provide the
nexus for the reasonable relationship requirement.
3.3 Growth, Risk and New Connections
One of the common phrases associated with impact fees is "growth paying for growth." While this is a
simple and convenient phrase to convey the concept and purpose of impact fees, the reality of the
transaction is far more complicated. As the recent downturn in the economy has demonstrated,
customer growth is not assured or to be taken for granted. At the same time, it must be kept in mind
that it is the existing customers that bear the risk of growth -related facilities that are built. If growth -
related facilities are built in anticipation of future growth, and little or no connections occur, it will be
the existing ratepayers that will bear the burden of any financial responsibility (e.g. long-term debt)
associated with those growth -related facilities. Absent some form of an impact fee, existing ratepayers
would likely be hesitant to fully support undertaking such risk.
3.4 Overview of the Impact Fee Methodology
There are "generally -accepted" methodologies that are used to establish impact fees. Within the
"generally accepted" impact fee methodologies, there are a number of different steps undertaken.
These steps are as follows:
• Determination of system planning criteria.
• Determination of equivalent residential units (ERUs).
• Calculation of system component costs.
• Determination of any credits.
The first step in establishing impact fees is the determination of the system planning criteria. This
implies calculating the amount of water required to serve a single-family residential customer.
Generally for a water system, two different criteria are determined due to differences in planning
criteria. The first planning criterion is the peak day water usage per ERU and the second is a water
22
storage requirement per ERU. These two different planning criteria are developed since a majority of
the water system infrastructure is sized to meet the peak day demand, and water storage is sized to
meet equalizing, emergency and fire flow requirements.
Once the system planning criteria is determined, the number of ERUs can be determined. For the water
system, this is determined by utilizing the peak day water system demand and dividing it by served
ERUs. This is a very important calculation since it provides the linkage between the amounts of
infrastructure necessary to provide service to a set number of customers. This implies that if the system
is designed to provide service to demands up to the year 2035, then the infrastructure costs are divided
by the ERUs in 2035 to determine the cost per ERU.
Once the number of ERUs has been determined, a component by component, e.g., source of supply,
treatment, storage, etc., analysis is undertaken to determine the component impact fee in dollar per
ERU. Individual facility components are analyzed separately for the water systems given that the
planning criteria for the design of the various system components differ. The calculation of the
component impact fee includes both historical assets and planned future assets. Historical assets can be
valued in a number of different ways. These include original cost plus interest, replacement cost and
depreciated replacement costs.
1. The original cost plus interest method includes original cost plus fifteen (15) years worth of
interest. This calculation is done to reflect the fact that existing customers have provided for
excess capacity in the system and hence need to be reimbursed for not only their initial
investment, but also the "carrying cost" on that investment. The reimbursement to existing
customers is accomplished by the fact that without an impact fee, rates would otherwise be
higher than they would be without impact fees.
2. The replacement cost method values existing assets based on the cost to replace the assets in
today's dollars. This is done by escalating the original cost by the Engineering News Record
Construction Cost (ERN) index. The theory behind the use of replacement cost is that customers
are indifferent since they would have to pay replacement cost if the infrastructure was built
today to serve their needs.
3. The use of depreciated replacement cost reflects the fact that the assets have been used and
hence their value to the new customer is less that the replacement cost. Caution needs to be
exercised in the use of depreciated replacement cost, since the book or accounting lives used by
many utilities are not reflective of the actual life of the asset and may result in the assets being
undervalued. An example is using a useful life for a storage reservoir of 40 years, when in
reality, with maintenance, the actual life may be between 60 to 80 years.
MMI recommends and used the original cost with interest method, since it will reflect the actual cost of
the City's system, to calculate the impact fee in this report. The City's system is developed to serve
future development through existing capacity and planned future capacity additions. This has been
accomplished by the City building excess capacity and using borrowing to finance this capacity and the
City building future capacity. Therefore, the use of the original cost with interest method will reflect the
actual costs that have been incurred or will be incurred by the City in providing capacity to new
development. This is also the most commonly used method to value capacity in water systems. This
23
method also appears to comply with the requirements under Montana law wherein in the actual cost of
infrastructure is required.
Once the total cost of the capital infrastructure is determined, it is then divided by the appropriate
number of equivalent residential units the infrastructure will serve to develop the cost per ERU for the
specific facility component.
After each plant component is analyzed and a cost per ERU is determined, the cost per ERU for each of
the facility components is added together to determine the "gross impact fee." The "gross impact fee"
is calculated before any credits for debt service.
The last step in the calculation of the impact fee is the determination of any debt credits. This is
generally a calculation to assure that customers are not paying twice — once through impact fees and
again through debt service included within the water rates. A crediting mechanism is also utilized if
general obligation or tax revenue has been used to finance the infrastructure.
The final cost -based impact fee is determined by taking the "gross impact fee" and subtracting any
credits. This results in a "net impact fee" stated in dollar per ERU. The general basis of this calculation
for a water system is the assumption that an ERU is equivalent to a single family residential customer.
Larger meter sizes are then imposed fees based on the number of ERUs for a given meter size based on
its safe operating capacity. The number of ERUs per meter size is generally based on the safe operating
capacity of the meter.
3.5 Summary
This section has provided a discussion of the criteria typically used in the determination of impact fees.
In addition, an overview of the "generally accepted" methodology used in the calculation of the water
impact fees has been provided. Given this background, the next section of the report discusses any
specific legal criteria that must be used by the City in the establishment of its impact fees.
24
4.0 Legal Consideration in Establishing Impact Fees for the City
4.1 Introduction
An important consideration in establishing impact fees is any legal requirements at the state or local
level. The legal requirements often establish the methodology around which the impact fees must be
calculated or how the funds must be used. Given that, it is important for the City to understand these
legal requirements. This section of the report provides an overview of the legal requirements for
establishing impact fees under Montana law.
The discussion within this section of the report is intended to be a summary of our understanding of the
relevant Montana law as it relates to establishing impact fee. It in no way constitutes a legal
interpretation of Montana law.
4.2 Requirements Under Montana Law
In establishing impact fees, an important requirement is they be developed and implemented in
conformance with local laws. In particular, many states have established
"The laws for the
specific laws regarding the establishment, calculation, and
enactment of impact
implementation of capacity fees. The main objective of most state laws is
fees in Montana are
to assure that these charges are established in such a manner that they
found in 7-6-1601 to
are fair, equitable, and cost -based. In other cases, state legislation may
7-6-1604 of the
have been needed to provide the legislative powers to the utility to
Montana Code.
establish the charges.
The Montana law enabling legislation for impact fees was enacted in 2005 via Senate Bill 185. This was
comprehensive legislation allowing public entities in the State of Montana to enact impact fees for
various services. The legal basis for the enactment of impact fees is found in Title 7, Chapter 6, and Part
1601 to 1604 of the Montana Code. A copy of the code is summarized in Appendix C.
4.3 Summary
This section of the report has reviewed the legal basis for establishing impact fees in Montana. MMI
concludes that the City has the authority to establish cost -based impact fees and the proposed
methodology to be used within this study, in the opinion of MMI and the City, meets the requirements
of Montana law.
25
5.0 Determination of the City's Water Impact Fees
5.1 Introduction
This section of the report presents the development of the City's 2013 water impact fee. The
calculations of the water impact fee presented in this section are based on:
1. The City's fixed asset records
2. Future capital improvements as identified in the City's current Capital Improvement Plan
(Appendix B)
3. Planning criteria projected by the 2011 Kalispell Growth Policy
5.2 Overview of the City's Water System
The City currently provides water services for a population of approximately 21,000 customers. This
report uses a population growth rate of 2.00% as projected by the 2011 Kalispell Growth Policy Update.
This is lower than the projected population growth rates applied in the August 2010 report and in the
2008 Facility Plan Updates.
The City obtains 100% of its water supply from wells. The City's source of supply is provided by eight
active well sites. (The Noffsinger Spring, located at the north end of the Lawrence Park complex, will be
considered a well for discussion purposes, as it does not have sufficient artesian pressure to contribute
to the system without additional pumping, and it was recently classified as a well by the Montana
Department of Environmental Quality.) The City also has four storage reservoirs including the recently
constructed Sheepherders Hill reservoir. The capital improvement plan calls for the construction of a
new well, upgrades to the distribution and transmission system, and new storage.
5.3 Overview of the City's Water Facility Plan
The water facility plan provides an update to the water system portions of the City of Kalispell Water,
Sewer, and Storm Drainage System Facility Plan, completed in July 2002. Since completion of the 2002
report, the City has continued to experience population growth and the expansion of infrastructure;
therefore, in 2006 and 2008 the City chose to update their facility plan to analyze potential growth and
effectively plan for growth while protecting water and environmental resources.
The area studied in the 2006 and 2008 Water Facility Plan is represented in Section 1, Figure 1-6 — Water
and Sewer Impact Fee Update. The basis of planning was to determine the requirements for the next 50
years in areas that the City will have to provide water service as growth continues.
On March 7, 2011 the City Council adopted an annexation policy that significantly revised the previous
annexation boundary. This report uses the annexation policy boundary for the planning boundary and
adjusted Capital Improvement Projects to meet the infrastructure needs in the expanded service area.
5.4 Present Impact Fees
The City currently assesses an impact fee for connection to the water system. The current water impact
fees are shown in Table 5-1.
26
Current
Meter Size
Table 5-1
Water Impact Fees
ERU Factor Charge
3/4"
1.0
$2,213
1,,
2.5
5,533
1-1/2"
5.0
11,066
2"
8.0
17,705
3"
16.0
35,411
Over 3"
Calculated
Calculated
5.5 Calculation of the City's Impact Fees
As was discussed in Section 3, the process of calculating impact fees is based upon a four -step process.
In summary form, these steps were as follows:
• Determination of system planning criteria
• Determination of equivalent residential units (ERU)
• Calculation of the impact fee for system component costs
• Determination of any impact fee debt credits
Each of these areas is discussed in more detail below.
5.5.1 System Planning
The number of equivalent residential units (ERUs) was determined based on the planning criteria from
the 2011 Kalispell Growth Policy which uses a projected growth rate of 2.00%. Kalispell water usage data
calculates a 166 gallons per capita day average flow and an assumed typical peaking factor of 2.67. An
averaged 2.5 persons per household or ERU was utilized to develop a peak day flow of 1,108 gallons per
day per ERU. A summary of the ERU conversion factors is presented below in Table 5-2.
(1) From the Kalispell water production reports.
(2) Based on a peaking factor of 2.67x
27
As discussed previously, certain facilities may be planned and sized around different planning criteria.
Therefore, the system planning criteria shown above will be used for different facility components to
determine the cost per ERU for that specific facility component.
5.5.2 Calculation of Equivalent Residential Units
The planning horizon of this study was 2012 — 2035. Other impact fee components were based on the
number of ERUs in 2035 or additional ERUs from 2012 to 2035
As a part of this study, a projection of the number of new/additional ERUs per year must be determined,
along with the total number of ERUs at 2035. The City's total number of residential ERUs for each year
was determined by dividing the peak day usage factor per ERU into total peak day demand. The number
of ERUs added during each year of the study period was made based on a 2% growth rate as set forth
2011 Kalispell Growth Policy. The ERU calculation in correspondence with the 2% growth rate is located
in Appendix A. A summary of the ERUs for 2012 and 2035 are presented in Table 5-3.
Given the development of the total water ERUs for each year of the planning period, the focus can shift
to the calculation of the impact fee for each facility component. This aspect of the analysis is discussed
in detail below.
5.5.3 Calculations of the Impact Fee for the Major System Components
The next step of the analysis is to review each major functional component of facility in service and
determine the impact fee for that component. In calculating the water impact fee for the City, both
existing facility assets, along with planned future CIP were included within the calculation. The major
components of the City's water system that were reviewed for purposes of calculating impact fee were
as follows:
• Source of Supply
• Pumping Facilities
• Storage Facilities
• Transmission and Distribution Mains
• Administrative Charge
A brief discussion of the impact fee calculated for each of the functional plant components is provided
below.
ME
SOURCE OF SUPPLY
The City's source of supply is provided entirely from wells. (The Noffsinger Spring, located at the north
end of the Lawrence Park complex, will be considered a well for discussion purposes, as it does not have
sufficient artesian pressure to contribute to the system without additional pumping, and it was recently
classified as a well by the Montana Department of Environmental Quality.) The sources of supply
consist of eight active well sites. Details of the calculations for source of supply are provided in
Appendix D, with present costs.
The current wells have a firm capacity of 10.195 million gallons per day (mgd). This firm capacity
assumes all wells, except the single largest, are on 24 hours per day. The firm capacity provides a
characterization of the system, but does not constrain the system to operate under such conditions; the
system should not operate with all pumps
turned on 24 hours per day, as this would
create obvious problems with operation and
maintenance of equipment.
The current pumping capacity of the system is
sufficient to meet current 2012 peak day
An Equivalent Residential Unit, or ERU, is a standard
way to measure capacity within a utility system. An
ERU is the water flow demand arising from an average
single-family home. Within the Kalispell water system,
an ERU is 415 gallons per day, or 166 gallons per
person with 2.5 persons per single-family residence. A
facility that consumes 830 gallons per day would have
demands (9.560 mgd) and to meet peak day the impact of two ERUs. This unit creates the
demands into 2015 (10.150 mgd). Between equitable distribution of costs across residential,
2012 and 2015, the City should consider commercial and industrial demands.
developing additional supply capacity in the
system. This will likely be accomplished through development of the Grossweiler well (2.880 mgd). The
Grossweiler well is located adjacent to the DNRC/DEQ/911 Center complex on Stillwater Road. The
costs associated with this well development are included in this impact fee analysis, and are shown in
Appendix D.
The addition of the Grossweiler well will bring the peak day capacity to 13.075 mgd. This is the
approximate peak day demand at the 2028 planning year, or 13.130 mgd.
Note on Planning Period: The 2008 Water Facility Plan Update uses the design year 2035 for facility
planning. This same design year is used as the planning year in this report. Extending the planning year
further into the future will increase the number of ERUs over which to distribute the impact fees. This
will decrease the impact fee, but will also create a greater risk to the City of not collecting sufficient
impact fee when the improvements are needed. Conversely, bringing the planning year closer to the
present year will decrease the number of ERUs and will increase the per-ERU impact fee. For these
reasons, the 2035 planning year is used for this water impact fee update.
By following the 2011 Montana Code Annotated 7-6-1602 (2 k iv), regarding the update of the impact
fee analysis, the City will be able to respond to changes in the actual population growth rates and
development patterns. This response will allow the City to modify future capital improvement plans to
meet changing population growth rates.
29
The total current cost for source of supply equipment is $2,879,260. This total cost is divided by the
ERUs at the 2035 planning year, or 13,612 ERUs. This generates a per-ERU supply cost shown below.
Details of this calculation are shown in Appendix D.
Total Impact 2012 Source of Supply Costs: $ 2,879,260
Total Proiected ERUs at 2035 Planning Year: 13,612
Impact Fee (Source of Supply) per ERU: $ 212
PUMPING FACILITIES
The City currently has pumping facilities at all well sites. No future capital improvements were identified
as part of the 2012 Capital Improvement Plan. The costs of future pumping facilities associated with the
Grossweiler Well are included in the source of supply costs in the previous section. The total cost of
existing pumping facilities are shown in Appendix E. Details of the pumping facilities calculation are also
provided in Appendix E.
The total 2012 cost for pumping facilities is $3,250,836. This total cost is divided by the ERUs at the
2035 planning year, or 13,612 ERUs. This generates a per-ERU cost shown below:
Total 2012 Pumping Facilities Costs: $ 3,250,836
Total Protected ERUs at 2035 Planning Year: 13,612
Impact Fee (Pumping Facilities) per ERU: $ 239
STORAGE FACILITIES
The City currently has four storage reservoirs with a total storage volume of 6.5 million gallons. Each
reservoir contains the following components of storage volume:
Operational Storage: this is the water that is stored between the pump "on" and pump "off' settings.
This is a relatively small component of the storage system, and allows the well pumps to cycle and
alternate rather than run continuously during average demand conditions. This is currently
approximately 0.880 million gallons.
Equalization Storage: This is the water used when the supply system cannot provide sufficient water at
peak system flows, e.g., summer watering patterns and daily peak demands. The use of this
equalization water does not indicate a deficiency in the system; rather, this component of storage
allows the system to function more cost-effectively by not requiring additional wells and pumps to meet
peak day demands; the storage tanks are in place to meet these peak day demands. The storage
facilities contain 1.625 million gallons of equalization storage, or 25% of the total storage volume.
Fire Storage: This water is used for fire suppression activities and is determined by the size of the
community and the land uses within the community. The City of Kalispell applies a 4000 gpm fire flow
over a period of four hours to develop the fire storage volume. This equates to 960,000 gallons of fire
storage.
Emergency Storage: This component is used to provide water to the community during extraordinary
events such as prolonged supply failures. The City's water system contains redundancies in the system,
411j,
which minimize the probability of an emergency scenario. These redundancies include multiple wells,
multiple tanks, auxiliary power, upper/lower zone connections and comprehensive monitoring by means
of the SCADA system (Supervisory Control and Data Acquisition). The current emergency storage
volume is approximately 2.720 million gallons.
Remaining storage is water that may be unavailable due to outlet levels or low pressures as the system
empties. This component is not considered in Kalispell storage calculations, as it comprises an
insignificant volume of water in the Kalispell system.
The total available operational and equalizing water storage is 2.820 million gallons. The City currently
utilizes approximately 0.880 million gallons of this available storage. Discussions with water department
staff have indicated the City intends to study the viability of optimizing the water system to use
approximately 1.195 of this storage. The full amount of this storage is not currently used due to low
pressures that develop when the tanks are drawn to lower levels. When the tanks are drawn to lower
levels in an attempt to use the full storage capacity, the water pressure (near the top of the lower
pressure zone) drops below what citizens typically expect.
The total cost of existing storage facilities was divided by the planning year 2035 ERUs to develop the
cost for storage facilities per ERU. Details of the storage facilities calculation are provided in Appendix F.
The total 2012 cost for storage facilities is $5,672,604. This total cost is divided by the ERUs at the 2035
planning year, or 13,612 ERUs. This generates a per-ERU cost shown below:
Total 2012 Storage Facilities Costs: $ 5,672,604
Total Proiected ERUs at 2035 Planning Year: 13,612
Impact Fee (Storage Facilities) per ERU: $ 417
TRANSMISSION AND DISTRIBUTION MAINS
The City's transmission/distribution network consists of numerous lines of 8-inch, 10-inch, 12-inch, 16-
inch, and 20-inch diameter mains. To determine the impact fee for transmission mains and booster
pumps, an inventory of the existing system was undertaken as well as those planned improvements as
identified in the capital improvement program. The historical investments of the City were adjusted for
interest charges up to a maximum of fifteen years and allocated to growth based on the capacity of the
assets to provide service to new development.
Recoupment Costs and Capital Projects within the Existing System
A significant component of the water impact fee arises from recoupment costs associated with existing
transmission and distribution facilities that have excess capacity. The total 2012 cost of these facilities is
$20,196,005. The impact fee related costs were determined by considering the additional ERUs that are
projected to connect to the system during the planning period (2012 to 2035), and then dividing this
number of ERUs by the total ERUs projected at the 2035 planning year. All existing mains that were
contributed by developers, financed through improvement districts, or contributed by grants were
excluded from the analysis. All mains less than six inches were also excluded from the analysis since
these would not be able to provide capacity to new development. Water main replacements were also
31
excluded since these are not growth -related and should be paid for through rates. The total impact fee
related to existing transmission and distribution facilities is $6,416,138, or $1,288 per ERU. A summary
of these costs and this calculation is shown in Appendix G.
A second component of the transmission and distribution facility impact fee is the cost related to capital
improvement proiects (CIP) within the existing system that are necessary to accommodate future
growth. The total impact fee related to capital improvements to the existing system is $1,438,603, or
$289 per ERU. These costs are also summarized in Appendix G.
The two components of the transmission and distribution facilities impact fee are shown below with the
associated per-ERU impact fee.
Transmission and Distribution Recoupment Impact Fee: $ 6,416,138 ($1,288 / ERU)
Transmission and Distribution CIP Impact Fee: $ 1,438,603 ($ 289 / ERU)
Total Proiected Additional ERUs at 2035 Planning Year: 4,980
Impact Fee (Trans. & Dist.) per ERU: $ 1,577
Extensions to the Existing System
A third component of the transmission and distribution facility impact fee is the cost related to
extensions to the existing system that are necessary to accommodate future growth. The costs of these
extensions were calculated based on the pre-2011 Kalispell Growth Policy Update. The September 2012
Water Impact Fee Summary (Appendix H) provides a proportional cost of these improvements based on
the improvements that are shown within the 2011 Growth Policy annexation boundary. A summary of
these costs and this calculation is shown in the summary report. The total impact fee related to
extensions to the existing system to accommodate future growth is $17,583,247, or $3,531 per ERU.
These extension costs were provided for discussion by the Impact Fee Advisory Committee (IFAC).
These costs may be included in or excluded from the impact fee analysis based on recommendations
from the Impact Fee Advisory Committee and as set by City policy. The IFAC reviewed the extension
costs and recommended not including the cost in the 2013 water impact fee total.
ADMINISTRATIVE CHARGE
Under Montana statute, an impact fee may include a fee for the administration of the impact not to
exceed 5% of the impact fee collected. For the August 2010 Impact Fee Final Report, the City Council
guided staff to use the allowable administrative charge of 5% in the impact fee analysis. The same
guidance from the City Council is followed for this report, and therefore the water administrative charge
of $122 per ERU equal to 5% is included as a part of the collected water impact fee.
5.5.4 Debt Service Credits
The final step in calculating the water impact fees was to determine if a credit for payment on debt
service for the City's outstanding bonds. Based on current growth projections, the water impact fee will
collect sufficient funds to cover the debt service related to growth. For example, the average annual
debt service payments for the drinking water loans is $235,259, and the projected annual water impact
fee revenue is $516,000. No water debt service credits are necessary in this current impact fee analysis.
M
5.6 Net Allowable Water Impact Fees
Based on the sum of the component costs calculated above, the net allowable water impact fee can be
determined. "Net" refers to the "gross" impact fee, net of any debt service credits. "Allowable" refers
to concept that the calculated impact fee as shown in Table 5-4 is the City's cost -based impact fee. The
City, as a matter of policy, may charge any amount up to the allowable impact fee, but not over that
amount. Charging an amount greater than the allowable impact fee would not meet the nexus test of a
cost -based impact fee. A summary of the calculated net allowable water impact fee for the City is
shown in the Table 5-4.
Table 5-4
Allowable Water Impact Fees ($/ERU)
Descrlptlon Total
Source of Supply
$212
Pumping Facility
$239
Storage Facility
$417
Transmission and Distribution Mains
$1,577
Administrative Cost at 5%
$122
Total Impact Fee
$2,567
Based on the impact fee for 1 ERU, the charges for a residential customer with a %" meter and various
sized meters results in the following impact fees as shown in Table 5-5. One (1) ERU is defined as the
usage for a single family residential customer. Other meter sizes are then weighted based on their safe
operating capacity.
33
Table 5-5
Allowable Water System Impact Fees By Meter Size
Meter Size ERU Factors Charge
3/4"
1.0
$2,567
1"
2.5
$6,418
1-1/2"
5.0
$12,835
2"
8.0
$20,536
3"
16.0
$41,072
Over 3"
Calculated
12] - commercial customers wan residential type usage pay the residential tee.
In Table 5-5 the impact fees for the larger meter sizes are determined by multiplying the impact fee for
an ERU by the meter capacity weighting factors for up to 3 inches. The weighting factors are
determined based on the American Water Works Association (AWWA) safe operating capacities for the
type and size of meter. For meter sizes over 3 inches, the impact fee is calculated based on the actual
usage of the customer.
5.7 Key Financial Assumptions
In the development of the impact fees for the City's water system, a number of key assumptions were
utilized. These are as follows:
• The City's asset records were used to determine the existing assets and the value of those
assets.
• The interest rate used for calculating interest on existing assets is the 10-year Treasury Note
Rate as reported by the US Department of the Treasury at closing on November 30th of each
year.
• Up to fifteen years of interest is included in the cost of the existing improvements. The fifteen -
year average interest rate is currently 4.25%. The August 2010 Impact Fee Final Report used an
interest rate of 6.00%.
5.8 Implementation of the Impact Fees
The methodology used to calculate the impact fees takes into account the cost of money or interest
charges and inflation. Therefore, consultants recommend the City adjust the impact fees each year by
an escalation factor to reflect the cost of interest and inflation. The most frequently used source to
escalate impact fees is the ENR index which tracks changes in construction costs for municipal utility
projects. This method of escalating the City's impact fee should be used for no more than a two-year
period. After this time period, as required by Montana law, the City should update the charges based on
34
the actual cost of infrastructure and any new planned facilities that would be contained in an updated
master plan or capital improvement plan.
5.9 Summary
The water impact fees developed and presented in this report are based on the engineering design
criteria of the City's water system, the value of the existing assets, future capital improvements and
"generally accepted" ratemaking principles. Adoption of the proposed impact fees will provide multiple
benefits to the City and create equitable and cost -based charges for new customers connecting to the
City's water system.
35
References
1. September 2012 Water Impact Fee Summary
2. Impact Fees for Water and Wastewater system August 2010 (non -adopted impact fee report)
K%
Appendix A: ERU Projections
37
City of Kalispell
Water System Impact Fees
ERU Projections
Water Production
Peak Average'
Day Flow Day Flow Total Additional
(MGD) (MGD) ERUs ERUs
Year
2005
9.02
3.38
2006
9.93
3.72
2007
10.79
4.04
2008
10.01
3.75
2009
10.51
3.94
2010
9.09
3.40
8,204
2011
9.38
3.51
8,463
2012
9.56
3.58
8,632
169
2013
9.76
3.65
8,804
173
2014
9.95
3.73
8,981
176
2015
10.15
3.80
9,160
180
2016
10.35
3.88
9,343
183
2017
10.56
3.96
9,530
187
2018
10.77
4.03
9,721
191
2019
10.99
4.11
9,915
194
2020
11.21
4.20
10,114
198
2021
11.43
4.28
10,316
202
2022
11.66
4.37
10,522
206
2023
11.89
4.45
10,733
210
2024
12.13
4.54
10,947
215
2025
12.37
4.63
11,166
219
2026
12.62
4.73
11,389
223
2027
12.87
4.82
11,617
228
2028
13.13
4.92
11,850
232
2029
13.39
5.02
12,087
237
2030
13.66
5.12
12,328
242
2031
13.93
5.22
12,575
247
2032
14.21
5.32
12,826
251
2033
14.50
5.43
13,083
257
2034
14.79
5.54
13,345
262
2035
15.08
5.65
13,612
267
2036
15.38
5.76
13,884
272
M'?
Water Production
Peak' Average'
Day Flow Day Flow Total Additional
(MGD) (MGD) ERUs ERUs
Year
2037
15.69
5.88
14,161
278
2038
16.01
5.99
14,445
283
2039
16.33
6.11
14,734
289
2040
16.65
6.24
15,028
295
2041
16.99
6.36
15,329
301
2042
17.32
6.49
15,635
307
2043
17.67
6.62
15,948
313
2044
18.02
6.75
16,267
319
2045
18.39
6.89
16,592
325
2046
18.75
7.02
16,924
332
2047
19.13
7.16
17,263
338
2048
19.51
7.31
17,608
345
2049
19.90
7.45
17,960
352
2050
20.30
7.60
18,319
359
1 2005 through 2011 Actual Water Production, 2012 through 2050 are projected flows based on
growth rate by Kal. Planning Department
2 Average Day Water Production with Peaking Factor Applied
2.00% Growth Rate from Kalispell Planning Department (Growth Policy Update
05/26/2011)
1108 gallons per day per ERU (from 2.5 persons per dwelling unit X 166 gallons
pp/day X 2.67 peaking factor)
415 gallons per day per ERU actual without peaking factor (from 2.5 persons
per dwelling unit X 166 gallons pp/day)
166 gallons per day per capita without peaking factor
2.67 peaking factor
39
Appendix B: Capital Improvement Plan
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?33
Appendix C: Montana Code Annotated 2011
42
7-6-1601. Dclinitions-
Montana Code Annotated 2011
PI*40us SWfiW MCA Crilerts Pan Ct"ets Segoth Heap Ner smfiu�
pae- I of 2,
7-6-1601. Definitions. As used in this part, the follow 1 ngdefinitions. apply:
(1) (a) "Capital improvements' means improvements, land, and equipment with a useful life
of 10 years, or more that increase or improve the service capacity of a public facility.
(b)The term dots not include consumable supplies.
(2)'"Connection charge" means the actual cost of connecting a property to at public utility
system and is limited to the labor, materials, and overhead involved in malcing connections and
installing meters.
(3) "Development" means construction, renovation, or installation of a building or structure,
a change in use of a building or structure, or a change in the use of land when the construction,
itutallati-on, or other action creates additional demand for public facilities.
(4) "Governmental entity" means a county, city. ;crown, or consolidated government,
(5) (a) "Impact fee" means any charge imposed upon development by a govern. mentalentity
as part of the development approval process to fund the additional service capacity required by
the development from which it is collected. An impact fee may include a fee for the
a4ministration of the impact fee W to execod 5% of the total impact fee Colleded.
(b)The term does not include:
(i) a charge or fee to pay fear administration,, plan review, or inspection cosLs associated with
a permit required for development;
(ii) a connection charge;
(iii) any other fee authorized by law, including but not limited to user fees, special
improvement distriet assessm, ents, fees authorized under Title 7 for county, municipal, and
consolidated government sewer and water districts and systems, and costs of ongoing
maintenance; or
(iv) onsite or offsite improvements .necessary for new development to meet the safety, level
of service, and other minimum development vtandards that have been adopted by the
governmental entity.
(6) "Proportionate %harc" mcam that tx)nion of thccoslof capitalsystati improvements. that
reasonably relates to the service demands and needs or the project. A pimportionate share must
take into uccount the limitations providedin
(7) "Pubtic facilities" means:
(a) a water supply production, treatment, storage, or distribution facility;
(b) a wastewater collection, treatment, or disposal facility;
(c) a, transportation facility, including roads, streets, bridges, rights -of -way, traffic signals,
and landscaping;
(d) a storm water collection, retention, detention, trmorriew, or disposal 61cility ma flood
control facility;
(c) a police, cmergency medical rescue, or fire protection facility; and
(1) other facilities for which documentation is prepared as provided in 7-6- 1 that have
43
7-6-1601. Definitions,
Fags 2 of 2
been approved as part of an impact i'cc ordinance or resolution by:
(i) a two-thirds majority of the governing body of an incmporatcd city, town, or consolidated
local government; or
(ii) a unanimous vote of the lxxtrd of county commissioners of a county government.
History: En. Sec. 1. Ch. 299, L. 2005.
RwlwdtyMO%Wn*vL*sV$VUW 9"kos
MI
7-6-1602. Calculation of impact fees documentation required -- ordinance or re... Page 1 of
Montana Code Annotated 2011
Precious Section MCA Contents Part Contents Search Help Next Section
7-6-1602. +Calculation of impact fees -- documentation trequired-.. ordinance or
resolution -- requirements for impact fees. (1) For each public facility for which an impact
fee is imposed, the governmental entity shall prepare and approve a service area report.
(2) The service area report is a written analysis that must:
(a) describe existing conditions of the facility;
(b) establish level -of -service standards;
(c) forecast future additional needs for service for a defined period of time;
(d) identify capital improvements necessary to meet future needs for service;
(e) identify those capital improvements needed for continued operation and maintenance of
the facility;
(f) make a determination as to whether one service area or more than one service area is
necessary to establish a correlation between impact fees and benefits;
(g) make a determination as to whether one service area or more d= one service area for
transportation facilities is needed to establish a correlation between. impact fees and benefits;
(h) establish the methodology and time period over which the governmental entity will
assign the proportionate share of capital costs for expansion of the facility to provide service to
new development within each service area;
(i) establish the methodology that the governmental entity will use to exclude operations and
maintenance costs and correction of existing deficiencies from the impact fee;
6) establish the amount of the impact fee that will be imposed for each unit of increased
service demand; and
(k) have a component of the budget of the governmental entity that.
(i) schedules construction of public facility capital improvements to serve projected growth;
(ii) projects costs of the capital improvements;
(iii) allocates collected impact fees for construction of the capital improvements; and
(iv) covers at least a 5-year period and is reviewed and updated at least every 2 years.
(3) The service area report is a written analysis that must contain documentation of sources
and methodology used for purposes of subsection (2) and must document how each impact fee
meets the requirements of subsection (7)_
(4) The service area report that supports adoption and calculation of an impact fee must be
available to the public upon request.
(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.
(6) The ordinance or resolution adopting the impact fee must include a time schedule for
periodically updating the documentation required under subsection (2).
(7) An impact fee must meet the following requirements-
lia
7-6-1602. Calculation of impact fees _- documentation required -- ordinance or re... Page 2 of 2
(a) The amount of the impact fee must be reasonably related to and reasonably attributable to
the development's share of the cost of infrastructure improvements made necessary by the new
development.
(b) Tile 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:
(i) the need for public facilities capital improvements required to serve new development;
and
(ii) 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..
(c) Costs for correction of existing deficiencies in a public facility may not be included in the
impact fee.
(d) New development may not be held to a higher level of service than existing users unless
there is a mechanism in place for the existing users to make improvements to the existing
system to match the higher level of service.
(e) Impact fees may not include expenses for operations and maintenance of the facility.
History: En. Sec. 2, Ch. 299, L. 2005, amd. Sec:. 1, Ch. 358, L. 2009.
rvlmded by Montana tevisloove Services
ie
7-6-1603. Collection and expenditure of impact fees — refunds or credits -- mech... Page 1 of 2
Montana Code Annotated 2011
Preilous Sedion MCA Contents Fart Concerns Seench Help Next Section,
7-6-1603. C"ollection and expenditure of impact fees refunds or credits -- mechanism
for appeal required. (1) The collection and expenditure of impact fees must comply with this
part. The collection and expenditure of impact fees must be .reasonably related to the benefits
accruing to the development paying the impact fees. The ordinance or resolution adopted by the
governmental entity must include the following requirements:
(a) 'Upon collection, impact fees must be deposited in a special proprietary fund, which must
be invested with all interest accruing to the fund.
(b) A governmental entity may impose impact fees on behalf of local districts.
(c) If the impact fees are not collected or spent in accordance with the impact fee ordinance
or resolution or in accordance with 7-6 602, any impact fees that were collected must be
refunded to the person who owned the property at the time that the refund was due.
(2) All impact fees imposed pursuant to the authority granted in this part must be paid no
earlier than the date of issuance of a building permit if a building permit is required for the
development or no earlier than the time of wastewater or water service connection or well or
septic pennitting.
(3) A governmental entity may recoup costs of excess capacity in existing capital facilities,
when the excess capacity has been provided in anticipation of the needs of new development,
by requiring; impact fees for that portion of the facilities constructed for future users. The need
to recoup costs for excess capacity must have been documented pursuant to 7-6-1602 in a
manner that demonstrates the need for the excess capacity. This part does not prevent a
governmental entity from continuing to assess an impact fee that recoups costs for excess
capacity in an existing facility. The impact fees imposed to recoup the costs to provide the
excess capacity must be based on the governmental entity's actual cost of acquiring,
constructing, ter upgrading the facility and must be no more than a proportionate share of the
costs to provide the excess capacity.
(4) Governmental entities may accept the dedication of land or the construction of public
facilities in lieu of payment of impact fees if.
(a) the need for the dedication or construction is clearly documented pursuant to 7-6-1602.
(b) the 'land proposed for dedication for the public facilities to be constructed is determined
to be appropriate for the proposed use by the governmental entity;
(c) formulas or procedures for determining the worth of proposed dedications or
constructions are established as part of the impact fee ordinance or resolution; and
(d) a means to establish credits against future impact fee revenue has been created as part of
the adapting ordinance or resolution if the dedication of land or construction of public facilities
is of worth in excess of the impact fee due from an individual development.
(5) Impact fees may not be imposed for remodeling, rehabilitation, or other improvements to
an existing structure or for rebuilding a damaged structure unless there is an increase in units
that increase service demand as described in 7--6-1602(2)(j). If impact fees arc imposed for
47
7-6-1603. Collection and expenditure of impact fees -- refunds or credits -- mech... Page 2 of 2
remodeling, rehabilitation, or other improvements to an existing structure or use, only the net
increase between the old and new demand may be imposed.
(6) This part does not prevent a governmental entity from granting refunds or credits:
(a) that it considers appropriate and that are consistent with the provisions of 7-6-1602 and
this chapter; or
(b) in accordance with a voluntary agreement, consistent with the provisions of 7-6-1 bt)2 and
this chapter, between the governmental entity and the individual or entity being assessed the
impact fees.
(7) An impact fee represents a fee for service payable by all users creating additional
demand on the facility.
(8) An impact fee ordinance or resolution must include a mechanism whereby a person
charged an impact fee may appeal the charge if the person believes an error has been made.
History: En, Sec. 3, Ch. 299, L. 2005; amd. Sec. 2, Ch. 358, L. 2009.
Pimded by Montane Legislative Services
7-6-1604. Impact fee advisory committee.
Montana Code Annotated 2011
Pievou.s Section MCA Contents Part Contents Search Help Next Section
Page 1 of 1
7-6-1604. Impact fee advisory committee. (1) A governmental entity that intends to
propose an impact fee ordinance or resolution shall establish an impact fee advisory committee.
(2) An impact fee advisory committee must include at least one representative of the
development community and one certified public accountant. The committee shall review and
monitor the process of calculating, assessing„ and spending impact fees.
(3) The impact fee advisory committee shall serve in an advisory capacity to the governing
body of the governmental entity.
History: En. Sec. 4, Ch. 299, L. 2005.
Povided by Moptans Legislative 4 eructs
.•
Appendix D: Source of Supply
50
Source of Supply
Year
Equipment List
Original
Cost
Cost
2012
2002
Source Water Delineation Study
$ 94,868
$
169,894
2002
Noffsinger Springs Chlorine Room
10,398
18,621
Total Existing Source
$ 105,266
$
188,515
Existing Wells
1913
Lawrence Park Well (Noffsinger Spring)
$ 9,835
$
18,362
1956
Depot Park Well
38,306
$
71,517
1966
Armory Well
34,251
$
63,946
1979
Buffalo Hill Well
94,577
$
176,574
1982
Buffalo Hill Well to Res
11,042
$
20,615
1956
Northridge Well Site
10
$
19
1997
Northside Water Wells (Grandview 1 and 2)
306,028
$
571,350
2007
Old School Water Well (Wells 1 and 2)
90,106
$
110,952
2009
West View Water Project
853,355
$
966,847
2011
Grosswieler Well Development
92,626
$
96,563
2011
Silverbrook Well (by Developer)
-
-
Total Existing Wells
Future Wells
2012-2023
Total Future
Wells
Total Wells
2035 ERUs
Grosswieller Water Supply
Source of Supply Impact Fee per ERU
51
$1,530,136 $ 2,096,744
$ 575,000 $ 594,000
$ 575,000 $ 594,000
$ 2,879,260
13,612
$ 211.53
Appendix E: Pumping Plant Facility
52
Pumping Plant Facility
Year
Equipment List
Original Cost
Cost 2012
Existing Pumping Plant
1913
Lawrence Park Pump & Springhouse
$ 112,024
$ 209,147
1966
Lawrence Park Pump # 1 & Motor
4,025
9,646
1964
Lawrence Park Pump # 2 & Motor
3,302
7,913
1959
Lawrence Park Pump # 3 & Motor
7,785
18,657
1971
Lawrence Park Chlorine Injector
1,073
2,572
1965
Lawrence Park Furnace
2,129
5,102
1987
L. Park-2 Cylinder Chlorine Scale
3,820
9,155
1951
Depot Park Pump house
3,000
7,190
1951
Depot Park Pump house Elec. & meter
6,780
16,249
2000
Chlorine Room Addition
7,550
15,192
1951
Depot Pump # 1
4,644
11,130
1959
Buffalo Hill Booster Station
2,150
5,153
1956
Buffalo Hill Booster Motor
4,870
11,671
1965
Armory Well Pump house
2,744
6,576
2000
Chlorine Room Addition
7,839
15,774
1965
Armory Pump/ Motor
7,293
17,478
1965
Armory Well Flow Meter
1,972
4,726
1975
Armory Well Muesco Valve
4,995
11,971
1967
Telemetry System
30,140
72,232
1974
Buffalo Hill Booster Station
22,678
54,349
1999
Buffalo Hill Fuel Tank
8,117
17,313
1986
B.H. Pressure Transducer System
5,330
12,774
1979
B.H. Well Turbine Pump
107,930
258,661
1985
Buffalo Hill Flow meter
1,979
4,743
1990
Remodel Lawrence Park Pump house
37,130
88,984
1991
Buffalo Hill Flow meter
2,467
5,912
1992
Buffalo Hill Telemetry System
60,276
144,455
1999
Telemetry System Upgrade
3,945
8,414
1998
Northside Pump house and Telemetry
501,757
1,134,424
2001
Noffsinger/Chlorine Room
6,249
11,862
2001
2002 Noffsinger Upgrade
4,148
7,874
2002
Standby Power Upgrade
249,924
447,576
2005
Wtr Supply Electrical Safety Syst Upgrade
346,497
521,003
2008
Grandview System Improvements
33,105
41,794
2011
Telemetry System wide upgrades
31,286
33,163
Total Existing Pumping Plant
$1,640,953
$ 3,250,836
Total ERUs 2035
13,612
Pumping Plant Impact Fee per ERU
$ 238.83
53
Appendix F: Storage
54
Storage
Original Cost
Year Equipment List Cost 2012
Existing Storage
Plant
1958
Buffalo Hill Standpipe
$ 48,117
$
89,834
1914
Reservoir # 1
24,031
$
44,866
1952
Reservoir # 2
73,691
$
137,580
1957
Reservoir Covers
97,577
$
182,175
1965
Buffalo Hill Elevated Storage Tank
111,970
$
209,046
1982
Buffalo Hill to Reservoir pipe
11,042
$
20,615
2001
Water Reservoir Roof
420,128
$
664,077
1914
Reservoir# 1 Land
715
$
1,335
1935
Noffsinger Land
1,500
$
2,800
1939
Monteath Land
650
$
1,214
1952
Reservoir # 2 Land
1
$
2
2009
Sheepherder's Hill
3,812,072
$
4,319,060
Total Existing Storage Plant
$ 4,601,494
$
5,672,604
Future Storage Plant
beyond 2035 North Kalispell Reservioir 1
beyond 2035 West Kalispell Reservior 2 3,277,5 3,796,4
beyond 2035 South Kalispell Reservior 33,277,590
Total Future Storage Plant -$ 9 929,10 11,498,31-7
Total Storage Plant $ 5,672,604
Total ERUs 2035 13,612
Distribution Storage Plant Impact Fee per ERU $ 416.75
- See Table 5-16 City of Kalispell Water Facility Plan Update - 2008
2 - See Table 5-18 City of Kalispell Water FacilityPlan Update - 2008
3 - See Table 5-20 City of Kalispell Water FacilityPlan Update - 2008
55
Appendix G: Transmission and Distribution
0
Percent trnpaGL
Original Cost Impact Fee Fee
Year Equipment List Cost 2012 Related Cligible"
Existing TransnyissionlDistribuffan Plant
1196T
-1200 8 inch
S 13,455
S 25„120
0.0% $
1911
3180 20 inch
10,8311
t 20134
36.13% $
7,403
loll
101 12 inch
251
S 469
36.6% $
171
1024
4204 18 Inch
30.224
S WAS
36.6% $
20,644
1924
17TO 16 inch
11,349
S 21,188
36,6% $
7,752
1924
19599 8 inch
50,136
S 93,803
36.6% $
34,244
1925
2040 12 inch
11.016
S 20,567
36,6% $
7,524
1926
11 M 0 inch
21,874
S 40,838
0.0% $
-
I D28
294 12 inch
1,278
S 2,388
36.6% $
873
1930
13169 6 inch
21,428
S 40.005
0.0% S
1932
1311 12 inch
51158
S 9,630
36.6% $
3.523
1935
10853 6 inch
1e,462
S 34,468
010% $
-
1938
1988 8 inch
12,786
S 23.871
30.6% S
8,733
1938
15678 6 Inch
31.309
5 58,453
0.0 */ft $
-
1948
11019 6 inch
1667
8 6,846
0.0% $
194E
3145 6 inch
11,624
S 21,702
0.0% $
-
1940
3290 8 inch
15,573
S 20,076
36.6% $
10,637
t 950
1452 6 inch
5A47
S 10,169
010% $
-
1952
630 20 inch
10.109
S 18,873
36.6%. $
6,905
1952
969 18 inch
14.578
S 27,217
36.6% $
9,967
1953
126 12 Inch
1,476
S 2,755
36.6% $
1.008
1955
6274 6 inch
29,235
S 54,581
0.0% $
-
1956
12M 8 inch
7M3
S 14.904
38.6% $
5.453
145 a
1884 6 inch
10,102
S 18,860
0.0% S
-
1959
5245 8 OvJi
35.004
S 69,067
36.69' $
25,26E
1900
2122 6 inch
12,006
S 22,415
0.0% $
-
1961
1098 12 Inch
17,9"
a 33,519
36.6% S
12,270
1961
1575 12 inch
26,910
S 50,241
36.6% $
18,380
t962
4720 8 inch
35,749
S 66,743
36.6% $
24,417
1962
5871 6 inch
34.739
S 64 857
010% $
1966
3225 12 In&
55,101
S 102,873
36.6% $
37,635
1965
2451 6 inch
14,956
5 27,923
0.0% $
1906
544 8 Inch
249.924
S 466,604
36.6".•1, $
170,704
1967
1060 12 In&
133,249
S 248,774
0,0% $
-
1907
500 8 inch
I58,707
S. 296.304
36.6% S
108,401
t 968
11 ST 12 bndi
1,192,190
S 2.225,801
36.6% $
814,296
1968
2705 8 indi
80,000
S t49,359
36.6% $
54,642
1968
1059 6 inch
133,249
S 248,774
13-01y. $
1969
1830 6 Inch
18,588
S 34,704,
0.0% $
1969
3724 8 inch
24,327
S 45,418
36.6% $
16,610
1969
70216 inch
46,023
5 64.057
0.0% $
1070
1070 8 inch
118,245
S 34,083
0.0% $
-
1970
11636 8 inch
13.517
$ 25,236
36.6% $
9,232
1970
3728 6 Inch
24,079
S 44,956
0.0% $
1971
18666 inch
1%266
$ 24,767
0-0% S
1972
AirpuTt 8 Inch
40,418
S 75.4160
36.6% S
27,607
1972
85810 inch
10,385
S 19,389
36.6% 5
7,093
1972
1671) 8 inch
9,419
$ 17,585
30.6% S
6,433
1972
2122 6 inch
15,212
S 28,401
0.01% S
-
1973
5674 10 inch
120.032
S 241,591
386% S
8A,747
1973
2318 14 inch
49,763
$ 92,907
36.6% $
33,989
1973
1769 12 inch
36,4336
$ 06,399
30-6% S
25,023
1973
159212 inch
31,899
$ 59,555
306% S
21,788
1973
31610 inch
3. DTO
S 7,420
36.6% S
2,718
1973
217 8 inch
2,064
S 3,853
366% $
1,410
1973
5930 6 inch
64,3117
S 101,409
36.6% $
37,100
1973
50 8 inch
457
5 853
36.6% $
312
1073
2589 6 inch
18,627
5 34.590
0.0% $
-
1973
7436 inch
5,523
S 10,311
0.0% $
1973
178 6 inch
1.273
S 2,377
0.0% $
1974
300712 inch
78,563
G 146,676
0.0% S
19T5
4334 6 Inch
48.168
6 89.966
0.0% S
-
1076
3097 t2 inch
103,550
S 193,343
36.6% S
70,733
1976
414 12 inch
410
5 765
366.6% $
280
1976
2196 12 Inch
10.882
$ 20.317
36A% $
7,433
1976
3682 8 mch
55.845
S 104,262
36.614 S
38,144
1976
845 6 inch
10,012
t 18,692
O.W.I. 5
-
1971
922 6 Inch
12 400
S 23,151
0.0% S
..
1981
10,8110 Stryei Main
79.872
3 149,120
36.6% S
54.556
1962
S10 328
24,6446
S 46,014
0 0% S
1963
Main Soren!
150.540
3 281,05,8
36 6% S
102.623
1983
dth Avenue Water Mla,n
4.216
S 7,871
36.6% S
2„880
1983
SID '326
4.Sit
$ 8,422
0 0191 5
-
1463
370 8 mch
I t tot
S 20.725
3ti.14% S
7.1502
1983
230 8 m-h
6.873
S 12,832
36.6'% S
4.094
1a83
12512 inch
1,475
S 2,754
36.6% S
1,007
1984
S10 SM Korniray Ae6ton
3, 781
S 7 ,0511
0 0% S
-
1984
350 6 inch
19.566
$ 36,5261
0 0% 5
1984
722 8 inch
32,507
$ 60,(1".
OD% 5
-
1964
1375 6 inch
14,7212
S 27,4BG
0 0% S
-
1964
220 12 4wh
1,980
$ 3,097
386% S
1,352
1964
2350 12 inch
43.968
S 52,068
162% S
13.3A4
1264
650 12 41ch
6 455
3: 12.051
0 0% S
-
1964
24012etch
8.M4
S 16,111
36.6% S
5,528
1984
360 6 inch
5,520
S 10,306
0.0% S
-
1984
25206mch
17,317
S 32,331
0.0% S
-
1984
JD 5108 Brackboo
43.350
S 80,934
3156% 5
2%(M
1985
3050 6 mch
37.708
S 70,400
0 0% S
1985
1080 8 inch
32,400
S 60.490
30 6% S
22130
1985
385amr,11
11,$50
S 21,564
Ir,Oi"A, S
7.SR5+
1985
40015mch
12,000
3 22,404
30.6% S
8,196
1985
1250 8 inch
37,S00
S 70.012
36.6% S
25,613
1985
320 8 me"
9.600
S 17,923
3(i ti?:6 S
6,557
1985
360 8,nch
10,000
S 20.163
36.8% S
7,377
19B0
22706inch
99,300
S 185.392
8.8% S
16,278
1984
010 a 11tc11
15,300
S 28,565
36.6% S
10,450
1087
5197 12 imh
302,513
S 564,ISY
23IM, 5
132.063
1987,
157 B.nth
9.486
S 17,710
36.8% S
9.479
1987
241 S meh
16.121
S 28.231
0.0'h, S
-
1967
400 6 mch
17,158
S 32,034
36.6% S
11,7t9
1987
300 Vnch
9.006
5 16,818
35.6% S
6,1S3
1987
457 8 mch
15,084
5, 28,152
3.3%, S
927
1967
272 B InUt
9,881
S 16.448
16.3% S
3,374
1987
6008inch
18,070
3 33,163
36.8% S
1Z3,46
1987
164012inch
70,434
$ 131,499
38.5%t S
48,108
1987
1454 12. inch
51,759
$ 96,933
36.6% S
35..353
1987
W 12,nrh
17,679
S 33,00E
36.6% S
12,075
1988
599 8 inch
18,145
S 33.876
36.6% S
12.393
-is"
$657 12 inch
68.322
S 27.55E
366% S
48,66E
1989
SW Kai Protect
257,627
$ 4fl1.3i1#
258% S
123,272
1989
68012,nch
24.318
3 45,401
36.6914 S
10,610
1980
300 8 inch
8..516
S 15,899
36.8% S
5,817
1990
2701 12 inch
162;4189
S :K]3,'738
36•.81A, S
111,121
1901
2619 12 inch
197,416
S 308.573
36.6% S
134;840
1991
400 13 inch
16,000
3 29,872
0 0% S
-
1991
430 8 inch
18.700
14, 34,913
36.6'A, S
t2,773
1991
700 8 ,ncit
30.120
S 56,234
36.6% S
20,.573
1991
366 8 inch
35.605
S 66,474
21.8% S
18.483
1002
Y+pv-1 Vac 80
13,652
S 25,4M
36 6% S
9 375
1992
113 8 inch
21.648
S 40,417
3 13% S
t4,786
1992
dth St W
06,480
$ 124.117
36.6% S
45.408
1992
141h St and 51h Ave
65 709
S 122,678
36 6% S
44,881
199.3
Cat 4268 QBCINhoo
46 932
4 87,621
36 8% S
32,05E
1993
Vdinchvard Upnf2a
15.000
S 28,005
38.6% S
10,245
1994
LN.8000 TarwOem
58. to8
$ 108,487
36 6% S
39,689
VIM
Gresetno'ler Up�ni7h
15,90:5
S 29,1101
38I, % 3
1i3,FW
1994
Kelly Road Upei2o
14.023
S. 26,181
346% S
9,578
1994
SO, Ave and Gat St
34,605
. 64,607
36-8% S
23,636
1995
Hydraulic ntlonnrt sysanm
0,700
S 12,109
36 6%, S
4,576
1995
Lawrence P att,
39.525
S 08, 192
30 6% S
24,948
19%
L3tah Street
19.521
S 36,445
36 6% S
13.333
I995
Ave of At1WZnl Avs
24.923
$ 46,531
36139E S
17,023
1996
E Anmma
15.750
S 29A05
36S
10,758
1997
Tapping Mach ne
12..320
S 23,001
3 AI% S
8,415
1997
Noodtand
169.225
S 315.941
36 6% S
1 15.585
11837
L,hatvplTvro Me
314.028
S 587.400
X 0% S
214,899
19A7
14th SI
28..798
S 53.766
36,6% S
19,070
1997
'Ncs.I.K'yorriog
68.130
S 164.637
38.6°o S
60,14a
1907
Backhoe JacMhnmmw
12.000
S 22,404
36.43% S
8,190
1998
Buffa&l Com
145,101
S 260,037
38.6 % S
95,133
1998
Telemetry Upgrade
8 438
S 15,111
36.64E S
5.528
01
Q0
1990
Sth Ave MN Watcx
91,657
S 157.454
366*16 S
57,W4
2000
John Deere Loader
34,490
$ 56,834
364% S
20,792
2001
Cat 430D aackftcm
56,361
$ 92,249
36.0% $
33,749
2001
MNSVCntr.Surest
622,454.
S 968.078
3e.6% $
354,165
2001
Wii:,cww Gian and'Woodlana
17,525
S 27,701
36.6% S
10,134
2002
Mowe 1"est Nandi
12.737
S 19,312
36,6% $
7,065
2002
Mor4lan Rd to 3 Mile Cn"rna
155.707
S 240,034
7,3% S
17,667
2002
Far tTV Tatan
03.000
S 141,00a
36.6% $
51,587
2004
NoMern Lights Blvd -Water Maln :natollatn r
2AI ,A59
S 3103.225
.36.6% S
143.859
2004
Wasl;tngtotl St. btwn tth 8. 8th
26,585
S 37,089
3e.6`L S
13. 559
200.5
trttKrroil Rand Roller
13,572
S 18.153
38.8% $
(,'045
2005
Masers - New Services
205,703
S- 275.279
0.0% $
2005
US HvhAvoy 93 South Utilities
1,904,005
S 2.540,21-
33,.3% S
8-ci,7rJ8
2006
West Vtevr lJos're
12,407
S 15,027
36.6% S
6,627
2007
Sterlxv Tandem
94,387
S 110.223
36.6% $
42,520
2007
Meridian Road INater Main
203.561
3 250,654
36.6% S
91, 700
2007
Westwood Upa,re
28.923
S 35,014
36.6% S
13.049
2007
Lone Pine Meadaas Upsire
55.275
S 71,757
36.6% $
20,252
2006
Spr41g Prairie U1lstae
18,187
$ 21,482
36.6% 6
7.869
20M
Floliday Inn Upsere
0.072
$ 7.1 T2
36.6 Rn $
2,624
2008
Gardner Extension Ups7.e
32.631
$ 30,642
3616`14 $
14,100
2008
Reserve Loop Extensxio
16,592
S 18,416
36.8% S
6,738
2008
Huiknn Ranch Phase 1 Upsaa
12,50ft
S 14,784
38.6% S
5.401
2008
Buffalo Hilfa Water Main Replacement Proic
100,275
$ 118.440
38-6% S
43.330
2009
Bobcat
52.881
S 59,914
7.3% S
4,384
2009
Trait K,ng Tilt Deck TraBktrr
20,895
S 23,674
3e.6% $
8.561
2009
Upper Zane Production
953,355
$ 966.847
36.6% S
353.715
2010
03 Bypass
100,724
3 109,467
30.8% S
40.048
2010
1 st Ave E 8 Idaho St - 140' 12 inch
32,385
$ 36.196
36.6% $
12.876
2010
Parivaay Dr - 36V :8 inch
C,9,818
$ 75,879
36.6% S
27, Tt10
201 t
11 St ERllh Ave E to Woodland-1.0168 nr
107,942
S 175,000
36.6% S
O4,062
2011
'Cat 6ackhoo
106,232
S 110,747
36,6% S
40,516
201,
f1wpon Rd 8 Merganser - 22W 8 inch
7,651
$ 7,976
36.6% S
2,918
2011
C>M Cotpor2wn S'oulomenl.
313,407
$ 313.467
100.0% S
313,467
Total Existing 7}ansntisaiorr and Watnburion Plant S
12,592,251
S 20,106,005
S
6,410.138
New ERUs 2012 to 2036
4. 980
Existing Trans missiordDistri
Plant Impact Fee par ERU
S.
t,288.46
Furore Trans misston�(Natrlbubon
Plant -COP Projects '
W-EX-B
Conway Drivn and Highway 03 Loop S
191,558
$ 207,417
100.0%, S
207,417
W-EX-I1<1
Misr, Contract Main Updae
875,000
675,000
100,0% $
875,000
W-EX-123
PAM- "... -Ntvv Services
356,186
356186
100.0°a' $
356,196
Total Future TransmissionlUistributlon Plant- COP Projects S
1.422,744
S 1,433,663
$
1.438.603
Now ERUs 2012 W 2035'
4,960
Future TrnnamissloniDiatribution Plant CIP Projects Impact Fee per ERU
S
2ea.64
Future TransmisslorvTNtirdbution Plant • Extension Prajer. is J
2011 AnnexaOon Boundary
2012.2035 East Whitefish R.war !!Atenslan5 13,544,300
15,684,871
0% -
2012-2035 Norh.Kalispell! Extensions 23.367,000
27,059,973
32% 8639,131
2012 2035 West Stillwater River Extensions 11,910.800
13,340,415
1S% 19811AM3
2012-2035 West Kalispell Extensions 40.114,200
46.453,938
7% 3.436.837
2012-7035 East Katlspell Exlensiorrn 1,392,000
1,611.995
15M 970.335
2012-2035 So wln Kollspett Extensions _ 6,466,100
__ 7 d75.27a
34% ).640.461
Toter Farturw Transmis.sioWDist0bution Plant Extension Projects S 96,392,400
S 111,626,470
$ 17.583,247
Ne- CRUs 2012 to 2035
4.380
Future Trans.missionODistnbution Plant Impact Fee par ERU
S _ 3,530-99
Total TranamissionlDIsIrlbutton Plant impact Fee par ERU
$ 5.10e 3535
1. AUncMMn for oxwoV prgttacr: bnsert , vn rxrw F-RUs from 2012 to 2035 divided by lotof ERUs in 2035.
Soma PkMW is OxCNrded Or reduced Dcrsr+d On the arnoutlt born devofallar cxxWibulbns and or the onloui,4 winch twos ftr
re"comort
2 - Sea Cfry of KaJPspeo Water Capital frrtpravemsnt Plan (Appendix F) for project defaixs
3- As-aurno3 rnat COP pft4isci3;r0vine aMvx:o COPSCO rhrocgih planning hOrIZOn.
4. Sao Chopler 5 of Ure Wafer Facility Plan Update - 2008 and ApptnWix F of tt#s report
Projects are adjused to 2012 doAor's "MUM 2007 plan values based on cfranges ir: flea ENR Construction Covet index"
Appendix H: September 2012 Water Impact Fee Update
Summary