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Kalispell Stormwater Impact Fee Final Report 11-30-17FINAL REPORT City of Kalispell Stormwater Impact Fee Study November 2017 F�� F)R November 30, 2017 Ms. Susie Turner, P.E. Public Works Director City of Kalispell 201 First Avenue East Kalispell, MT 59901 Subject: Final Report—Stormwater Impact Fee Report Dear Ms. Turner: Enclosed please find HDR Engineering, Inc.'s (HDR) final report regarding the City of Kalispell's (City) stormwater impact fees. The development of this report is intended to provide to the City the basis to establish cost -based impact fees. The adoption of final impact fees is a policy decision of the City Council. As a part of this study, HDR and the City worked with the City's advisory committee and the development community in an open and positive manner. In 2006, HDR developed the City's stormwater impact fees and then, in 2010, updated that analysis. This fee study reflects the current City Council policy positions (e.g., population growth, annexation policy), along with the current stormwater capital improvement plan. This study reflects the general methodology and approach used in those prior studies, updated to reflect the City's current data, information and growth policies. This report has been prepared using "generally accepted" financial, rate, and engineering principles. The City's financial, planning, and engineering data were the primary sources for much of the information contained in this report. HDR would recommend that the City have the fees, developed as a part of this study, reviewed by their legal counsel to determine compliance with Montana State law. HDR appreciates the opportunity to assist the City in this matter. Thank you for the assistance you provided to us during the development of this study. Sincerely yours, HDR Engineering, Inc. 1�9 J "111" Tom Gould Vice President/HDR Business Leader for Finance and Rates hdrinc.com 700 SW Higgins Avenue, Suite 200, Missoula, MT 59803-1489 (406)532-2200 Table of Contents Executive Summary Introduction.................................................................................................................. 1 Present Stormwater Impact Fee....................................................................................... 1 Overview of the City's Stormwater System.................................................................... 2 Calculation of the City's Stormwater Impact Fee........................................................... 2 Net Allowable Stormwater Impact Fee.......................................................................... 4 Annual Adjustments to the Stormwater Impact Fee ...................................................... 6 Stormwater Impact Fee Credits (Offsets)....................................................................... 6 Advisory Committee Review.......................................................................................... 6 Consultant's Recommendations.................................................................................... 7 Summary....................................................................................................................... 7 1 Introduction and Overview 1.1 Introduction........................................................................................................ 8 1.2 Overview of the Study......................................................................................... 8 1.3 Disclaimer............................................................................................................9 1.4 Summary.............................................................................................................9 2 Overview of Impact Fees 2.1 Introduction...................................................................................................... 10 2.2 Defining Impact Fees..................................................................................................10 2.3 Economic Theory and Impact Fees.................................................................... 10 2.4 Impact Fee Criteria............................................................................................ 11 2.5 Overview of the Impact Fee Methodology......................................................... 13 2.6 Summary......................................................................................................................14 3 Legal Considerations in Establishing Impact Fees 3.1 Introduction...................................................................................................... 15 3.2 Requirements Under Montana State Law .......................................................... 15 3.3 Summary...........................................................................................................17 4 Development of the City's Stormwater Impact Fee 4.1 Introduction...................................................................................................... 18 4.2 Overview of the City's Stormwater System........................................................ 18 4.3 Present Stormwater Impact Fees....................................................................... 19 4.4 Calculation of the City's Stormwater Impact Fees .............................................. 20 4.4.1 System Planning Criteria....................................................................... 20 4.4.2 Equivalent Residential Units................................................................. 21 4.4.3 Calculation of the Stormwater Impact Fees .......................................... 21 4.5 Net Allowable Stormwater Impact Fee.............................................................. 23 FN Table of Contents City of Kalispell - Stormwater Impact Fee Report 4.6 Annual Adjustments to the Stormwater Impact Fee .......................................... 25 4.7 Stormwater Impact Fee Credits (Offsets)........................................................... 25 4.8 Key Assumptions............................................................................................... 25 4.9 Consultant's Recommendations........................................................................ 26 4.10 Advisory Committee Review.............................................................................. 26 4.11 Summary...........................................................................................................26 Technical Appendix A — Stormwater Impact Fees Technical Appendix B — Montana Code — Impact Fees Technical Appendix C — Adopted Ordinance FN Development of the Stormwater Impact fees ii City of Kalispell - Stormwater Impact Fee Report '. Executive Summary Introduction The purpose of stormwater impact fees is to bring equity between existing customers and new customers connecting to the City's stormwater utility system. The objective of an impact fee study is to calculate cost -based fees for new customers connecting to, or requesting additional capacity to, the City's stormwater system. By establishing cost -based impact fees, the City attempts to have "growth pay for growth" and existing utility customers will, for the most part, be sheltered from the financial impacts of growth. HDR was retained by City to review and update the City's stormwater impact fees. The City's impact fees need to be reviewed and updated every five years as required under Montana Code 7-6-1601 to 7-6-1604, the Montana impact fee legislation. In addition the City growth policy has changed and annexation has occurred since the adoption of the 2008 Stormwater Facility Plan Update. Given these changes and the legal requirements, it is prudent for the City to review and update their stormwater impact fees. Present Stormwater Impact Fee The City currently has a stormwater impact fee and is based on the 2006 impact fee study. The impact fee utilizes an equivalent residential unit approach. Presented below in Table ES-1 is an overview of the present stormwater impact fee. Impact Fee Per Equivalent Residential Unit[11 Type of Use # of ERUs(l) Impact Fee Single -Family 1.0 $1,121 Duplex or Multi -Family .75 ERUs Per Living Unit $841/Unit Calculated on Impervious Area; Commercial 2,400 sq. ft./ERU or a maximum of $1,121 / 2,400 s.f. six (6) ERU's per acre if meeting up to current detention standards $6,726/acre [1] - Streets and highways are exempt from impact fees. Stormwater fees for single-family, duplex, and multifamily are for each additional ERU or percentage of ERU. Commercial is calculated based on impervious area at 2,400 square foot per ERU or a maximum of six ERU's per acre if meeting current detention standards. FN Executive Summary 1 City of Kalispell - Stormwater Impact Fee Report Apartments are calculated as commercial. The use of an ERU/impervious surface approach is a generally accepted and common method for determining stormwater impact fees for specific parcels. Streets and highways are exempt from impact fees. Overview of the City's Stormwater System The City has a stormwater utility and it is responsible for managing stormwater run-off within its boundaries. To provide a better understanding of the complexity of this utility, along with its regulatory requirements and challenges, the following brief overview is provided. The City is legally required to manage both the quantity and the quality of the City's stormwater run-off. Stormwater runoff can collect pollutants from urbanized areas, which can add to or create problems in local lakes and streams. Federal and state regulations require action by the City of Kalispell to minimize pollution carried by stormwater runoff. At a federal level, the City is subject to the federal regulations related to the National Pollutant Discharge Elimination System (NPDES). The City is required to implement a Stormwater Management Program (SWMP) which consists of Best Management Practices (BMPs), involving six minimum control measures, to control pollutants in stormwater to the maximum extent practical. However, the City does require certain infrastructure (facilities) to manage stormwater quantity. These facilities are needed for purposes of conveyance, detention and discharge. More specifically, these facilities can include ponds, pipes, catch basins, ditches, curbs and gutters. While management of stormwater is related to quantity, it is also related to water quality. Finally, it is important to note that growth, in and of itself, creates additional impacts and requires additional resources. This is true for all aspects of the City's services, and holds true for the stormwater utility and its facilities. To determine the City's facility requirements for the stormwater utility, a Stormwater Facility Plan is developed. In summary, the City's approach to stormwater quantity management is two fold; implementation of measures to manage runoff from new development to historic levels, and provide adequate facilities downstream to convey, detain and discharge stormwater. Under this approach, new development will typically make on -site improvements to manage runoff, but also benefit from downstream facilities. It is the investment in "downstream facilities" which are the basis for the City's impact fees. The City's 2008 Stormwater Facility Plan Update also provides, in part, the basis for the development of the City's cost -based stormwater impact fees. Calculation of the City's Stormwater Impact Fees The process of calculating impact fees is based upon a four -step process. In summary form, these steps are as follows: • Determination of system planning criteria • Determination of Equivalent Residential Units (ERUs) • Calculation of the impact fee for system component costs FN Development of the Stormwater Impact fees 2 City of Kalispell - Stormwater Impact Fee Report • Determination of any impact fee credits System Planning Criteria - System planning criteria are used to establish the capacity needs of an equivalent residential unit. The City's 2008 Stormwater Facility Plan Update did not directly specify the number of ERUs to be served at the end of the planning period. The Facility Plan Update focused on population served and area (acres). Given that limitation of the study, the impact fee study needed to determine the current ERUs being served and the potential ERUs at buildout. The existing 2015 ERUs shown in this report were based on planning policy, City annexation maps, and dwelling land use designations per zoning. At the present time, the total acres included within the planning area is 4,971 acres which equates to 21,298 ERUs. A more detailed discussion of the determination of the total current ERUs can be found in subsection 4.4.1. Residential Units - The planning horizon of this analysis was from 2015 to 2035. Based on Kalispell growth policy, a 2% annual growth rate was assumed for the planning period. A summary of the ERUs for 2015 and 2035 are presented below in Table ES-2. Description Calculated ERUs Equivalent Residential Units-2015 Equivalent Residential Units - 2035 Additional Units from 2015 to 2035 21,298 31,648 10,350 Calculation of the Stormwater Impact Fee - The next step of the analysis is to review existing services and planned future improvements and determine the impact fee for each component. For the stormwater system, given the limited assets, all assets were included in a single group. These assets were subsequently increased from their original cost to current cost based on the Engineering News Record (ENR) Construction Cost Index (CCI) for the 20-City average. This amount was reduced by the percent that was contributed by developers or grants. Those stormwater improvements that were funded through tax increment financing (TIF), grants and special improvement districts (SID) were also excluded from the analysis. The value of the existing assets (net of contributions, grants, etc.) was divided by the total ERUs at buildout (31,648). The City also has future planned capital projects which are contained in the Stormwater Facility Plan. These future capital projects were reviewed by staff along with incorporating the City's current working capital improvement plan for a 2035 time period horizon of the planning study. Total Capital Improvement Projects (CIP) from 2016 to 2035 amounted to $18.9 million. Of this amount, the total committed CIP, eligible for impact fees was $9.5 million. This total amount is primarily related to two extension projects; Conveyance Outlet Pipe (COP) 124 and COP 118. These two projects are growth dependent. Project COP 124 (Pipe conveyance from detention ORExecutive Summary 3 City of Kalispell - Stormwater Impact Fee Report pond 124 in West Stillwater Drainage) for $3.4 million and COP 118 (Pipe conveyance from detention pond 118 to Stillwater/N. Kalispell drainage area) for $4.1 million are detailed separately for review purposes. Exhibit 4 of Technical Appendix A, along with Exhibit 2, contains the details of the capital improvement projects and the impact fee eligible portion of the fee. The future components are divided by the future ERUs of 10,350. Under Montana statute, an impact fee may include a fee for the administration of the impact fee not to exceed 5% of the impact fee collected. In calculating the City's stormwater impact fee, an administrative component of 5% was added to the impact fee. The final step in calculating the stormwater impact fee was to determine a credit for debt service. The stormwater utility has no current outstanding debt related to any existing infrastructure. It is also presumed future projects will not be debt funded. Rather, the future projects will be funded as rate funding allows or funded from developer contributions. Given that assumption, the stormwater impact fee does not contain a debt service credit. Net Allowable Stormwater Impact Fee Based on the sum of the component costs calculated above, the net allowable stormwater impact fee can be determined. "Net" refers to the "gross" impact fee, minus any debt service credits. "Allowable" refers to the concept that the calculated impact fee shown in Table ES-3 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. F)R Development of the Stormwater Impact fees 4 City of Kalispell - Stormwater Impact Fee Report Impact Fee Component Existing Future Total Fee with Future Projects Only Stormwater Facilities $264 $182 $446 5% Administrative Charge 13 9 22 Subtotal $277 $191 $468 Fee with COP 124 Extension Stormwater Facilities $0 $333 $333 5% Administrative Charge 0 17 17 Subtotal $0 $350 $350 Fee with COP 118 Extension Stormwater Facilities $0 $398 $398 5% Administrative Charge 0 20 20 Subtotal $0 $418 $418 Net Allowable Impact Fee $277 $959 $1,236 Future + COP 124 + Fee with Future + COP 124 & 118 Projects Existing COP 188 Total Stormwater Facilities $264 $913 $1,177 Administrative Charge 13 46 59 Net Allowable Impact Fee $277 $959 $1,236 For ease of administration and customer understanding, the impact fee is shown rounded to $1,236 per ERU. This total includes future projects COP 124 ($333/ERU) and COP 118 ($398/ERU) which can be seen in detail in Exhibits 2 and 4 of Technical Appendix A. Provided below in Table ES-4 is a summary of the net allowable stormwater impact fee by customer type. FN Executive Summary 5 City of Kalispell - Stormwater Impact Fee Report Type of Use Single -Family Impact Fee Per Equivalent Residential Unit[11 # of ERUs(1) Impact Fee 1.0 $1,236 Duplex or Multi -Family .75 ERUs Per Living Unit $927/Unit Calculated on Impervious Area; Commercial [21 2,400 sq. ft./ERU or a maximum of $1,236 / 2,400 s.f. six (6) ERU's per acre if meeting up to current detention standards $7,416/acre [1] - Streets and highways are exempt from impact fees. [2] - Apartments are calculated as commercial As noted previously, the current stormwater impact fee is $1,121/ERU. The calculated fee shown above is $1,236/ERU or an increase of $115/ERU. No change in assessment methodology is proposed. Details of the analysis and key documents relied upon for this study are provided within the Technical Appendix. Annual Adjustments to the Stormwater Impact Fee The methodology used to calculate the impact fees takes into account the cost of money or interest charges and inflation. Therefore, HDR recommends the City adjust the impact fees each year by an escalation factor to reflect the cost of interest and inflation. This method of escalating the City's impact fee should be used for no more than a four-year period. After this time period, as required by Montana law, the City should update the fees based on the actual cost of infrastructure and any new planned facilities contained in an updated master plan, capital improvement plan or rate study. Stormwater Impact Fee Credits (Offsets) Credits or offsets against a stormwater impact fee may be appropriate under certain conditions. A credit or offset against the stormwater impact fees are a policy decision of the City. Any credits or offsets against stormwater impact fees would need to be determined on a case -by -case basis. The City's ordinance No. 1656 allows for credits or offsets as outlined under Montana law (7-6-1604). Advisory Committee Review Under Montana law (7-6-1604), the proposed impact fees must be reviewed by an impact fee advisory committee. The City has convened an impact fee advisory committee for this specific purpose. The role of the advisory committee is to serve in an advisory capacity to the City F)R Development of the Stormwater Impact fees 6 City of Kalispell - Stormwater Impact Fee Report Council. The advisory committee reviews and monitors the process of calculating, assessing and spending impact fees. Ultimately, the City Council is the governing body responsible for determination of and adoption of the final stormwater impact fees. Consultant's Recommendations Based on our review and analysis of the City's stormwater system, HDR recommends the City adopt stormwater impact fees at or below the net allowable impact fees as set forth in this report ($1,236/ERU). As a matter of policy, the City may adopt a stormwater impact fee which is less than the calculated fee as shown in this report, but in doing so, the City will be sharing some portion of development impact costs with the existing stormwater utility ratepayers. Summary The impact fees developed and presented in this report are based on the planning and engineering design criteria of the City's stormwater system, the value of the existing assets, past financing of the system and nationally recognized ratemaking principles. The impact fees will provide multiple benefits to the City and will continue the City's practice of establishing equitable and cost -based impact fees for new development benefitting from the City's stormwater system. FN Executive Summary 7 City of Kalispell - Stormwater Impact Fee Report 1. Introduction and Overview Is 1.1 Introduction HDR Engineering Inc. (HDR) was retained by the City of Kalispell; Montana (City) to update the City's current stormwater impact fees. The development of this study and the resulting stormwater impact fees are intended to provide an equitable and cost -based method to establish these impact fees while complying with the legal requirements of Montana Code 7-6- 1601 through 7-6-1604. This report discusses and documents the development of the City's stormwater impact fee study. Impact fees are a one-time assessment on new or expanded development to pay for the cost of infrastructure required to provide service (i.e., accommodate development). Impact fees provide the means of balancing the cost requirements for new utility infrastructure between existing customers and new customers impacting the City's stormwater system. The portion of existing system and future capital improvements that will provide service (capacity) to new customers is "The primary purpose of included in the impact fees. In contrast to this, the stormwater systems and City has future Capital Improvement Projects (CIP) associated stormwater that are related to renewal and replacement of management policies is to control existing systems in service. These infrastructure costs runoff in ways that minimize are included within the rates charged to the City's hazards to life and property, and stormwater customers, and are not included within minimize inconvenience to the the impact fee. general public." The objectives in managing stormwater and establishing a stormwater utility are varied. Arthur C. Nelson, a national expert in impact fees notes: "Stormwater runoff usually occurs during or immediately after rainfall, but can sometimes involve groundwater flow and snowmelt. The primary purpose of stormwater systems and associated stormwater management policies is to control runoff in ways that minimize hazards to life and property, and minimize inconvenience to the general public. Urban development increases the frequency and severity of flooding by removing vegetation, filling natural water storage areas, covering floodplains and watersheds with pavement, and reducing the size of the natural channel available for flood flows."1 1.2 Overview of the Study The development of a cost -based stormwater impact fee requires a detailed technical analysis. 1 Arthur C. Nelson, System Development Charges for Water, Wastewater and Stormwater Facilities (Boca Raton: Lewis Publishers, 1995) p. 137. FN Introduction and Overview 8 City of Kalispell - Stormwater Impact Fee Study To better understand the approach and methodology used, along with the development of the City's stormwater impact fee, this report has been divided into a number of sections (chapters) to discuss and document the process used to establish the fees and reach our final conclusions and recommendations. This report is organized in the following manner: • Section 2 — Review methodologies and practices related to impact fees • Section 3 — Overview of the legal requirements for impact fees under Montana law • Section 4 — Review of the development of the cost -based stormwater impact fees 1.3 Disclaimer HDR, in its determination of the stormwater impact fees presented in this report, has relied upon data and information provided by the City. At the same time, HDR has used "generally accepted" engineering, accounting and ratemaking principles in the development of the cost - based stormwater impact fee. This should not be construed as a legal opinion with respect to Montana law. HDR recommends the City have its legal counsel review the methodology, as discussed herein, to ensure compliance with Montana law. 1.4 Summary This section of the report has provided an introduction and overview of the stormwater impact fee report developed for the City. This report provides the basis for the establishment of a cost -based stormwater impact fee by the City. The next section of the report will provide an overview of impact fees and the methodologies and practices used by utilities to establish the fees. FN Introduction 9 City of Kalispell - Stormwater Impact Fee Report 2. Overview of Impact Fees 2.1 Introduction An important starting point in establishing impact fees is to have a basic understanding of the purpose of these fees, along with the criteria and general methodology used to establish cost - based impact fees. This section of the report presents an overview of impact fees and the methodologies commonly used to develop cost -based impact fees. It should be noted, the City has historically used these same methodologies to establish their utility impact fees. 2.2 Defining Impact Fees The first step in establishing cost -based impact fees is to gain a better understanding of the definition of an impact fee or, as it may also be referred to, a "system development charge". For the purposes of this report, an impact fee is defined as follows: "[Impact fees] . . . are one-time charges paid by new development to finance construction of public facilities needed to serve them.I Simply stated, impact fees are a contribution of capital to either reimburse existing customers for the available capacity in the existing system, and/or help finance planned future growth- ". related capacity improvements. At other utilities, impact ..impact fees area fees may be referred to as system development fees, contribution of capital to either capacity fees, impact fees, capacity reserve charges, reimburse existing customers infrastructure investment fees, etc. Regardless of the for the available capacity in label used to identify them, their objective is the same. the existing system, and/or That is, these charges or fees are intended to provide help finance planned future funds to the utility to finance all or a part of the capital growth -related capacity improvements needed to serve and accommodate new improvements." customer growth. Absent those fees, many utilities would likely be unwilling and unable to build growth - related facilities which could burden existing rate payers with costs of growth -related capacity expansions. 2.3 Economic Theory and Impact Fees Impact fees are generally imposed as a condition of service. The objective of impact fees is not to generate money for a utility, but to create equity between existing customers and new customers so that all customers seeking to connect to the utility's system bear an equitable share of the cost of capacity that is invested in both the existing and any future growth -related expansions. Through the implementation of equitable impact fees, existing customers will not z Arthur C. Nelson, System Development Charges for Water, Sewer, and Stormwater Facilities, Lewis Publishers, New York, 1995, p. 1. FN Overview of Impact Fees 10 City of Kalispell - Stormwater Impact Fee Study be unduly burdened with the cost of new development. By updating the City's current stormwater impact fees, the City continues an important step in providing adequate infrastructure to meet growth -related needs while providing this infrastructure to new customers in a cost -based, fair, and equitable manner. 2.4 Impact Fee Criteria In determining impact fees, a number of different criteria are utilized. The criteria most often used by utilities to establish impact fees include the following: • State/local laws • System planning criteria • Financing criteria • Customer understanding Many states and local communities have enacted laws governing the calculation and imposition of impact fees. These laws must be followed in the development of impact fees. Most states require a "reasonable relationship" between the fee imposed 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. The utilization of the planning criteria, the actual costs of construction and the planned costs of construction provide the nexus for the "reasonable relationship" requirement. 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. In general terms, the rational nexus test requires a connection (nexus) established between new development and the new or "System planning criteria expanded facilities required to accommodate new provides the "rational development, and a reasonably appropriate apportionment nexus" between the of the cost to the new development in relation to benefits amount of infrastructure received. An example of using system -planning criteria is the necessary to provide planning assumptions on post -development land use and service and the charge to impervious area contained within the City's stormwater the customer." facility plan update. This provides a direct connection between the fees charged and the assumed (planned) level of development (impervious area). A "rational nexus test" is used to evaluate the reasonable relationship between the impact fee and the infrastructure necessary to accommodate the new development. A "rational nexus test" typically contemplates the following: 1. "A connection be established between new development and the new or expanded facilities required to accommodate such development. This establishes the rational basis of public policy. 2. Identification of the cost of these new or expanded facilities needed to accommodate FN Overview of Impact Fees 11 City of Kalispell - Stormwater Impact Fee Study new development. This establishes the burden to the public of providing new facilities to new development and the rational basis on which to hold new development accountable for such costs. This may be determined using the so-called Banberry factors. [Banberry Development Company v. South Jordan County (631 P.2d 899, Utah 1981)]. 3. Appropriate apportionment of that cost to new development in relation to benefits it reasonably receives. This establishes the nexus between the fees being paid to finance facilities that accommodate new development and the benefit new development receives from such new facilities."3 The first bullet of the rational nexus test requires the establishment of a rational basis of public policy. This implies the planning and capital improvement studies used to establish the need for new facilities to accommodate growth. Adopted master plans or facility plans should firmly meet this first test since these plans assess existing facilities and capacity, project future capacity requirements, and determine the future capital infrastructure needed to accommodate growth. The second portion of the rational nexus test discusses the Banberry Factors. In summary form, "consideration must be given to seven factors to determine the proportionate share of costs to be borne by new development: 1. The cost of existing facilities 2. The means by which existing facilities have been financed 3. The extent to which new development has already contributed to the cost of providing existing excess capacity 4. The extent to which existing development will, in the future, contribute to the cost of providing existing facilities used community wide or non -occupants of new development 5. The extent to which new development should receive credit for providing at its cost facilities the community has provided in the past without charge to other development in the service area. 6. Extraordinary costs incurred in serving new development 7. The time -price differential inherent in fair comparisons of amount of money paid at different times.114 The final portion of the rational nexus test is the reasonable apportionment of the cost to new development in relation to benefits it reasonably receives. This is accomplished in the methodology to establish the impact fee, which is discussed in more detail within this section. 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 infrastructure on the system and assures customers are not paying twice for infrastructure — once through the impact fees and s Ibid, p. 16 and 17. 4 Ibid, P. 18 and 19. OROverview of Impact Fees 12 City of Kalispell - Stormwater Impact Fee Study again through rates. The double payment can come in through the imposition of an impact fee and then the requirement to pay debt service within a customer's rates. The financing criteria also reviews the basis under which facilities were built and funded such that the customer is not charged for infrastructure that was provided (contributed) by developers (i.e., customer contributions, contributions in aid of construction, etc.). The component of customer understanding implies that the fee is easy to understand. This criterion has implications for the way the fee is implemented and assessed to the customer. For a stormwater system, the fee is based upon an Equivalent Residential Unit or ERU. The ERU is equal to the impervious area of a typical or average residential customer. In the case of the City, one (1) ERU is currently assumed to be 2,400 square feet. For non-residential customers, the number of ERUs are calculated or determined by the City using the same definition of an ERU. The other implication of this criterion is that the methodology is clear and concise in its calculation of the amount of infrastructure necessary to provide service. 2.5 Overview of the Impact Fee Methodology As a part of the cost -based methodology, there are four steps commonly undertaken. These steps are as follows: 1. Determination of system planning criteria 2. Determination of equivalent residential units (ERU) 3. Calculation of system component costs 4. Determination of any credits The first step in establishing impact fees is the determination of the system planning criteria. For a stormwater system, total impervious area can be divided by the average impervious square footage of a residential lot to determine total system ERUs. These are very important calculations 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 for 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 total number of equivalent units has been determined, an impact fee stated in $/ERU is calculated. The calculation of the impact fee typically includes both historical (existing) assets and planned future assets (i.e., capacity additions). The cost per equivalent unit is 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 credits. This is generally a calculation to prevent customers from paying twice for an asset, once through the value of the asset included within the impact fee, and then again through any debt service associated with that same asset and included within the utility rates. A similar crediting mechanism is also utilized if general obligation (G.O.) bonds or tax revenue has been used to finance the infrastructure. FN Overview of Impact Fees 13 City of Kalispell - Stormwater Impact Fee Study The final impact fee is determined by taking the "gross impact fee" and subtracting any credits. This results in a "net impact fee" stated in $/ERU. The general basis of this calculation for stormwater system is the assumption that an equivalent unit is equivalent to the impervious area and run-off from a typical or average residential customer. Other types of dwellings or businesses are then assigned ERUs based on total impervious area divided by 1 ERU to determine total ERUs5. 2.6 Summary This section of the report has provided an overview of stormwater impact fees. This has included a discussion of the basis for establishing the fees, considerations in establishing an impact fee, and the connection (nexus) which must be established between new development and the fee being imposed. The next section of the report will provide a brief discussion of the legal considerations associated with impact fees. 5 The City uses a similar approach but "caps" the maximum per acre assessment for non-residential properties based upon the City's current land use planning. OROverview of Impact Fees 14 City of Kalispell - Stormwater Impact Fee Study 3. Legal Considerations in Establishing Impact Fees II. 3.1 Introduction An important consideration in establishing any impact fee is review and consideration of 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. Therefore, 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 State law. This summary represents HDR's understanding of the relevant Montana State law as it relates to establishing impact fees. 3.2 Requirements Under Montana State Law 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 summary of the Montana Code is provided below. A copy of the full code is provided in Appendix B. A summary of the requirements under Montana law is as follows: "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." "7-6-1601. Definitions. As used in this part, the following definitions apply: 5) (a) "Impact fee" means any charge imposed upon development by a governmental entity as part of the development approval process to fund the additional service capacity required by the development from which it is collected. An impact fee may include a fee for the administration of the impact fee not to exceed 5% of the total impact fee collected. (b) The term does not include: (i) a charge or fee to pay for administration, plan review, or inspection costs 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 district assessments, 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 standards that have been adopted by the governmental entity. F)R Legal Considerations in Establishing Impact Fees is City of Kalispell - Stormwater Impact Fee Report "7-6-1602. Calculation of impact fees -- documentation required -- 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 than 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; (j) 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 5 years. (3) The service area report is a written analysis that must contain documentation of sources and methodology used for the purposes of subsection (2) and must document how each impact fee meets the requirements of subsection (7). (7) An impact fee must meet the following requirements: (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) The impact fees imposed may not exceed a proportionate share of the costs incurred or to be incurred by the governmental entity in accommodating the development. The following factors must be considered in determining a proportionate share of public facilities capital improvements costs: (i) the need for public facilities capital improvements required to serve new FN Legal Considerations in Establishing Impact Fees 16 City of Kalispell - Stormwater Impact Fee Study 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. 7-6-1603. Collection and expenditure of impact fees -- refunds or credits -- mechanism for appeal required... . (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, or upgrading the facility and must be no more than a proportionate share of the costs to provide the excess capacity." The basic principle followed under Montana State law requires the fee to be based on a proportionate share of the costs of the system required to provide service and adoption of fees and accounting be in compliance with the State of Montana law. The City's stormwater planning documents provide the planning criteria and need for any future improvements. The use of the methodology discussed in this report should meet the proportional share standard and provide final proposed impact fees in compliance with Montana law. The discussion within this portion of the report is intended to provide an overview of relevant Montana law as it relates to establishing impact fees. This summary discussion does not constitute a legal interpretation of Montana State law. 3.3 Summary This section of the report reviewed the legal basis for establishing impact fees in the State of Montana and, in particular, the City. The next section of the report provides a detailed discussion of the specific calculation of the stormwater impact fee for the City. FN Legal Considerations in Establishing Impact Fees 17 City of Kalispell - Stormwater Impact Fee Report 1 ■ 4. Development of the City's Stormwater Impact Fee 4.1 Introduction The City of Kalispell currently has stormwater impact fees in place. Under Montana law, impact fees need to be reviewed and updated every five years. This section of the report will discuss the development and update of the City's stormwater impact fee. The current stormwater impact fee was developed and established in 2006. In 2010, the City conducted another review and update of the fee. While the fees were reviewed in a comprehensive manner during the 2010 study, the City Council made a policy decision to not change the fees and maintained the stormwater impact fees at their current level. This study is timely, not only from a legal perspective, but also from a policy and equity perspective. Since the last study, the City's growth policy has changed and annexation has occurred. In addition, since the completion of the City's 2008 Facility Plan and the 2010 impact fee analysis, the City in 2011, shifted their planning policy (perspective) from a divided "core" and "outside core" area to an overall annexation area. This section of the report presents the key assumptions and details used in calculating the City's stormwater impact fee. The calculation of the City's stormwater impact fee is based on City - specific asset and planning information, along with other financial and accounting information. The City's calculated stormwater impact fee is based on the value of the available system capacity, along with the value of future or expansion -related capacity projects. In summary form, the calculated buy -in component and the future/incremental component are added together, including a debt credit, resulting in the total "net allowable impact fee". 4.2 Overview of the City's Stormwater System The City has a stormwater utility and it is responsible for managing stormwater run-off within its boundaries. To provide a better understanding of the complexity of this utility, along with its regulatory requirements and challenges, the following discussion and overview is provided. The City is legally required to manage both the quantity and the quality of the City's stormwater run-off. Stormwater runoff can collect pollutants from urbanized areas, which can add to or create problems in local lakes and streams. Federal and state regulations require action by the City of Kalispell to minimize pollution carried by stormwater runoff. At a federal level, the City is subject to the federal regulations related to the National Pollutant Discharge Elimination System (NPDES). The City is required to implement a Stormwater Management Program (SWMP) which consists of Best Management Practices (BMPs), involving six minimum control measures, to control pollutants in stormwater to the maximum extent practical. However, the City does require certain infrastructure (facilities) to manage stormwater quantity. These facilities are needed for purposes of conveyance, detention and discharge. More specifically, FN Development of the City's Stormwater Impact Fee is City of Kalispell - Stormwater Impact Fee Study these facilities can include ponds, pipes, catch basins, ditches, curbs and gutters. While management of stormwater is related to quantity, it is also related to water quality. Finally, it is important to note that growth, in and of itself, creates additional impacts and requires additional resources. This is true for all aspects of the City's services, and holds true for the stormwater utility and its facilities. To determine the City's facility requirements for the stormwater utility, a Stormwater Facility Plan is developed. In summary, the City's approach to stormwater quantity management is two fold; implementation of measures to manage runoff from new development to historic levels, and provide adequate facilities downstream to convey, detain and discharge stormwater. Under this approach, new development will typically make on -site improvements to manage runoff, but also benefit from downstream facilities. It is the investment in "downstream facilities" which are the basis for the City's impact fees. The City's 2008 Stormwater Facility Plan Update also provides, in part, the basis for the development of the City's cost -based stormwater impact fees. Given this brief overview of the City's regulatory requirements to manage stormwater runoff and its stormwater program, the focus can shift to the calculation of the City's stormwater impact fees. Provided below is a more detailed discussion of the City's current stormwater impact fees and how they are determined. 4.3 Present Stormwater Impact Fees The City currently has a stormwater impact fee. The impact fee is based upon an equivalent residential unit approach. Presented below in Table 4-1 is an overview of the present stormwater impact fee. Impact Fee Per Equivalent Residential Unit[11 Type of Use # of ERUs(l) Impact Fee Single -Family 1.0 $1,121 Duplex or Multi -Family .75 ERUs Per Living Unit $841/Unit Calculated on Impervious Area; 2,400 sq. ft./ERU or a maximum of $1,121 / 2,400 s.f. Commercial [2] six (6) ERU's per acre if meeting up to current detention standards $6,726/acre [1] — Streets and highways are exempt from impact fees. [2] — Apartments are calculated as commercial The use of an ERU/impervious surface approach is a generally accepted and common method ORDevelopment of the Stormwater Impact fees 19 City of Kalispell - Stormwater Impact Fee Report for determining stormwater impact fees for specific parcels. As can be seen from Table 4-1, the City's current stormwater impact fee is assessed on the basis of $1,121/ERU. For single-family residential properties, one (1) ERU is assessed. For duplex and multi -family customers it is based upon a living unit approach. For commercial (non-residential) properties, the stormwater impact fee is assessed based upon a property -specific impervious surface calculation. If the commercial customer is meeting current detention standards, the parcel is assessed a maximum of six (6) ERU's per acre 6. The fee's limitation on the number of maximum ERUs for a parcel meeting current stormwater detention standards provides a financial benefit and offset to the developer for building detention facilities and meeting current development standards. It should be noted that streets and highways are not included in the City's impact fee calculation. This is a common practice of stormwater utilities and the justifications for this policy are often centered around the following possible justifications: ✓ Streets and highways are an integral part of the stormwater conveyance system. ✓ The streets are owned by the City, and thus, any charge against the City is a charge to the taxpayers Given this overview of the present stormwater impact fee, the focus can shift to the development of the calculated stormwater impact fee. In developing the calculated stormwater impact fee, the starting point is to review the City's planning document for stormwater planning. As noted previously, this is the City's 2008 Stormwater Facility Plan Update. 4.4 Calculation of the City's Stormwater Impact Fee As discussed in Section 2, the process of calculating impact fees is based upon a four -step process. In summary form, these steps areas follows: • Determination of system planning criteria • Determination of Equivalent Residential Units (ERUs) • Calculation of the impact fee for system component costs • Determination of any impact fee credits Each of these steps is discussed in more detail below. 4.4.1 System Planning Criteria System planning criteria are used to establish the capacity needs of an ERU. The City's 2008 Stormwater Facility Plan Update did not directly specify the number of ERUs to be served at the end of the planning period. The Facility Plan Update focused on population served and area (acres). Given that limitation of the study, the impact fee study needed to determine the current ERUs being served and the potential ERUs at buildout. 6 An acre is equal to 43,560 square feet. If a parcel does not meet current detention standards then the parcel could be assessed up to approximately 17 ERU's (43,560 sq. ft. - 2,500 sq. ft./EU = 17.4 ERUs) ORDevelopment of the City's Stormwater Impact Fee 20 City of Kalispell - Stormwater Impact Fee Study The existing 2015 ERUs were based on planning policy, City annexation maps, and dwelling land use designations per zoning. Table 4-2 shows the dwelling units per acre, the total acres, and the total ERUs for 2015. Description Units High Density Residential Urban Residential Urban Mixed Use Suburban Residential Commercial Industrial Total Acres 4,971 4.4.2 Equivalent Residential Units 10 dwelling units per acre 8 dwelling units per acre 8 dwelling units per acre 3 dwelling units per acre 6 dwelling units per acre 6 dwelling units per acre Total ERUs 21,298 The planning horizon of this analysis was from 2015 to 2035. Based on Kalispell's current growth policy, an annual growth rate of 2% was assumed for the planning period. A summary of the ERUs for 2015 and 2035 are presented below in Table 4-3. Details of the determination of ERUs are provided in Exhibit 1 of Technical Appendix A. Description Calculated ERUs Equivalent Residential Units-2015 Equivalent Residential Units — 2035 Additional Units from 2015 to 2035 21,298 31,648 10,350 As noted above, the assumed growth is consistent with the City's current growth policy. Given the development of the total stormwater ERUs for the planning horizon, the focus can shift to the calculation of the impact fee. This aspect of the analysis is discussed below. 4.4.3 Calculation of the Stormwater Impact Fees The next step of the analysis was to review the major functional system infrastructure to determine the stormwater impact fee for the system. In calculating the stormwater impact fee for the City, existing facility components, debt service for existing facilities, if any, and future FN Development of the Stormwater Impact fees 21 City of Kalispell - Stormwater Impact Fee Report capital improvements relating to capacity expansion were included. The general approach or methodology used to calculate each component is described in more below. EXISTING OR Buy --IN COMPONENT —To calculate the value of the existing stormwater assets for the buy -in component, the City's methodology considered the original cost of each stormwater asset. The City provided a detailed asset listing for the various existing components and their installation date. Given the value of the asset, the next step was to determine the portion of the project costs that were deemed eligible to be included in the calculation of the impact fee. The term "impact fee eligible" simply describes the amount of the asset to be included within the calculation of the fee. This amount was reduced by the percent that was contributed by developers or grants. Stormwater improvements funded through Tax Increment Financing (TIF) and Special Improvement Districts (SIDS) were also excluded from the analysis. After making these adjustments, the remaining balance reflects the amount of the asset eligible for inclusion within the impact fee. These impact fee eligible assets were subsequently increased to reflect present replacement cost. To accomplish this, the impact fee eligible cost of each asset was escalated to current, July 2016 dollars, based on the Engineering News Record (ENR) Construction Cost Index (CCI) for the 20-City average. The total value of the existing assets was $14.7 million dollars. The total replacement value of the impact fee eligible assets was $8.3 million. The replacement value was then divided by the total ERUs at 2035 or 31,648 ERUs for a total existing facilities (buy -in component) impact fee of $264. FUTURE COMPONENTS — An important requirement for an impact fee study is the connection between the anticipated future growth on the system and the needed facilities required to accommodate that growth. For purposes of this study, the City's most current Capital Improvement Plan through 2035 along with the projects from the Facility Plan were evaluated. City staff reviewed/confirmed the existing Capital Improvement Plan (CIP) and updated the projects necessary to meet demand for the stormwater system. Total capital improvement projects from 2016 to 2035 amounted to $18.9 million. Of this amount, the total committed CIP, eligible and included within the impact fee was $9.5 million. This total amount is primarily related to two extension projects; Conveyance Outlet Pipe (COP) 124 and COP 118. These two project are growth dependent. Project COP 124 (Pipe conveyance from detention pond 124 in West Stillwater Drainage) for $3.4 million and COP 118 (Pipe conveyance from detention pond 118 to Stillwater/N. Kalispell drainage area) for $4.1 million are detailed separately for review purposes. Exhibit 4 of Technical Appendix A, along with Exhibit 2, contains the details of the capital improvement projects and the impact fee eligible portion of the fee. The future components were then divided by the future ERUs of 10,350 for a future collection impact fee of $913. DEBT SERVICE COMPONENT - The final step in calculating the stormwater impact fee was to determine a credit for debt service. The stormwater utility has no current outstanding debt related to any existing infrastructure. The stormwater utility has historically not utilized long- term debt for capital projects. Rather, the utility has rate funded capital projects or used other funding methods such as developer contributions or tax increment financing. Given this past approach, it is assumed that no long-term debt will be incurred for this utility and therefore, no debt service credit is provided. ADMINISTRATIVE CHARGE— In accordance with Montana statute, an impact fee may include a FN Development of the City's Stormwater Impact Fee 22 City of Kalispell - Stormwater Impact Fee Study fee for the administration of the impact not to exceed 5% of the impact fee collected. 4.5 Net Allowable Stormwater Impact Fee The methodology used to establish the stormwater impact fees is a "combined approach". The combined approach adds the buy -in component and the incremental or future component together, and accounts for any existing debt credit resulting in a "net allowable impact fee". In total, the stormwater impact fee was determined to be $1,236 per ERU ($1,121 impact fee + $59 administrative charge = $1,236). A summary of these calculations is provided in Table 4-4. Impact Total Facility Component Fee ($000) $/ERU Existing Stormwater Facilities Total Existing Facilities [Original Cost] ($000) Less: Contributed and Non -Eligible Capital ($000) Total Eligible Existing Facilities ($000) Total Eligible Existing Facilities [State in 2016 $] ($000) Less: Net Impact Fee Eligible Outstanding Debt Principal Total Eligible Existing Facilities [2016 $] ($000) Existing and Future Equivalent Residential Units Total Existing Facilities Impact Fee ($/ERU) Future Stormwater Facilities (a) Total Other Future Facilities (i.e., w/o COP's) Future Residential Customer Equivalent Units Total Other Future Facilities Impact Fee ($/ERU) (b) COP 124 Future Residential Customer Equivalent Units Total COP 124 Impact Fee ($/ERU) (c) COP 118 Future Residential Customer Equivalent Units Total COP 118 Impact Fee ($/ERU) Total Future Collection Impact Fee ($/ERU) Total Combined Stormwater Impact Fee ($/ERU) Plus 5% Administrative Fee ($/ERU) Total Combined Stormwater Impact Fee ($/ERU) $14,672 (9,421) $5,251 $8,348 (0) $8,348 31,648 $1,888 10,350 $182 $3,444 10,350 $333 $4,122 10,350 $398 $264 913 $1,177 59 $1,236 The combined fee of $1,236 is slightly more than the City's current impact fee of $1,121 for 1 ERU connection; an increase of $115 per ERU. Table 4-5 shows the fee by existing and future components. Details of the net allowable impact fee for the City are shown in Exhibit 3 of F)R Development of the Stormwater Impact fees 23 City of Kalispell - Stormwater Impact Fee Report Technical Appendix A. Impact Fee Component Existing Future Total Fee with Future Projects Only Stormwater Facilities $264 $182 $446 5% Administrative Charge 13 9 22 Subtotal $277 $191 $468 Fee with COP 124 Extension Stormwater Facilities $0 $333 $333 5% Administrative Charge 0 17 17 Subtotal $0 $350 $350 Fee with COP 118 Extension Stormwater Facilities $0 $398 $398 5% Administrative Charge 0 20 20 Subtotal $0 $418 $418 Net Allowable Impact Fee $277 $959 $1,236 Future + COP 124 + Fee with Future + COP 124 & 118 Projects Existing COP 188 Total Stormwater Facilities $264 $913 $1,177 Administrative Charge 13 46 59 Net Allowable Impact Fee $277 $959 $1,236 Table 4-6 are the present and calculated stormwater impact fees. F)R Development of the City's Stormwater Impact Fee 24 City of Kalispell - Stormwater Impact Fee Study Impact Fee Per Equivalent Residential Unit[11 Present Calculated Type of Use #of ERUs(l) Impact Fee Impact Fee Single -Family Duplex or Multi -Family Commercial [2] 1.0 .75 ERUs Per Living Unit Calculated on Impervious Area; 2,400 sq. ft./ERU or a maximum of six (6) ERU's per acre if meeting current detention standards $1,121 $841/Unit $1,121/2,400 s.f. up to $6,726/acre $1,236 $927/Unit $1,236/2,400 s.f. up to $7,416/acre [1] The calculated stormwater impact fee is based on 1 ERU. Streets and highways are exempt from impact fees. [2] Apartments are calculated as commercial Table 4-6 shows the stormwater impact fee can be potentially increased to $1,236 per ERU. Stormwater fees for residential, duplex, and multifamily are for each additional ERU or percentage of ERU. Commercial is calculated based on impervious area at 2,400 square foot per ERU. 4.6 Annual Adjustments to the Stormwater Impact Fee The methodology used to calculate the impact fees takes into account the cost of money or interest charges and inflation. Therefore, HDR recommends the City adjust the impact fees each year by an escalation factor to reflect the cost of interest and inflation. This method of escalating the City's impact fee should be used for no more than a four-year period. After this time period, as required by Montana law, the City should update the fees based on the actual cost of infrastructure and any new planned facilities contained in an updated master plan, capital improvement plan or rate study. 4.7 Stormwater Impact Fee Credits (Offsets) Credits or offsets against a stormwater impact fee may be appropriate under certain conditions. Credits or offsets against the stormwater impact fee are a policy decision of the City. Any credits or offsets against stormwater impact fees would need to be determined on a case -by -case basis. The City's ordinance No. 1656 allows for credits or offsets and follow state law. 4.8 Key Assumptions In developing the impact fees for the City's stormwater system, a number of key assumptions were utilized. These are as follows: • The City's planning criteria was based on the City's current planning policy. FN Development of the Stormwater Impact fees 25 City of Kalispell - Stormwater Impact Fee Report • The impact fee methodology utilized within this study was the "combined" methodology. The buy -in and incremental/future component were added together to establish the net allowable charge. • The City's asset records as of June 2015 were used to determine the existing stormwater assets. • The replacement cost method was used and was escalated to ENR construction cost index levels for July 2016. • The City provided the CIP for future improvements • The City determined the portion of future improvements that were growth -related. 4.9 Consultant's Recommendations Based on our review and analysis of the City's stormwater system, HDR recommends the following: • The City should adopt stormwater impact fees that are no greater than the net allowable impact fees as set forth in this report ($1,236/ERU). As a matter of policy, the City may adopt a stormwater impact fee which is less than the calculated fee as shown in this report. However, in doing so, the City will be sharing some portion of the costs associated with new or expanded development with the existing ratepayers. • The adopted stormwater impact fees should be updated annually by a local construction cost index such as the Engineering New Record Construction Cost Index (ENR-CCI) for no more than four years before a complete update of the charge is undertaken. This best industry practice of annually adjusting the fee can keep the charge relatively current with construction pricing practices. • The City should update the actual calculation for the impact fees at such time when a new capital improvement plan, public facilities plan, comprehensive system plan, or a comparable plan is approved or updated by the City, every five years, or when a major infrastructure project is completed. 4.10 Advisory Committee Review Under Montana law (7-6-1604), the proposed impact fees must be reviewed by an impact fee advisory committee. The City has convened an impact fee advisory committee for this specific purpose. The role of the advisory committee is to serve in an advisory capacity to the City Council. The advisory committee reviews and monitors the process of calculating, assessing and spending impact fees. Ultimately, the City Council is the governing body responsible for determination of and adoption of the final stormwater impact fees. 4.11 Summary The stormwater impact fees developed and presented in this report are based on the planning and engineering design criteria of the City's stormwater system, the value of the existing assets, planned future capital improvements, and "generally accepted" ratemaking principles. Adoption of final proposed net allowable impact fees will create equitable and cost -based charges for new customers connecting to the City's stormwater system, or customers expanding their existing capacity requirements. ORDevelopment of the City's Stormwater Impact Fee 26 City of Kalispell - Stormwater Impact Fee Study Technical Appendix A — Stormwater Impact Fee 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 City of Kalispell Exhibit 1 Storm Water Impact Fee - 2016 Development of ERUs ERU = Equivalent Residential Unit Year ERUs Additional ERUs per Year Total New ERUs Rate of Growth [2] 2015 21,298 [1] 2016 21,724 426 426 2.0% 2017 22,158 434 860 2.0% 2018 22,602 443 1,304 2.0% 2019 23,054 452 1,756 2.0% 2020 23,515 461 2,217 2.0% 2021 23,985 470 2,687 2.0% 2022 24,465 480 3,167 2.0% 2023 24,954 489 3,656 2.0% 2024 25,453 499 4,155 2.0% 2025 25,962 509 4,664 2.0% 2026 26,481 519 5,183 2.0% 2027 27,011 530 5,713 2.0% 2028 27,551 540 6,253 2.0% 2029 28,102 551 6,804 2.0% 2030 28,664 562 7,366 2.0% 2031 29,238 573 7,940 2.0% 2032 29,822 585 8,524 2.0% 2033 30,419 596 9,121 2.0% 2034 31,027 608 9,729 2.0% 2035 31,648 621 10,350 2.0% Notes: [11 2015 ERU based on City Engineer estimates based on planning, City annexation maps, and the following land use designations per zoning. See "ELU Annex GP Developed" City excel file. 10 DU/AC High Density Residential 8 DU/AC Urban Residential 8 DU/AC Urban Mixed Use 3 DU/AC Suburban Residential 6 DU/AC Commercial 6 DU/AC Industrial Total Acres 4,971 Total ERUs 21,298 [21 2% growth rate was used based on Kalispell Growth Policy. Update,• page 2-11 shows historical growth rate of 1.3% and projected growth rate of 3%. Technical Appendix A - Page 1 of 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 City of Kalispell Exhibit 2 Storm Water Impact Fee -2016 Determination of Storm Water Impact Fee for Collection Plant ENR: Base CCI Year 7/1/2016 10,379 Page 1 of 4 Percent Original SIF SIF ENR 2016 Year Type Cost Eligible [2] Eligible Rate $ Cost Existing Collection Plant [1] Jun-781st Ave $127,106 34.3% $43,597 3.74 $163,007 Jun-78 8th St to Courthouse 94,117 34.3% 32,282 3.74 120,701 Jun-78 Phase l 2nd Ave 23,636 34.3% 8,107 3.74 30,312 Jun-78 Fifth St 364,094 34.3% 124,884 3.74 466,933 Jun-78 7th Ave W 65,453 34.3% 22,450 3.74 83,940 Jun-78 7th Ave W (HUD) 6th to 11th (100%grant-HUD) 200,000 0.0% 0 3.74 0 Jun-78 Woodland Park 12,461 34.3% 4,274 3.74 15,981 Jun-78 Storm Sewer Construction 4,982 34.3% 1,709 3.74 6,389 Jun-80 E N Project 1,409,301 20.0% 281,860 3.21 903,769 Jun-82 Additions 1981 80,140 100.0% 80,140 2.71 217,462 Jun-84 SID 328 8,000 0.0% 0 2.50 0 Jun-86 400' 30' Concrete Storm (Mall) 12,000 0.0% 0 2.42 0 Jun-86 160' 18' 15' Concrete (Mall) 31,214 0.0% 0 2.42 0 Jun-87 21 RCP Storm Phase II 153,766 100.0% 153,766 2.36 362,228 Jun-87 18 RCP Storm Phase II 156,342 52.0% 81,298 2.36 191,514 Jun-87 15RCP Storm Phase II 14,692 100.0% 14,692 2.36 34,610 Jun-87 12 RCP Storm Phase II 46,112 100.0% 46,112 2.36 108,627 Jun-87 350' 15' Concrete-Kinshella St 10,500 0.0% 0 2.36 0 Jun-87 732 12 inch 18,549 54.0% 10,016 2.36 23,596 Jun-89 1St Alley West 29,579 100.0% 29,579 2.25 66,524 Jun-76 Storm Sewer Holding Ponds 11,550 100.0% 11,550 4.32 49,929 Jun-70 Storm Sewer Land - Ponds 15,000 100.0% 15,000 7.52 112,736 Jun-90 Meridian 97,570 100.0% 97,570 2.19 214,012 Jun-91 676' 12' 211' 8' Westside 41,935 0.0% 0 2.15 0 Jun-92 1263' 36' Center Market 173,826 0.0% 0 2.08 0 Jun-92 6th St W -811- 12' 256' 8' 38,545 0.0% 0 2.08 0 Jun-93 530' of 8" PVC 13,250 100.0% 13,250 1.99 26,396 Jun-93 E Washington St 4,000 100.0% 4,000 1.99 7,969 Jun-93 W Montana St 7,500 100.0% 7,500 1.99 14,941 Jun-94 18th St East 23,600 100.0% 23,600 1.92 45,294 Jun-94 6th Ave EN and California 2,000 100.0% 2,000 1.92 3,838 Jun-94 Sth Street West 11,750 100.0% 11,750 1.92 22,551 Jun-94 4th Street West 2,975 100.0% 2,975 1.92 5,710 Jun-94 Harrison Blvd 13,675 100.0% 13,675 1.92 26,246 Jun-94 325' 12' 3rd Ave W (West/Sykes) 15,700 0.0% 0 1.92 0 Jun-95 12th - 2dn to 3rd Ave 5,906 100.0% 5,906 1.90 11,205 Jun-95 4rh Street W 7,472 100.0% 7,472 1.90 14,175 Jun-95 8' Storm Greenbriar Subd. 34,650 0.0% 0 1.90 0 Jun-96 Corporate Way -SID 342 43,466 0.0% 0 1.85 0 Jun-96 160' 8' Belmar Subdivision 5,600 0.0% 0 1.85 0 Jun-96 Woodland Hill Boring 17,094 100.0% 17,094 1.85 31,570 Jun-96 198' 12' 909'10' 353' 8' 1st Ave 22,756 0.0% 0 1.85 0 Jun-96 Check Valve 8 inch 659 100.0% 659 1.85 1,217 Jun-96 Check Valve 24 inch 3,499 100.0% 3,499 1.85 6,462 Jun-96 14th Street East 153,537 100.0% 153,537 1.85 283,559 Jun-97 40' 8; Meadow Park II 1,200 0.0% 0 1.78 0 Jun-97 430' 15' 844' 12' S32' 10' Buffalo 67,048 0.0% 0 1.78 0 Jun-97 80' 18' 392' 12' Lonepine View 17,944 0.0% 0 1.78 0 Jun-96 120' 12' Woodland Court 8,380 0.0% 0 1.85 0 Jun-98 650' 12' 685' Buffalo Commons 33,375 0.0% 0 1.75 0 Jun-99 Caterpillar Model Back hoe 1/2 27,507 100.0% 27,507 1.71 47,120 Jun-98 336' 8" 1st Alley E Project 13,540 0.0% 0 1.75 0 Jun-99 1205' 23" Buffalo Stage phase III 29,048 0.0% 0 1.71 0 Jun-99 800' 15" 640'12" Willos Subd 68,000 0.0% 0 1.71 0 Technical Appendix A - Page 2 of 7 1 2 3 4 5 6 7 8 9 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 City of Kalispell Exhibit 2 Storm Water Impact Fee -2016 Determination of Storm Water Impact Fee for Collection Plant ENR: Base CCI Year 7/1/2016 10,379 Page 2 of 4 Percent Original SIF SIF ENR 2016 Year Type Cost Eligible [2] Eligible Rate $ Cost Jun-98 1080' 12" 150' 6" Main Ballflds 15,385 0.0% 0 1.75 0 Jun-98 6th St to Woodland 12,839 100.0% 12,839 1.75 22,510 Jun-99 7th Ave 6th to 7th Street 7,863 100.0% 7,863 1.71 13,470 Jun-99 Montana 4th Ave EN to Sth Ave 5,526 100.0% 5,526 1.71 9,466 Jun-99 Oregon 7th EN Alley to 7 Ave 2,265 100.0% 2,265 1.71 3,880 Jun-99 Sth Ave NW RR to Montana 6,166 100.0% 6,166 1.71 10,563 Jun-99 370' 12" 290' 8" 9th St W 1st Sth 125,693 0.0% 0 1.71 0 Jun-99 2nd St W 7th to loth 26,426 100.0% 26,426 1.71 45,269 Jun-00 John Deere Loader 34,483 100.0% 34,483 1.67 57,532 Jun-01 Storm MN 580'/12" Bflo Sig IV 9,280 0.0% 0 1.64 0 Jun-01 Storm MN 208' 8" /595' 10"/705' 12" 23,533 0.0% 0 1.64 0 Jun-00 Storm MN 150'10"/60' 18" 3,450 0.0% 0 1.67 0 Jun-01993/4T Chevy W/V-Plow 13,332 100.0% 13,332 1.64 21,847 Jun-02 Lee's Meridian Bus. Park 13,622 0.0% 0 1.59 0 Jun-02 Stratford Vlg Ph 1 18,728 0.0% 0 1.59 0 Jun-02 Sunnyview Reconstruct 90,886 0.0% 0 1.59 0 Jun-03 Stratford Village Phse II 2,236 100.0% 2,236 1.55 3,467 Jun-03 Northview Ph 1-3 MI. DR&N Riding 448 100.0% 448 1.55 695 Jun-03 Ashley PK Ph 4 4,575 100.0% 4,575 1.55 7,094 Jun-02 Facility Plan 81,055 0.0% 0 1.59 0 Jun-02 2nd Ave W Parking Lot Keno Inn 20,105 100.0% 20,105 1.59 31,917 Jun-03 Open Bay Equipment Storage Bldg 18,092 100.0% 18,092 1.55 28,052 Jun-04 24'-12" & 172'-15" W. Wyoming 20,388 100.0% 20,388 1.46 29,742 Jun-04 Rate Study 16,796 0.0% 0 1.46 0 Jun-04 3107' 8" Ashley Pk Ph V 47,921 0.0% 0 1.46 0 Jun-04 413' 8"/503' 10"/Blue Hrrn Ph 1 23,976 0.0% 0 1.46 0 Jun-04 48' 8" /Vill Grns Ph 17&19 2,540 0.0% 0 1.46 0 Jun-04 1328' 10"/2764'12"/295'15"/497'18" 142,771 0.0% 0 1.46 0 Jun-0443'-10"/1&L Subd 1,658 0.0% 0 1.46 0 Jun-04 175' 8"/Sunnyside Subd Phil 30,000 0.0% 0 1.46 0 Jun-04 Pump Station/Ashley Pk Ph V 35,500 0.0% 0 1.46 0 Jun-05233'18"/5705'12"/351'10" 1,347,176 25.0% 336,794 1.39 469,471 Jun-05 Hywy93-1st Ave W&16th St 279,966 56.0% 156,781 1.39 218,544 Jun-05 Ashley Pk Ph Ph VII 549' 12" 39,512 0.0% 0 1.39 0 Jun-05 Daley Fld, Lot 3 208' 8" 13,946 0.0% 0 1.39 0 Jun-05 Empire Est Ph 1&2855'8" 55,697 0.0% 0 1.39 0 Jun-05 Glcr Vill Grns 90'8" 10,863 0.0% 0 1.39 0 Jun-05 Leisure His Ph 1119'12" 7,885 0.0% 0 1.39 0 Jun-05 Muskrat Slough 368'8" 21,194 0.0% 0 1.39 0 Jun-05 Sttfrd Phlll 840'8"/210'10"/85'12" 63,164 0.0% 0 1.39 0 Jun-05 3 MI Sub 313'12"/74'18" 26,600 0.0% 0 1.39 0 Jun-05 Wview Bus Cntr 240'8" 15,396 0.0% 0 1.39 0 Jun-05 C Sch Museum RF Drain Project 8,557 0.0% 0 1.39 0 Jun-0505 GMC Savana Utility Van 930 0.0% 0 1.39 0 Jun-05 05 GMC Savana Utility Van (220) 930 0.0% 0 1.39 0 Jun-04 Sewer Cleaning/Vacum Trick 44,354 100.0% 44,354 1.46 64,703 Jun-06 06 GMC Canyon 1,799 0.0% 0 1.34 0 Jun-06 Storm Drain Laterals - Same Fe St 18,300 100.0% 18,300 1.34 24,505 Jun-06 420'4"/135'6"/190'8"/120'12" 14,848 0.0% 0 1.34 0 Jun-06 280'8"-Cottonwood Pk Sub 17,037 0.0% 0 1.34 0 Jun-06 23'12"/685'18"/90'24" Blue Heron 25,604 0.0% 0 1.34 0 Jun-06 963'8" Empire Estates 3&4 22,027 0.0% 0 1.34 0 Jun-06 50'15" Glacier High School 1,200 0.0% 0 1.34 0 Jun-06 140'8" Sinopah 6,415 0.0% 0 1.34 0 Jun-06 283'8" Daily Field Sub 12,883 0.0% 0 1.34 0 Jun-06735'8" Glacier Village Greens 27,202 0.0% 0 1.34 0 Technical Appendix A - Page 3 of 7 1 2 3 4 5 6 7 8 9 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 City of Kalispell Exhibit 2 Storm Water Impact Fee -2016 Determination of Storm Water Impact Fee for Collection Plant ENR: Base CCI Year 7/1/2016 10,379 Page 3 of 4 Percent Original SIF SIF ENR 2016 Year Type Cost Eligible [2] Eligible Rate $ Cost Jun-06 540'8" Ashley Pk Ph 8 16,004 0.0% 0 1.34 0 Jun-06 428'8" Strafford Village Ph 4 13,117 0.0% 0 1.34 0 Jun-06500'8"/250'10"/680'12"Greenery 59,811 0.0% 0 1.34 0 Jun-06 1113'18"/938'24"/213'30"/900'36" 114,388 0.0% 0 1.34 0 Jun-06 1138'8"/938'12" W View Estates 37,420 0.0% 0 1.34 0 Jun-06 435'8"/160'12" Leisure Hts Ph2 17,303 0.0% 0 1.34 0 Jun-05 05 Chevrolet Malibu (410) 9,250 0.0% 0 1.39 0 Jun-05 05 Chevrolet Malibu (409) 9,250 0.0% 0 1.39 0 Jun-07 Aspen Cr Ph.l (287'12") 6,336 0.0% 0 1.30 0 Jun-07 Meadows (557'8"/1228'12") 114,468 0.0% 0 1.30 0 Jun-07 Mtn Vista Ph. 1(Remarks) 61,137 0.0% 0 1.30 0 Jun-07 Mtn Vista Ph. 2 (628'12") 31,979 0.0% 0 1.30 0 Jun-07 Northland Phl(170'8") 8,921 0.0% 0 1.30 0 Jun-07 Northland Ph 2 (372'8") 20,384 0.0% 0 1.30 0 Jun-07 Old School St (660'15") 53,896 0.0% 0 1.30 0 Jun-07 Spring Cr (Remarks) 173,245 0.0% 0 1.30 0 Jun-07 Village Grns Ph. 18(385'8") 11,334 0.0% 0 1.30 0 Jun-07 Westwood Pk(1864'8") 74,266 0.0% 0 1.30 0 Jun-07 Stillwater Bluffs(140'8") 8,395 0.0% 0 1.30 0 Jun-07 Lone Pine Mdws (1040'8") 45,958 0.0% 0 1.30 0 Jun-07 John Deere Cab Tractor 49,400 100.0% 49,400 1.30 64,355 Jun-07 Meridian Rd(12"/18"/24") 874,441 40.0% 349,776 1.30 455,668 Jun-07 Fairway Blvd Infiltration Tank 24,098 100.0% 24,098 1.30 31,393 Jun-08 FY08 Slipline Manhole 9,334 0.0% 0 1.25 0 Jun-08 FY08 Hyster 6000 LB Capacity 4,625 100.0% 4,625 1.25 5,776 Jun-08 08 Dodge lY W/Dump 18,078 100.0% 18,078 1.25 22,577 Jun-08 Diamond Ridge (137'8"/366'12") 32,163 0.0% 0 1.25 0 Jun-08 Treeline Rd (2-30" Catch Basins) 2,276 0.0% 0 1.25 0 Jun-08 Silverbrook 1,970,146 0.0% 0 1.25 0 Jun-08 Reserve LP 485,443 0.0% 0 1.25 0 Jun-08 W View Est Ph 2 (333'8"/362112") 40,131 0.0% 0 1.25 0 Jun-09 Replace Lift Station St#1(Mosquito Drain) 194,648 0.0% 0 1.21 0 Jun-09 Timberwolf Ph1A (165'12") 65,810 0.0% 0 1.21 0 Jun-09 2009 Bobcat 10,576 100.0% 10,576 1.21 12,802 Jun-09 Mobile Pipeline Inspection Unit 13,797 100.0% 13,797 1.21 16,700 Jun-09 2009 Ford Ranger 2,255 0.0% 0 1.21 0 Jun-09 2009 Ford Ranger 2,255 0.0% 0 1.21 0 Jun-10 Glenwood Dr 18"273' Culvert 72,441 0.0% 0 1.18 0 Jun-10 Leisure Hgts Russel Dr(1359'15"0 158,586 100.0% 158,586 1.18 186,995 Jun-10 Stillwtr Rd(54'12"/1435'24"/343'30") 216,865 100.0% 216,865 1.18 255,714 Jun-10 SE Ph 1(1207'12") 177,413 100.0% 177,413 1.18 209,195 Jun-10 Ashley Hgts(31'8"/119'12"/41'24") 17,219 0.0% 0 1.18 0 Jun-10 911 Center (61'12") 2,135 0.0% 0 1.18 0 Jun-11 S Meadows Survey 5,300 100.0% 5,300 1.14 6,062 Jun-10 Lower Spring Creek Storm Drain Dsgn 68,582 100.0% 68,582 1.18 80,868 Jun-11 11Th St E Improvement Project G 43,992 100.0% 43,992 1.14 50,320 Jun-12 20121T Gmc Excab W/Crane&Sery Body 41,684 100.0% 41,684 1.12 46,481 Jun-13 Ph.l & 2 S Meadow Proj 807,875 100.0% 807,875 1.09 878,338 Jun-13 Storm Drain Corrections 86,646 100.0% 86,646 1.09 94,203 Jun-13 Arc/Gis City Works System 24,626 100.0% 24,626 1.09 26,774 Jun-14 Survey Grade Gps System 7,797 100.0% 7,797 1.06 8,252 Jun-14 HP Designjet T1200 Hd Printer 5,596 0.0% 0 1.06 0 Jun-14 Rotating Scraper/Rooter-Lg Diameter 3,321 100.0% 3,321 1.06 3,515 Jun-14 Willows Sid(1248'18") 315,680 23.0% 72,606 1.06 76,847 Jun-14 Fred'S Appliance -Hwy 93 S(13'12")Developer 2,874 0.0% 0 1.06 0 Jun-14 Glacier Eye Clinic -Sect 36(37'12") Developer 6,080 0.0% 0 1.06 0 Technical Appendix A - Page 4 of 7 1 City of Kalispell Page 4 of 2 Exhibit 2 ENR: 3 Storm Water Impact Fee-2016 Base Year 7/1/2016 4 Determination of5torm Water Impact Fee for Collection Plant CCI 10,379 5 6 Percent 7 Original SIF SIF ENR 2016 8 Year Type Cost Eligible [2] Eligible Rate $Cost 9 178 Jun-14 Northland Ph 4-4 Mi Dr(139'12"/105'18") Developer 33,222 0.0% 0 1.06 0 179 Jun-14 Spring Prairie Ph 3-Culver Under Treeline Rd -Developer 90,937 48.0% 43,650 1.06 46,199 180 Jun-132014 Freightliner Vactor Vacuum Truck 327,064 100.0% 327,064 1.09 355,590 181 Jun-15 9Th St E(254'8"/705'12") 294,672 100.0% 294,672 1.03 304,137 182 Jun-15 S Meadows Ph lii (1509'12") 231,026 100.0% 231,026 1.03 238,447 183 Jun-15 Willows Subdivision - See Asset U03156 5,067 100.0% 5,067 1.03 5,230 184 Jun-15 4Th Ave En Storm Improvements 25,454 100.0% 25,454 1.03 26,272 185 Jun-15 Parkway Dr Storm Improvements 54,518 100.0% 54,518 1.03 56,269 186 Jun-15 Mtn Vista Ph 4A(107'8"/187'15") Developer 22,445 0.0% 0 1.03 0 187 Total Existing Collection Plant $14,672,079 $5,251,379 $8,348,229 188 189 Total ERUs at 2035 [3] 31,648 190 191 Total Existing Collection Impact Fee per ERU $264 192 193 Future Committed Improvements [4] 151 194 Projects 195 Southeast Storm Drain Improvements Phase II (Phase I completed) $1,534,151 0% $0 $0 196 Liberty Street Storm Drain Improvements 193,916 0% 0 0 197 Storm Drain Corrections 1,600,000 0% 0 0 198 Spring Creek Re-route 3,194,483 5% 159,724 159,724 199 Stormwater Facility Upsizing 580,000 100% 580,000 580,000 200 Sylvan Drive Conveyance and Detention Impr (ph 1 -pipe, ph 2 WQ+pipe, ph 3 Detention) 971,400 0% 0 0 201 Sand/Cold Mix Storage Shed (total $103,000 split streets, sewer, water, storm) 25,771 0% 0 0 202 North Main Storm Improvement Project 94,576 0% 0 0 203 Elm's Stormwater Improvement Project 123,551 0% 0 0 204 Two Mile Drive Drainage Improvement from Hawthorn to Meridian 270,760 0% 0 0 205 3rd Ave E and 8th St E Intersection Drainage Improvements 186,754 0% 0 0 206 4th St W and 9th Ave W Intersection Drainage Improvements 200,698 0% 0 0 207 Shop Complex Pavement Restoration (Split b/t water, sewer, storm, streets, solid waste) 30,552 0% 0 0 208 Stormwater Quality Treatment Facility- Wyoming Street Outfall 143,154 0% 0 0 209 Stormwater Quality Treatment Facility-8th ave W and 11 St W Outfall 215,919 0% 0 0 210 Stormwater Quality Treatment Facility- 1st Ave W South of City Shops 215,919 0% 0 0 211 Stormwater Quality Treatment Facility- Meridian Detention Facility Outfall 191,417 0% 0 0 212 DP-127: Regional Detention Pond for New Develop. Areas North of Three Mile Dr and W. of Stillwater Rd 1,148,107 100% 1,148,107 1,148,107 213 Storm for 4th Ave E Water Project (project split with water and streets) 381,188 0% 0 0 214 Total Projects $9,768,164 $1,887,831 $1,887,831 215 10,350 216 $182 217 Extension Projects 218 COP-124 (Pipe conveyance from detention pond 124 in West Stillwater Drainage) $3,444,321 100% $3,444,321 $3,444,321 219 10,350 220 $333 221 222 COP-118 (Pipe conveyance from detention pond 118 to Stillwater/N. Kalispell drainage area) $4,121,996 100% $4,121,996 $4,121,996 223 10,350 224 $398 225 226 Total Future Committed Improvements $17,334,481 $9,454,148 $9,454,148 227 228 Total Additional ERUs from 2016 to 2035 [6] 10,350 229 230 Total Future Collection Impact Fee per ERU $913 231 232 Total Existing & Future Collection Fee per ERU $1,177 233 234 235 Notes: 236 /11 From Cityfixed asset records for 2015. 237 /21 Percentage growth relatedfixed assets shown on Cityfied a ssetrecordsfor2015. 238 Percentages were reduced for contributions by developers, grants, and assets funded by TIF or SIDS 239 /31 From Exhibit 1 showing ERUS at 2035. 240 [41 CIP are in 2016 dollars. See Exhibit for details. 241 [51 Committed CIP growth related from City. 242 [61 From Exhibit 1 showing additional ERUS to 2035. Technical Appendix A - Page 5 of 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 City of Kalispell Exhibit 3 Storm Water Impact Fee - 2016 Summary Current Storm Water System Impact Fee $1,068.10 Plus: Administrative Fee 53.40 Total Current Storm Water System Impact Fee 1,121.50 Total Current Storm Water System Impact Fee (rounded) $1,121.00 Calculated Storm Water Impact Fee Plus: Administrative Fee at 5%Allowed [1] Total Calculated Storm Water System Impact Fee $1,177 59 $1,236 Difference $115 Storm Water Impact Fee Calculation Results ($ per ERU) Fee with Future Projects Only Collection Plus: Administrative Cost [1] Net Allowable Impact Fee 27 Fee with COP 124 Extension Project 28 Collection 29 Plus: Administrative Cost [1] 30 Net Allowable Impact Fee 31 32 Fee with COP 118 Extension Project 33 Collection 34 Plus: Administrative Cost [1] 35 Net Allowable Impact Fee 36 37 Existing Future Total $264 $182 $446 13 9 22 $277 $191 $468 COP 124 Only Total $333 $333 17 17 $350 $350 COP 118 Only Total $398 $398 20 20 $418 $418 Future + COP 124 + 38 Fee with Future and COP 124 & 118 Extension Project Existing COP 118 Total 39 Collection $264 $913 $1,177 40 Plus: Administrative Cost [1] 13 46 59 41 Net Allowable Impact Fee $277 $959 $1,236 42 43 44 Notes: 45 [11 Under Montana statute, an impact fee may include a fee for the 46 administration of the impact not to exceed 5% of the impact -fee collected. Technical Appendix A - Page 6 of 7 I City of Kalispell 2 Exhibit 3 Storm Water Impact Fee - 2016 4 Capital Improvement Plan 5 6 7 Project Impact Fee 8 Funding Number Committed Projects 2017 2018 2019 2020 2021 2022 to 2035 Total [1] Rate [4] Growth [4] Total [2] 9 10 Capital Projects 11 R STX-5 Southeast Storm Drain Improvements Phase II (Phase I completed) $1,534,151 $1,534,151 100% 0.0% $0 12 R STX-6 Liberty Street Storm Drain Improvements $193,916 0 193,916 100% 0.0% 0 13 R STX-21 Storm Drain Corrections $100,000 $100,000 $100,000 $100,000 $100,000 100,000 1,000,000 1,600,000 100% 0.0% 0 14 R /I STX-26 Spring Creek Re-route 3,194,483 3,194,483 95% 5.0% 159,724 15 1 STX-32 Stormwater Facility Upsizing 130,000 30,000 30,000 30,000 30,000 30,000 300,000 580,000 0% 100.0% 580,000 16 R STX-39 Sylvan Drive Conveyance and Detention Impr (ph 1 -pipe, ph 2 WQ+ pipe, ph 3 Detention) 581,400 390,000 0 971,400 100% 0.0% 0 17 R STX-40 Sand/Cold Mix Storage Shed (total $103,000 split streets, sewer, water, storm) 25,771 0 25,771 100% 0.0% 0 18 R STX-41 North Main Storm Improvement Project 94,576 0 94,576 100% 0.0% 0 19 R STX-42 Elm's Stormwater Improvement Project 123,551 0 123,551 100% 0.0% 0 20 R STX-43 Two Mile Drive Drainage Improvement from Hawthorn to Meridian 270,760 0 270,760 100% 0.0% 0 21 R STX-45 3rd Ave E and 8th St E Intersection Drainage Improvements 186,754 0 186,754 100% 0.0% 0 22 R STX-46 4th St W and 9th Ave W Intersection Drainage Improvements 200,698 0 200,698 100% 0.0% 0 23 R STX-48 Shop Complex Pavement Restoration (Split b/t water, sewer, storm, streets, solid waste) 30,552 0 30,552 100% 0.0% 0 24 R STX-49 Stormwater Quality Treatment Facility- Wyoming Street Outfall 143,154 0 143,154 100% 0.0% 0 25 R STX-50 Stormwater Quality Treatment Facility-8th ave W and 11 St W Outfall 215,919 0 215,919 100% 0.0% 0 26 R STX-51 Stormwater Quality Treatment Facility- 1st Ave W South of City Shops 215,919 0 215,919 100% 0.0% 0 27 R STX-52 Stormwater Quality Treatment Facility- Meridian Detention Facility Outfall 191,417 0 191,417 100% 0.0% 0 28 1 STX-53 DP-127: Regional Detention Pond for New Develop. Areas North of Three Mile Dr and W. of Stillwater Rd 1,148,107 0 1,148,107 0% 100.0% 1,148,107 29 R STX-54 Storm for 4th Ave E Water Project (project split with water and streets) 381,188 0 381,188 100% 0.0% 0 30 Total Projects $1,248,911 $790,760 $1,588,412 $224,576 $689,771 $731,252 $6,028,634 $11,302,315 $1,887,831 31 32 Extension Projects 33 1 STX-28 COP-124 (Pipe conveyance from detention pond 124 in West Stillwater Drainage) $3,444,321 $0 $3,444,321 0% 100.0% $3,444,321 34 1 STX-29 COP-118 (Pipe conveyance from detention pond 118 to Stillwater/N. Kalispell drainage area) 4,121,996 0 4,121,996 0% 100.0% 4,121,996 35 Total Extension Projects $0 $0 $0 $0 $3,444,321 $4,121,996 $0 $7,566,317 $7,566,317 36 37 Total Committed Projects $1,248,911 $790,760 $1,588,412 $224,576 $4,134,091 $4,853,248 $6,028,634 $18,868,632 $9,454,148 38 39 40 Notes: 41 [1] Capital improvement plan projects were from City Committed CIP from 2017 to 2032. 42 [2] City provided CIP in 2016 dollars. 43 [3] Funding Designation 44 R = Rates 45 1= Impact Fees 46 SID= Special Improvement District 47 TIF-Tax Increment Funding Technical Appendix A - Page 7 of 7 Technical Appendix B — Montana State Impact Fees 2015 Montana Code Annotated Title 7. LOCAL GOVERNMENT CHAPTER 6. FINANCIAL ADMINISTRATION AND TAXATION Part 16. Impact Fees to Fund Capital Improvements 7-6-1601. Definitions. As used in this part, the following definitions 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 does not include consumable supplies. (2) "Connection charge" means the actual cost of connecting a property to a public utility system and is limited to the labor, materials, and overhead involved in making 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, installation, or other action creates additional demand for public facilities. (4) "Governmental entity" means a county, city, town, or consolidated government. (5) (a) "Impact fee" means any charge imposed upon development by a governmental entity as part of the development approval process to fund the additional service capacity required by the development from which it is collected. An impact fee may include a fee for the administration of the impact fee not to exceed 5% of the total impact fee collected. (b) The term does not include: (i) a charge or fee to pay for administration, plan review, or inspection costs 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 district assessments, 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 standards that have been adopted by the governmental entity. (6) "Proportionate share" means that portion of the cost of capital system improvements that reasonably relates to the service demands and needs of the project. A proportionate share must take into account the limitations provided in 7-6-1602. (7) 'Public 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, treatment, or disposal facility or a flood control facility; (e) a police, emergency medical rescue, or fire protection facility; and (f) other facilities for which documentation is prepared as provided in 7-6-1602 that have been approved as part of an impact fee ordinance or resolution by: (i) a two-thirds majority of the governing body of an incorporated city, town, or consolidated local government; or (ii) a unanimous vote of the board of county commissioners of a county government. 7-6-1602. Calculation of impact fees -- documentation required -- 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 than one service area for transportation facilities is needed to Technical Appendix B - Page 1 of 3 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; (j) 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 5 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: (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) The impact fees imposed may not exceed a proportionate share of the costs incurred or to be incurred by the governmental entity in accommodating the development. The following factors must be considered in determining a proportionate share of public facilities capital improvements costs: (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. 7-6-1603. Collection 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 7-6-1602, 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 permitting. (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 Technical Appendix B - Page 2 of 3 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, or 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 adopting 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)0). If impact fees are imposed for 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 7-6-1602 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. 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. 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. Technical Appendix B - Page 3 of 3 Technical Appendix C — Adopted Ordinance City of Kalispell P a` . II Post Office Box 1997 - Kalispell, Montana 59903 l Telephone: (406) 758-7701 Fax: (406) 758-7758 MONTANA MEMORANDUM To: Doug Russell, City Manager DK From: Susie Turner, Public Works Director Re: Stormwater Impact Fee Report Meeting Date: November 20, 2017 BACKGROUND: In 2016 the City initiated the process to update the Stormwater Impact Fee Report and associated fees. The 2017 Stormwater Impact Fee Report was completed in April, recommended by the Impact Fee Advisory Committee in July, and presented to Council at a work session in August. The updated report was developed to be compliant with Montana legislation and includes the calculations, methods, assumptions, and the proposed cost based fee. A copy of the 2017 Stormwater Impact Fee Report is enclosed for reference. As part of the consideration for the adoption of the report, the updated report has been reviewed with Council, public advertisement has been performed, and a public hearing was held on October 16, 2017. FINANCIAL IMPACT: The 2017 Stormwater Impact Fee Report recommends increasing the stormwater impact fee from $1,121/ERU to $1,236/ERU. Table 4-6 as referenced from the report provides a break out of the differences between the present costs per ERU to the proposed calculated 2017 cost per ERU. Impact Fee Per Equivalent Residential Unit[l] Present Calculated Type of Use #of ERUsI`I Impact Fee Impact Fee Single -Family Duplex or Multi -Family Commercial [2] 1.0 .75 ERUs Per Living Unit Calculated on Impervious Area; 2,400 sq. ft./ERU or a maximum of six (6) ERU's per acre if meeting current detention standards $1,121 $1,236 $841/Unit $927/Unit $1,121/2,400 0. $1,236/2,400 s.f. up to up to $6,726/acre $7,416/acre [1] The calculated stormwater impact fee is based on 1 ERU. Streets and highways are exempt from impact fees. [2] Apartments are calculated as commercial ACTION REQUESTED: A motion to approve Resolution No. 5845 to accept and adopt the 2017 Stormwater Impact Fee Report as findings of fact and to impose a Stormwater Impact Fee at 50% of the maximum calculated fee. ALTERNATIVES: As suggested by City Council. ATTACHMENTS: Resolution 5845, and 2017 Stormwater Impact Fee Report RESOLUTION NO.5845 A RESOLUTION TO APPROVE THE CITY OF KALISPELL 2017 STORMWATER IMPACT FEE REPORT, TO AMEND THE CITY'S STORMWATER IMPACT FEES AND TO SET AN EFFECTIVE DATE. WHEREAS, pursuant to authority granted to municipalities operating utility services by Section 69-7-101, MCA and the authority granted to municipalities by 7-6-1601 through 7-6-1604, MCA to charge impact fees to fund capital improvements to utilities, it is prudent and necessary for the City to regularly review the fees, schedules, charges and classifications it imposes on its inhabitants and other persons served by the City of Kalispell Stormwater Utility; and WHEREAS, the Kalispell Impact Fee Committee met with the City's consultant, HDR Engineering, Inc. (HDR) in noticed public meetings to review the HDR report, methodologies utilized and recommendations made on the City's stormwater facilities and thereafter issued its recommendations to the City Council for an amendment to the existing impact fee schedule, including data sources and methodology supporting the amendment; and WHEREAS, on September 5, 2017, the City Council set a public hearing to be held on October 16, 2017 on said proposed amendments to the stormwater impact fees of the City of Kalispell and the City Clerk published the necessary Notice thereof as required by Section 69-7-111, MCA; and WHEREAS, the public hearing was duly held by the City Council in the Kalispell City Hall on October 16, 2017, and all oral and written comments were given consideration by the Council; and WHEREAS, based upon the recommendations of the Kalispell City Impact Fee Committee and the written and oral evidence provided by the public, the City Council adopts as its findings the HDR 2017 Stormwater Impact Fee Report, along with the data sources and methodology used supporting the conclusions therein and further finds it to be reasonable and necessary to adjust the stormwater impact fees to 50% of the maximum calculated fees set forth in the Report. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL AS FOLLOWS: SECTION 1. That the stormwater fees applicable to the use of the City of Kalispell Stormwater Utility and other services performed by said utility, as set forth in Exhibit "A", attached hereto and by this reference made a part hereof, are found to be just and are hereby established and adopted to be imposed for stormwater services to the inhabitants of the City of Kalispell and those other persons served by its stormwater utility service. SECTION 2. This resolution becomes effective ten (10) days after filing of this Resolution with the City Finance Director. The Finance Director shall file a copy hereof with the Public Service Commission of Montana at that time. SECTION 3. That the fees, schedules, charges and classifications applicable to the use of the City of Kalispell Stormwater Utility and other services performed by said utility shall be reviewed no later than five years after the effective date of this resolution. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR THIS 20TH DAY OF NOVEMBER, 2017. ATTEST: C), Aim e Brunckhorst, CMC City Clerk ®'pis ®/`tt�tlll�ea� Type of Use Single -Family Duplex or Multi -Family Commercial [2] Exhibit "A" Mark Joh Mayor Stormwater Impact Fee Impact Fee Per Equivalent Residential Unit [1] Approved Current Final Report Impact Fee Impact Fee Allowable Res. 5845 # of ERUs [1] Res. 5273 Impact Fee (50% of Allowable Fee) $1,121 75 ERUs Per Living Unit $841/Unit Calculated on Impervious $1,121/2,400 s.f Area; 2,400 sq. ft./ERU or a up to maximum of six (6) ERU's per $6,726/acre acre if meeting current detention standards $1,236 $618 $927/Unit $464 $1,236/2,400 s.f. $618/2,400 s.f, up to up to $7,416/acre $3,708/acre [1] The calculated stormwater impact fee is based on 1 ERU. Streets and highways are exempt from impact fees. [2] Apartments are calculated as commercial