HomeMy WebLinkAboutResolution 4048 Adopting the July 2007 Wastwater Impact Fee Cost of Service Study Update
COMMISSION RESOLUTION NO. 4048
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN,
MONTANA, ADOPTING THE JULY 2007 WASTEWATER IMPACT FEE COST
OF SERVICE STUDY UPDATE.
WHEREAS, the City of Bozeman is committed to addressing the community's expressed needs
and desires for services; and
WHEREAS, the City of Bozeman is committed to meeting those desires and demands for
services in a fiscally responsible manner; and
WHEREAS, the City of Bozeman is committed to meeting those desires and demands for
services in a manner which recognizes the fiscal and legal interest of all of the system users now and in
the future and not a limited subset of users; and
WHEREAS, the City of Bozeman has developed and adopted a wastewater facility plan which
examines current and future wastewater needs and provides a lawful, logical, balanced, operationally
sound, and cost effective basis upon which to maintain and develop the City's wastewater system; and
WHEREAS, the City Commission has chosen to utilize impact fees as one portion of an
integrated approach to provide wastewater services; and
WHEREAS, Sections 7-6-1601 through 7-6-1604, MCA provide specific authority and
guidance about the necessary documentation to establish an impact fee and procedures to adopt and
administer an impact fee; and
WHEREAS, the City simultaneously with development of the updated wastewater impact fee
also pursued development of updated wastewater rates; and
WHEREAS, the City staff has developed the wastewater facility plan, capital improvements
program, rate study, and impact fee in a manner open to the public and accepted and responded to
comment and input; and
WHEREAS, the City of Bozeman Impact Fee Advisory Committee considered and made a
recommendation to the City Commission on the draft document; and
WHEREAS, the City Commission conducted a public hearing on May 21, 2007 and continued
the public hearing to July 23, 2007 to enable an extended period of time for public comment and input
on the draft impact fee study update; and
WHEREAS, the Consultant assisting the City of Bozeman during the period between the public
hearings did receive and respond to public comment and determined that no revisions to the draft impact
fee study update were required; and
WHEREAS, the draft was made available for review to the public prior to the resumed public
hearing on July 23,2007; and
WHEREAS, the City Commission again opened the public hearing on July 23, 2007; and
WHEREAS, no testimony was given which disputed the factual basis of the fee study update or
the methodology of the impact fee study update as presented on July 23, 2007; and
WHEREAS, the City Commissioners have reviewed and discussed this impact fee study update
and accept and agree with the content of the impact fee study update and recognize that updates and
modifications will be made in the future in accord with the requirements of Chapter 3.24 BMC; and
WHEREAS, the City Commission found that all required elements necessary for compliance
with standards for development of an impact fee have been satisfied; and
WHEREAS, the City Commission on July 23, 2007 voted to direct staff to bring back a
resolution of adoption for the wastewater impact fee study update.
NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Bozeman,
Montana, that the July 2007 draft of the Wastewater Impact Fee Study Update, as contained in Exhibit
"A", attached hereto and by this reference made a part hereof, is hereby adopted.
PASSED AND ADOPTED by the City Commission of the City of Bozeman, Montana, at a
regular session thereof held on the 6th day of August 2007 and specifying that the study shall be
implemented on September 8, 2007.
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Acting City Clerk
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City of Bozeman
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Final Report
Impact Fees for the
Wastewater System
July 2007
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Prepared by
HDR Engineering, Inc.
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July 18, 2007
Mr. Chris Saunders
City of Bozeman
20 E Olive Street
Bozeman, MT 59715
Subject: Impact Fees for the Wastewater System
Dear Mr. Saunders:
HDR Engineering Inc. was retained by the City of Bozeman (City) to develop recommended
impact fees for the water and wastewater systems for new development. While the City
currently has impact fees for the watcr and wastewatcr systems, these fees need to be updated
and assure compliance with Montana law. To that end, please find attached our final report
dctailing the findings, conclusions and rccommendations of the review undertaken by HDR
Engineering for thc determination of cost based impact fee for the City's wastewater system.
This final report has incorporated appropriate comments from the Southwest Montana Building
Industry Association. HDR Enginecring, Inc. recommends that the City have the charges set .
forth in this report reviewed by its legal counsel to assure compliance with Montana law.
We appreciate the opportunity to provide this technical report to the City. Should you have any
qucstions about this report, please call. It has been a pleasure working with you on this project.
We look forward to the opportunity to continue to provide assistance to the City.
Sincercly yours,
HDR ENGINEERING INC,
~f'/' #/i/-
Randall P. Goff
Project Principal
Attachments
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Contents
1 Introduction and Overview of the Study
1.1 Introduction.......... .............................. .................................. ....................... ......... I-I
1.2 Overview of the Study ......................................................................................... I-I
1.3 Disclaimer........................ ......................... ............................ ....................... ........ 1-2
1.4 Summary ............... .............................................. ...... ............................. .............. 1-2
2 Overview of Impact Fees and "Generally Accepted" Utility
Industry Practices
2.1 Introduction................................. ............. .............. ..................... .......... ............... 2-1
2.2 Defining Ttnpact Fees.......................................... ...... ................................ ........... 2-1
2.3 Historical Perspective...... ............................ .................................. ...................... 2-2
2.4 Impact Fees and "Generally Accepted" Practices ............................................... 2-3
2.5 Financial Obj ectives of 1 mpact Fees.................................................................... 2-6
2.6 Relationship of Impact Fees and New Construction Activity .............................2-7
2.7 SUlnmary ... ..... .................................. .............. ......... ............................. ................ 2-9
3
Overview of Impact Fee Methodologies
3.1 Introduction..... ........... ...... ..................................................... ............................... 3-1
3.2 Impact Fee Criteria.............................................................................................. 3-1
3.3 Overview of the Impact Fee Methodology.......................................................... 3-2
3.4 Summary............ ...................... ........................... ...... ................ ........................... 3w4
4 Legal Considerations in Establishing Impact Fees for the City
4.1 Introduction............................ ............... .................. ................... ................. ......... 4-1
4.2 Requirements under Montana Law...................................................................... 4w 1
4.3 Sunlmary ...................................... ............ ........................................... ................. 4-4
5
Determination of the City Wastewater Impact Fees
5.1 Introduction.. ................................... ................................. .................................... 5-1
5.2 Overview of the City's Wastewater System ........................................................ 5-1
5.3 Present Wastewater Impact Fees ...................... ........................ ........................... 5-1
5.4 Service Areas.................. .................... ........... ............................ .......................... 5-2
5.5 Calculation of the City's Wastewater Impact Fees.............................................. 5w2
5.6 Net Allowable Wastewater Impact Fcc ............................................................... 5-5
5.7 Key Assulnptions ............ ...................... ................. .............................................. 5-6
5.8 Implementation of the Impact Fees...................................................................... 5-7
5.9 Consultant Recommendation ...............................................................................5-7
5.10 Summary.............. ......... .......... ................. .... ............................................... .... ..... 5- 7
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Table of Contents
City of Bozeman, Montana
Tables
5-1 Present Wastewater Impact Fees ......................................................................... 5-2
5-2 Wastewater System Equivalent Residential Units ...............................................5-3
5-3 Allowable Wastewater Impact Fees............................... ...................................... 5-5
5-4 Allowable Wastewater System Impact Fees........................................................ 5-6
Figures
2-1 Overview of the Three~Interrelated Analyses to Review Rates........................... 2-5
2-2 Overview of the "Cash-Basis" Approach to Establishing
Revenue Requirenlents ..... ....... ................................................ ................ ............ 2-6
Appendix A - Wastewater Impact Fees
1 Development of Level of Service and EDUs
2 Wastewater Treatment
3 Collection System
4 Summary
5 High Strength Summary
Appendix B - Montana Code for Impact Fees
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Table of Contents
City of Bozeman. Montana
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Section 1
Introduction and Overview of the Study
HDR Engineering, Inc. was retained by the City of Bozeman; Montana (City) to update and
develop recommended cost based impact fees for the City's wastewater system that comply with
Montana Code 7-6-1601 to 7-6-1604. This report provides details of the development of cost
based impact fees for the City's wastewater system. Impact fees
arc a one-time assessment against new development to pay for
the cost of infrastructure required to provide service. Impact fees
provide the means of balancing the cost requirements for new
utility infrastructurc bctwcen existing customers and new
customers. The portion of existing plant and future capital
improvements that will provide service (capacity) to new
customers is included in the impact fees. Tn contrast to this, the
City has future capital improvement projects that are related to
renewal and replacement of existing facilities in service. These
infrastructure costs arc typically ineluded within the rates
charged to the City's customers, and are not included within the
impact fee. Impact fees and rates exclude those portions of infrastructure directly related to
individual development projects.
1.1 Introduction
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"The objective of this
report is to properly place
in context the purpose of
impact fees, and to
determine cost based
impact fees for the
wQ.'ittewater system that
complies with Montana
law. "
By establishing cost-based impact fees, the City will assure that "growth pays for growth" and
existing utility customers will bc sheltered from the financial impacts of growth. The City
formally adopted the policy of having beneficiaries of services pay for the services in 1983. The
policy has remained in effect ever since and is reflected in many aspects of the City financial
structure.
1.2 Overview of the Study
This report is divided into five distinct components. The next section of the report, Section 2,
provides a rcview of "generally accepted" utility industry practices as they relate to impact fees.
At the same time, it also discusses the financial objectives of impact fees and the practices of
other utilities in relation to this fee. Section 3 provides an overview of the criteria and
methodologies used in the development of cost-based impact fees and Section 4 provides a
summary of the legal requirements for the enactment of impact fees under Montana law. The
cost based impact fee calculation for the City's wastewater system is provided in Section 5. The
study relies upon the adopted wastewater facility plan and other standards established by the
City. These additional materials are cited to but not directly included in this study.
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Introduction and Overview of the Study
City of Bozeman, Montana
1.1
1.3 Disclaimer
HDR Engineering, Inc., in its determination of impact fees presented in this report, has used
"generally accepted" engineering, accounting and ratemaking principles. This should not be
construed as a legal opinion with respect to Montana law. Prior to adoption of this study, the
City conducted a legal analysis of its impact fee program, including this study, and concluded
that the program conforms to all legal requiremcnts.
1.4 Summary
This section of the rcport has provided an overview of the report developed for the City
concerning wastewater impact fecs. The next section of the report will discuss the "generally
accepted" utility industry practices as they relate to impact fees.
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Introduction and Overview of the Study
City of Bozeman. Montana
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Section 2
Overview of Impact Fees and "Generally
Accepted" Utility Industry Practices
2.1 Introduction
An important starting point in discussing the City's continued implementation of wastewater
impact fees is an understanding of the purpose and concept of impact fees and the financial
objective of those fees. This section of the report will discuss the concept of impact fees and the
"generally accepted" practices ofthe industry.
2.2 Defining Impact Fees
One must first define an "impact fee" before beginning
an assessment and review of the fees. Impact fees are
also often called system development charges (SDC's),
capacity charges, buy-in fees, facility expansion charges,
plant investment fees, etc. Regardless of the name
applied to the fee, the concept is still the same. Simply
stated, impact fees "arc capital recovery fees that arc
generally established as one-time charges assessed
against developers or new wastewater customers as a way
to recover a part or all of the cost of system capacity
constructed for their use. Their application has generally
occurred in areas that are experiencing extensive new residential and/or commercial
developmcnt."l The main objective of an impact fee is to assess against the benefiting party,
their proportionate share of the cost of infrastructure required to provide them service. Stated
another way, impact fees imply that new development creates new or additional costs on the
system, and the impact fee assesses that cost in an equitable manner to those customers creating
the additional cost.
"Impact fees are capital
recovery fees that are generally
established as one-time charges
assessed against developers or
new wastewater customer." as a
way to recover a part or all of
the cost of!.ystem capacity
constructed for their use.
I George A. Raftelis, 2nd Edition, Comprehensive Guide to Water and Wastewater Finance and
Pricin!! (Boca Raton: Lewis Publishers, 1993), p.73.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
2-1
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2.3 Historical Perspective
Governments are established to protect the health and safety of the public. Provision of
infrastructure, such as wastewater collection and treatment systems, directly advance this
purpose by avoiding disease. Due to its importance, provision of adequate infrastructure to
deliver adequate service has long been a concern of local, state, and federal governments.
Historically, the financing of infrastructure was typically paid for via long-term debt and "pay as
you go" rates. However, over the last twenty years, the use of impact fees as a method of
financing growth and infrastructure has risen sharply. According to reccnt national surveys,
about 60 percent of all cities with over 25,000 residents and almost 40 percent of all metropolitan
counties use some form of impact fees. In California and Florida, the extent of cities and counties
using impact fees is at 90 and 83 percent, respectively. Since1987, 26 states have passed impact
fec enabling acts. Most of these statcs arc located in the western United States, Great Lakes
region, and on the Atlantic coast. Unfortunately, many of these acts are as prohibitive as they are
pennissive.2 At this timc, thc State of Montana has very specific legislation related to impact
fees. This specific legislation regarding the fees provides the City specific authority to establish
and collect impact fees. This authority is provided in Montana Code Section 7-6-1601 to 7-6-
1604.
Whilc many utility managers viewed impact fees as an important and alternativc source of
funding for new capital construction, these fees were also being rationalized from a number of .
different perspectives. Among these were the following:3
. To shift the fiscal burdens from growth from existing development to new development.
. To synchronize the construction of new or expanded facility capacity with the arrival of new
development.
. To ensure that new development decisions include broad and realistic cost information.
. To respond to locally vocal anti-growth sentiments.
Each of these ditTerent perspectives is discussed in more detail below. In addition, impact fees
allow the continucd ability to develop land by avoiding failed or insufficicnt infrastructure that
constrains growth.
Historically, existing devclopment was often subsidized by federal or state resources. As an
example, in the early 1970's, many wastewater treatment plants in the U.S. were 901% grant
funded by the Environmental Protection Agency (EPA). Today, grants are nearly extinct,
replaced instead by low-interest state revolving fund (SRF) loans. City's ability to issue bonds
are constrained by state law and votcr initiatives have limited the ability to increase taxes.
Citizens of communities have also expressed increasing reluctance to increase their taxes and
fees to provide benefits primarily to others. Therefore, as existing customers were being
impacted by the cost of growth, local communities searched for methods to help minimize rate
2 www.impactfees.com.
~ Adapted from: Arthur C. Nelson, System Development Charges for Water, Wastewater and
Stormwater Facilities (Boca Raton: Lewis Publishers, 1995) p. 6-7.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman. Montana
2.2
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increases and the impacts of the cost of growth.
Unchecked growth and inefficient low density development is very costly on a per unit of service
capacity basis. In response to this dilemma, many legislative bodies created urban growth
boundaries. At the same time, utilities moved towards impact fee and extension policies that
assist in managing system growth in an orderly and coordinated manner. As a result, improved
planning and cost-based fees have helped utilities provide necessary scrviccs, manage the costs
of growth, while stabilizing rates to cxisting customers.
Establishing the price of a commodity equal to its cost is a basic economic and market principle.
]n theory, consumers of a service will make "optimal" consumption decisions when the pricc of
the commodity is set equal to its cost. By establishing cost-based impact fees, developers should
be in a position to make better and more rational decisions concerning new development. At the
same time, proper pricing of impact fees also encourages "right sizing" of facilities to serve new
development. In other words, given the proper price signal, the developer will properly size their
service facilities to meet their realistic needs (e.g. installing a %-inch meter and service pipeline
versus a 2" meter and service pipeline).
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Within all communities, there is a segment of the population that wishes to maintain the status
quo. Concerns over the possibility of increased taxes and service rates and decreased quality of
services due to new development can be a material factor in opposition to growth. Adoption of
impact fees, even if only partially cost-based, helps to constrain cost impacts and loss of service
quality to existing system users.
Accountability, efficiency, and transparency of government has received greater emphasis over
the past two decades. The process of developing and utilizing impact fees is heavily focused on
elear identification of future demand, currcnt conditions, and cquitable assignment of costs. The
use of impact fees helps coordinate provision of service to needed locations in a timely manner.
Impact fees therefore, when use correctly, support accountability, efficiency, and transparency in
government.
Tn summary, the use of impact fees has changed over time, as historical funding sources such as
grants have been reduced or eliminated. In response, many communities have moved towards
adoption of cost-based impact fees, particularly in areas of high growth.
2.4 Impact Fees and "Generally Accepted" Practices
Impact fees arc one input into the rate setting process. Therefore, it is important to understand
how, within the context of "generally accepted" utility industry practices, impact fees may be
used. In conducting a comprehensive rate study, three interrelated analyses are typically
conducted. They are a revenue requirement analysis, cost of service analysis and rate design
analysis. Figure 2-1 provides an overview of each of these analyses.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
2-3
Figure 2-1
Overview of the Three-Interrelated Analyses to Review Rates
Revenue Requirement Analysis
Compares the sources offimds (revenues) to
the expenses ()(the utility to determine the
overall adjustment to rates
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Cost of Service Analysis
Allocates the total revenue requirements to the
various customer classes o(service in a ':fair
and equitable" manner
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Rate Design Analysis
Consider hoth the level and the structure of the
rate design to collect the appropriate and
targeted /evel o(revenue
Impact fees are factored into the revenue requirement analysis, The revenue requirement
analysis for most municipal utilities is referred to as the "cash basis" approach. Figure 2~2,
shown below, provides an overview of the key components of the "cash basis" approach to
developing revenue requirements.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
2.4
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Figure 2-2
Overview of the "Cash-Basis" Approach to Establishing Revenue Requirements
"" , '.,
+ Operationand~*.pt""
+ Taxe./Transfttr9~
~'. Debt Servlce(Netof'AJ)plfe,~U:i,lp'c:tFee.)
+ CaDltallmprovemtn~~uttJIM'f...'t'alM
.",', ',' ,::.\' , ',' :'\' ,.. ","
-Total Revenue Require....:
... MI..cen..f!leo~.yenue8
= Total Req,ui,.i;I ftorn Rates
"
Total Capital Improvement Projects
Less: Outside Funding Sources
- Capital Reserves
- Impact Fees
- Grants
'--- - Long-Term Debt
- Other CaDital Fundina Sources
= Total Capital Improvements Funded From Rates
As can be seen in Figure 2-2, there are two elements to establishing the "cash basis" revenue
requirements. The top or blue box shows the four basic cost components that are included within
the "cash basis" revenue requirements. In contrast, the bottom or yellow box illustrates the
various methods used to fund capital infrastructure projects.
It should be noted in Figure 2-2 that impact fees might be used (applied) in two different ways,
each having a different impact upon the utility's revenue requirements and rates. The first
possible use of impact fees is shown in the bottom or yellow box. In that particular case, the
impact fees are applied directly against growth or expansion related capital projects. The effect
of using the funds in this manner is that it helps to minimize long-term borrowing. For each
dollar of impact fees applied in this manner, one less dollar of long-term borrowing and
associated increased interest costs is required.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
2-5
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The other potential use of impact fees is to apply the fees against growth-related debt scrvice.
As shown in Figure 2-2, debt service paid for by rates is shown as net of any impact fecs
revenues uscd to pay for debt service. In contrast to applying impact fces directly against the
capital project, in this particular case, for every dollar applied in this manner, there is a
corresponding dollar decrcase in revenue requirements and the resulting rates. This is a very
effective method to help minimize rates, but even better at matching the cost of growth to the
way in which customer growth occurs. Tn other words, a utility may build or expand a facility
with sufficient capacity to handle growth over the next ten to twenty years. That growth doesn't
occur in the first year, but rather, tricklcs in over a number of years. Therefore, applying the
impact fees against the debt service associated with the project creates a better matching of the
cost incurrencc (debt payments) to the actual customer growth.
An impact fee represents a fee for service payable by all
users creating additional demand on the facility. To
undcrstand this perspective, one must recognize that new
development creates the need for ncw or expanded facilities.
As a result, without payment of impact fees, the City would
have insufficient revenues to provide the facilities, and
therefore the community is unable to accommodate new
development. Protection of public safety requires the
provision of public infrastructure; therefore the City has
adopted regulations which require its installation so that
adequate service can be delivered. In some circumstances it
is more effective and efficient to collect money payments.
For example, rather than requiring each development to try to build a tiny part of a
wastewater pipe.
2.5 Financial Objectives of Impact Fees
"An impact fee represents a
fee for service payable by all
users creating additional
demand on the facility. To
understand this perspective,
one must view new
development as creating the
needfor new or expanded
facilities. "
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major
Impact fces help the City achieve a number of different financial objectives. These objectives
include financial equity between customers; maintaining cost effective services, avoiding costly
debt, and protecting public safety.
One key financial/rate objective that is achicved from impact fees is equity. Equity is achieved
in two different ways. First, an impact fee establishes equity between existing (old) customers
and new customers. For example, assume that a wastewater treatment plant is expanded by 5
million gallons per day (MOD) to accommodate growth and the facility is financed over a 20-
year period. Without an impact fee, new customers connect to the system and pay for the debt
service on the facility via their rates. The customer that connects to the system in year onc will
contribute to the cost of that facility for 20 years. In contrast, the person who connects in ycar 10
will only pay for debt service on the facility for ten years, even though the "value" of the
capacity was the same for the person connecting in year 1 or year 10. Impact fees create equity
within the system by addressing the issue of timing and the "value" of the assets and the "value"
of the capacity.
The second way 111 which impact fees help to create equity IS after a facility IS paid for.
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2-6
Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
. Continuing with the example above, after the debt service is fully paid off in year 20, and
assuming that capacity is still available, a new customer connecting to the system would "in
theory" receive their capacity at zero cost, because the debt service is paid in full. All the
existing customers connected to the system, over the past twenty years, paid for that customer's
capacity. Therefore, an impact fee is also a form of a financial reimbursement to existing
ratepayers who paid for those facilities in advance of the new customer connecting to the system.
Based upon the above example, impact fees also have an equity perspective associated with the
rate setting process. That is, impact fees are a form of "system buy-in." A properly established
impact fee implies that a new customer connecting to the system has bought into the system at its
current cost. Therefore, from a rate setting perspective the utility does not need to have rates for
"old" and "new" customers. Again, existing customers have been equitably reimbursed for past
investments.
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Most commonly, impact fees are
adopted in high growth areas
where infrastructure expansion
has strained existing financial
resources. Philosophically,
many utilities desire to have a
policy of "growth paying for
growth. "
Even with the above discussion, not all eommumtles
have impact fees. Most commonly, impact fees are
adopted in high growth areas where infrastructure
expansion has strained existing financial resources.
Philosophically, many utilities desire to have a policy of
"growth paying for growth." Impact fees comport with
that philosophy, and it is achieved by applying the
impact fees either directly against the capital cost of the
expansion facilities or against the debt service
associated with it.
2.6 Relationship of Impact Fees and New Construction
Activity
There arc a numbcr of misconceptions surrounding impact fees. In a very broad sense, somc
may argue that impact fees are bad for economic development. These arguments center around
two issues. These are as follows:
. Development will occur on those parcels with lower or non-existent impact fees.
. Impact fees raise the cost of doing business and hinder development
Of the research conducted on these topics, just the opposite has been found. Provided below is a
brief explanation of each.
Developers look at many factors before a parcel is developed. One misconception concerns the
selection of parcels for development and whether impact fees are applied to the land.
"The argument goes that fla developer is choosing between two parcels of land on which
to build-where the first parcel is inside a city where SDC's (System Development
Charge - impact fees) are charged and the second is just outside where lower or no
SDC's (impactfees) are charged-the developer will choose the second parcel.
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2.7
Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
The trouble is this means that the owner <?{ the first parcel does not make a sale. The
landowner must lower the land price to offr;et thefee in order to make a sale. However, !l
the landowner does not lower the price, this indicates that the value qf future
development maJ' he higher on that parcel. Thus, be WalY of developers who claim they
will choose the second parcel. Chances are they would not have chosen the first parcel
anyway. In the meantime. the land market will be holding the first parcel available for
higher value development. In effect what might look like a loss in the short term may be
a much higher level of development in the long-term. ,,4
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The other argument and misconception that one commonly hears about impact fees is that they
are bad for economic development. The argument against this position is as follows:
"The argument goes that because SDC's (impactfees) raise the price q{doing business.
the.v frustrate economic development. However, just the opposite is realzv true. First,
remember that SDC's (impact fees) will be ojfset by reduced land prices and by enabling
the community to more easizy expand the suppzv qfbuildable land relative to demand.
Now, consider what economic development real(v looks for: skilled labor. access to
markets, and land with adequate infrastructure. Competitiveness for economic
development lA/ill be stimulated h.-v the new or expanded b?frastructure paid in part hy
SDC's (impact fees). Besides, local governments retain the option to waive SDC's
(impact fees) fbr spectfic kinds q{ economic development, such as development locating
in enterprise zones. Tn the competition for certain kinds of development, it will be able to
show developers the dollar value qlSDC's (impact fees) waived as a solid demonstration
(~lthe local government's commitment to such development. ,,5
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"A.\' can be seen, at least
in the opinion of
Nelson, impactJees do
not hinder growth, but
in fact may help to spur
growth. "
As can be seen, at least in the opinion of Nelson, impact fees do
not hinder growth, but in fact may help to spur growth. It must
be remembered that an important concept associated with impact
fees is that the fees are required to develop infrastructure
concurrently with or in advance of the actual developmcnt.
From the developer's perspective, absent impact fees (i.e. a
moratorium on ncw connections) no new development can
occur. Therefore, developers arc generalIy supportive of equitable cost-based impact fees,
particularly when it provides available capacity and opportunities for development.
4 Nelson. "System Development Charges for Water, Wastewater and Stormwater .Facilities" P. 55.
Nelson, "System Development Charges for Water, Wastewater and Stormwater Facilities" P. 56.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
2.8
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2.7 Summary
This section of the report has provided an overview of the financial objectives associated with
impact fees and some of the issues surrounding them. This section should have provided a basic
understanding of the fees such that when the City is ready to have a policy discussion concerning
the continued implementation of impact fees and the imposition of new impact fees, they can be
placed in proper perspective. The next section of the report will provide an overview of
methodologies for the imposition of impact fees.
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Overview of Impact Fees and "Generally Accepted" Utility Industry Practices
City of Bozeman, Montana
2-9
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Section 3
Overview of Impact Fee Methodologies
3.1 Introduction
An important starting point in establishing impact fees is to have a basic understanding of the
purpose of these charges, along with criteria and general methodology that is used to establish
cost-based impact fees. Presented in the section of the report is an overview of impact fees
criteria and general methodologies that are used to develop cost-based fees.
3.2 Impact fee Criteria
In the determination and establishment of the impact fees, a number of different criteria are often
utilized. The criteria often used by utilities to establish impact fees are as follows:
. Customer understanding
. System planning criteria
. Financing criteria, and
. State/local laws
The component of customer understanding implies that the charge is easy to understand. This
criterion has implications on the way that the fee is implemented, administered and assessed to
the customer. For wastewater systems, the charge can be based on meter size or the type of
dwelling or business type being assessed. For example, a school could be assessed based on a
per student basis corresponding to the sanitary sewer flow per student. The other implication of
this criterion is that the methodology is clear and concise in its calculation of the amount of
infrastructure necessary to provide service.
The use of system planning criteria is one of the more
important aspects in the detennination of impact fees.
System planning criteria provides the "rational nexus", or
logical connection, bctween the amount of infrastructure
necessary to provide service and the charge to the
customer. The rationalncxus test requires that there be a
connection (nexus) established between new
development and the existing or expanded facilities
required to accommodate new development; and
appropriate apportionment of the cost to the new
development in relation to benefits reasonably received.
An example using system-planning criteria is the
determination that a single-family residential customer requires 204.7 gallons on average of
wastewater treatment. The impact fee methodology then charges the customer for 204.7 gallons
of wastewater treatment at the cost of treatment.
"The use of !Jystem planning
criteria is one of the more
important a!.pects in the
determination of/he impact
fees. System planning criteria
provides the "rational nexus" or
logical connection between the
amount of infrastructure
necessary to provide service and
the charge to the customer. "
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3-1
Overview of Impact Fee Methodologies
City of Bozeman. Montana
.
.
.
One of the driving forces behind establishing cost-based impact fees is the City's adopted policy
since 1983 that "growth pays for growth." Therefore, impact fees are typically established as a
means of having new customers pay an equitable share of the cost of their rcquired capacity
(infrastructure). Thc financing criteria for establishing impact fees relates to the method used to
finance infrastructure of the system and assures that customers are not paying twice for
infrastructure ~ once through impact fees and again through rates. The doublc payment can
come in through the imposition of impact fees and then the requirement to pay debt service
within a customer's rates. The financing criterion also reviews the basis under which collection
line extensions were provided and assures that customers are not charged for infrastructure that
was provided (contributed) by developers.
Many states and local communities have enacted laws, which govern the calculation and
imposition of impact fees. These laws must be followed in the determination of the impact fees.
Most statutes require a "reasonable relationship" between the fee charged and the cost associated
with providing service (capacity) to the customer. The charges do not need to be mathematically
exact, but must bear a reasonable relationship to the cost burden imposed. As discussed above,
the utilization of the planning criteria and the actual costs of construction and the planned costs
of construction provide the nexus for the reasonable relationship requirement.
3.3 Overview of the Impact Fee Methodology
There are "generally-accepted" methodologies that are used to establish impact fees. Within the
"generally accepted" impact fee methodologies, there are a number of different steps undertaken.
These steps are as follows:
. Determination of system planning criteria
. Determination of equivalent residential dwelling units (EDUs)
. Calculation of system component costs
. Determination of any credits
The first step in establishing impact fees is the determination of the system planning criteria as
established in the wastewater facilities plan. A common unit of capacity demand is needed in
order to enable calculation of demand across many different types of users. This is the amount of
wastewater generated by a single-household residential customer, or EDU. For the wastewater
system, the common unit of capacity demand is the average wastewater flow per EDU. The use
of strength can also be developed if the system contains very high strength customers. While a
wastewater system has many planning factors, such as peak flow, if these arc consistent for
customer types, then the use of average flow is appropriate. The average flow approach
recognizes that the demand at a specific location may vary greatly over time. Since impact fees
arc a one time charge the average allows a reasonable representative calculation. Special cases
may be identified that require an alternative approach. Such special cases will be addressed on a
case by case basis.
Once the system planning criteria are determined, the number of EDUs able to be served by
expansion of system capacity can be determined. For the wastewater system total number of
EDUs is determined by dividing the total system average flow by the average wastewater flow
per EDU. This is a very important calculation since it provides the linkage between the amounts
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Overview of Impact Fee Methodologies
City of Bozeman, Montana
3.2
of infrastructure necessary to providc scrvicc to a sct numbcr of customcrs. This implics that if
the system is designed to provide service to flow up to the year 2025, then the infrastmeture
costs are divided by the EDUs in 2025.
.
Onee the number of EDUs has been determined, a eomponent by componcnt (e.g. treatment,
collection, ctc.) analysis is undertaken to determine the component impact fee in $ per EDU.
Individual plant components are analyzed scparately for the wastewatcr system given that the
planning criteria for the design of the various system components differ. The calculation of the
component impact fee includes both historical assets and planned future assets. Historical asscts
can be valued in a numbcr of different ways. These include original cost plus intcrcst,
replacemcnt cost and depreciated replacement costs. Costs are limited to those providing
capacity expansion beyond that required for minimum local scrvicc needs, such as the local
collection system. As shown in Exhibit 3, these costs are not included as part of the impact fee
calculation.
. Thc original cost plus interest method includes original cost plus ten (10) years worth of
interest. This calculation is done to reflect the fact that existing customers have provided for
excess capacity in the system and hence need to be reimbursed for not only their initial
investment, but also the "carrying cost" on that investment. The reimbursement to existing
customers is accomplished by the fact that without an impact fcc, rates would otherwise be
higher than they would be without impact fees.
. The replacement cost method values existing assets based on the eost to replace the assets in
today's dollars. This is done by escalating the original eost by the Engineering News Record
Constmction Cost (ENR) index. The theoretical basis for the use of replaeement cost is that
customers are indifferent since they would have to pay replacement cost if the infrastmcture
was built today to serve their needs.
.
. Thc use of depreciated replacement cost reflects thc fact that thc assets have been used and
hence their value to thc new customer is less than the replacement cost. Caution nccds to bc
exercised in the use of depreciated replaccmcnt cost, sincc thc book or accounting lives used
by many utilities are not reflective of the actual life of the asset and may result in the assets
being undervalued. An example is using a useful life for a storage reservoir of 40 years,
when in reality, with maintenance, the actual life maybe between 60 to 80 years.
Each of these three (3) methods are used in the industry and the appropriate method selected by
the City should bc bascd on thc method that best reflects the cost of providing capacity in thc
systems. HDR Engineering, Inc. recommends the usc of the original cost with interest method,
since it will rcflcct the actual cost of the City's system. The City's system is developed to serve
future dcvelopment through existing capacity and planned future capacity additions. This has
becn accomplished by the City building excess capacity. Thcrefore, the use of the original cost
with intcrest mcthod will reflect the actual costs that have been incurred or will be incurred by
the City in providing capacity to new development. This is also the most commonly used
method to value capacity in wastewater systems. This method also appears to comply with the
requirements under Montana law wherein in the "actual cost" of infrastructure is required.
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Overview of Impact Fee Methodologies
City of Bozeman, Montana
3.3
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The total cost of the capital infrastructure is then divided by the appropriate number of
equivalent dwelling units the infrastructure will serve to determine the cost per EDU for the
specific plant component.
After each plant component is analyzed and a cost per EDU is determined, the cost per EDU for
each of the plant components is added together to determine the "gross impact fee." The "gross
impact fee" is calculated before any credits for debt service.
The last step in the calculation of the impact fee is the determination of any credits. This is
generally a calculation to assure that customers are not paying twice - once through impact fees
and again through debt service included within thc wastewater rates. A crediting mechanism is
also utilized if general obligation or tax revenue has been used to finance the infrastructure.
The final impact fee is detennined by taking the "gross impact fee" and subtracting any credits.
This results in a "net impact fee" stated in dollars per EDU. The general basis of this calculation
for a wastewater system is the assumption of an EDU. Larger meter sizes are then assigned fees
based on the number of ED Us for a given meter size based on operating capacity. The theory for
this approach is that larger meter sizes create greater flows on the wastewater system and hence
impose additional costs on the wastewater system.
.
In order to maintain the necessary proportionality in cost to service benefits the impact fees need
to be periodically updated. Updates should examine both increased costs of construction and
changes in the number and type of infrastructure to be constructed.
3.4 Summary
This section has provided a discussion of the criteria typically used in the determination of
impact fees. In addition, an overview of the "generally accepted" methodology used in the
calculation of the impact fees has been provided. Given this background, the next section of the
report discusses any specific legal criteria that must be used by the City in the establishment of
its impact fees.
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Overview of Impact Fee Methodologies
City of Bozeman, Montana
34
Section 4
Legal Considerations in Establishing Impact
Fees for the City
4.1 Introduction
An important consideration in establishing impact fees is any legal requirements at the state or
local level. The legal requirements often establish the methodology around which the impaet
fees must be calculated or how the funds must be used. Given that, it is important for the City to
understand these legal requirements. This section of the report provides an overview of the legal
requirements for establishing impact fees under Montana law.
The discussion within this section of the report is intended to be a summary of our understanding
of the relevant Montana law as it relates to establishing impact fec. It in no way constitutes a
]egal interpretation of Montana law by HDR Engineering, Inc.
4.2 Requirements under Montana Law
In establishing impact fees, an important requirement is that they be developed and implemented
in conformance with local laws. In particular, many states have established specific laws
regarding the establishment, calculation and implementation of
capacity fees. The main objective of most state laws is to assure that
these charges are established in such a manner that they are fair,
equitable and cost.based. In other cases, state legislation may have
been needed to provide the legislative powers to the utility to
establish the charges.
"The lawsfor the
enactment of impact
lees in Montana are
found in 7-6-1601 to
7-6-1604 of the
Montana Code.
In general, thc power to impose exactions must either be expressly
granted by statute, or be reasonably inferred from express statutory
provision. Montana Subdivision statutes authorize monetary exactions in separate sections of the
Montana Code. Mont. Code Ann. S 76-3-510 provides that, as a condition of subdivision
approval, the City may require that a development payor guarantee payment for part or all of the
costs of extending capita] facilities related to the public health and safety, including but not
limited to public roads, sewer lines, water supply lines, and stornl drains to a subdivision. Mont.
Code Ann. S 76-3-621 requires that subdividers dedicate a portion of a proposed subdivision for
use as parks or open space. Alternatively, the statute authorizes the City to require the
subdivider to pay the cash equivalent to the fair market value of the required portion that would
have otherwise been utilized as a park. These statutes apply only to subdivisions.
The Montana Supreme Court has also recognized a city's authority to impose development fees
in other circumstances. In Lechner v. City afBillings, (Mont. 1990) 797 P.2d 191, the Court
concluded that if a statutory framework authorizing the operation of an improvement or system
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Legal Considerations in Establishing Capacity Charges for the City
City of Bozeman, Montana
4.1
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.
.
.
of improvements existed (e.g., sewer or water system), and a provision allowing for charge of a
fee for the service or the improvement existed, then it is a reasonable extension of the city's
express statutory authority to accumulate fees to pay for the implementation of that authority.
Cities and counties, prior to 2005, enacted impact fees through the authority of these and other
statutes and powers.
The Montana enabling legislation for impact fees was enacted in 2005 via Senate Bill 185. This
was comprehensive legislation specifically 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 as Appendix B.
A summary of the requirements under Montana law is as follows:
"7-6-1601. Definitions. As used in this part. the following definitions appZv:...
.
...5) (a) "Impact fee" means any charge imposed upon development by a
governmental entit.v as part of the development approval process to fund the
additional service capacity required b.v the development from which it is
collected. An impactfee may include afeefor the administration of the impactfee
not to exceed 5~() of the total impact fee collected.
(b) The term does not include:
(i) a charge orfee to pay for administration, plan review, or inspection
costs associated with a permit requiredfor development;
(iO a connection charge;
(iiiJ any other fee authorized by law. including but not limited to user
.lees. !!;pecial improvement district assessments, fees authorized under Title 7 for
count.v. municipal, and consolidated government sewer and water districts and
.\~vstems, and costs (?/,ongoing maintenance; or
(iv) onsite or off'lite improvements necessary .lor new development to
meet the safe t.v. level of service. and other minimum development standard\' that
have been adopted by the governmental entity.
.
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
documentation that:
(a) describes existing conditions of the facility;
(b) establishes level o/,service standards;
(c) forecastsflJture additional need.. for service for a defined period of time;
(d) identifies capital improvements necessary to meet future need'ifbr service:
(e) ident(fies those capital improvements neededfor continued operation and
maintenance C?fthefacility;
(j) makes 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;
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Legal Considerations in Establishing Capacity Charges for the City
City of Bozeman, Montana
4-2
(g) makes a determination as to whether one service area or more than one
service area fhr transportation facilities is needed to establish a correlation
between impact fees and benefits;
(h) establishes the methodology and time period over which the governmental
enti~v will assign the proportionate share of capital costs fhr expansion q{ the
faciliry to provide sen1ice to new development within each service area;
(i) establishes the methodology that the governmental enti~v will use to exclude
operations and maintenance costs and correction of existing deficienciesfrom the
impact fee;
(j) establishes the amount of the impact fee that will be imposedfor each unit
of increased service demand; and
(k) has a component of the budget of the governmental entiZv that:
(i) schedules construction of public faciliZv capital improvements to
serve projected growth;
(ii) projects costs qfthe capital improvements;
(Ui) allocates collected impact fees for construction of the capital
improvements; and
(iv) covers at least a 5-.vear period and is reviewed and updated at least
every 2 years.
....5) An impact fee must meet the fhllowing requirements:
(a) The amount of the impact fee must be reasonabzv related to and reasonabzv
attributable to the development's share (~fthe cost q{i1?!rastructure 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 entiZv in accommodating the
development. The fhllowing factors must be considered in determining a
proportionate share ofpublic/acilities capital improvements costs:
(i) the needfor public facilities capital improvements required to serve
new development; and
(if) consideration qf payments for system improvements reasonabzv
anticipated to be made by or as a result qf the development in the form C?l user
.lees. debt service pa.vments. taxes. and other available sources qrfunding the
system improvements.
(c) Costs for correction o.f existing deficiencies in a public faciliZv ma.-v not be
included in the impact fee.
(d) New development maJ' not be held to a higher level o.fservice 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 .lees maJ' not include expenses fhr operations and maintenance qf
thefaciliZv.
7-6-1603. Collection and expenditure of impact fees -- refunds or credits --
mechanism for appeal required....
...(3) A governmental entity may recoup costs (?f' excess capaciry in existing
capital facilities, when the excess capaciZv has been provided in anticipation qf
the needs qf new development, by requiring impact fees for that portion q{ the
.
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Legal Considerations in Establishing Capacity Charges for the City
City of Bozeman, Montana
4-3
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facilities constructed .FJr 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 enti(vfrom continuing to assess an impactfee that recoups costsfhr
excess capacity in an existingfacili(v. The impactfees imposed to recoup the costs
to provide the excess capacity must be based on the governmental enti(v's actual
cost of acquiring. constructing, or upgrading the facility and must be no more
than a proportionate share qlthe costs to provide the excess capacity. "
The use of the methodology discussed in Section 3, is designed to assure that the proportional
share standard is met and the impact fees are in compliance with Montana law.
4.3 Summary
This section of the report has reviewed the legal basis for establishing impact fees in Montana.
HDR concludes that the City has the authority to establish cost-based impact fees and the
methodology used is designed to assure compliance with Montana law.
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Legal Considerations in Establishing Capacity Charges for the City
City of Bozeman, Montana
4-4
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Section 5
Determination of the City's Wastewater
Impact Fees
5.1 Introduction
The calculation of wastewater impact fees presented in this section are based on the City's fixed
asset records, future capital improvements, and planning criteria from the facility plan entitled,
Bozeman Wastett'ater Facilities Plan, dated March, 2007 (the wastewater facilities plan).
To the extent that the cost and timing of future capital improvements change, then the impact
fees presented in this section should be updated to reflect the cost of these adjustments.
5.2 Overview of the City's Wastewater System
The City's wastewater system consists of conventional sewer mains and lift stations to deliver
wastewater to the City's treatment plant. The City has a single wastewater treatment plant with a
current design capacity of 5.80 MGD average annual flow. To meet capacity and effluent .
quality requirements, the City's capital improvement plan calls for a number of improvements to
the solids handling processes and liquid treatment facilities at the wastewater treatment plan.
These improvements will be accomplished in three phases. The improvements through Phase 3
will expand the wastewater treatment plant trom 5.80 mgd average daily flow to 13.9 mgd
average daily flow.
The City will also need to make improvements to the existing collection system by upsizing
existing pipe or paralleling existing pipe to accommodate growth. The City will also need to
add a large number of new extensions and pump stations to the existing system to service growth
in currently unsewered areas. The City's discharge of treated wastewater is subject to permitting
by the Montana Department of Environmental Quality. Recent changes in the pollutant discharge
standards under which thc permit is issued will have a substantial impact on the City treatment
plant and future capacity expansion.
5.3 Present Wastewater Impact Fees
The City currently assesses an impact fee for connection to the wastewater system. By policy,
the City has chosen to only assess 80% of the allowable fee. The current allowable wastewater
impact fees and currently assessed wastewater impact fees are shown in Table 5-1.
.
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Determination of the City's Wastewater Impact Fees
City of Bozeman, Montana
5-1
.
'1," 1.00 $3,540.57 $ 2,832.46
1" 2.50 8,852.08 7,081.67
1-1/4" 3.50 12,392.66 9,914.12
1-1/2" 5.00 17,702.86 14,162.29
2" 8.00 28,324.57 22,659.66
1" 16.00 56,649.14 45,319.31
4" 25.00 88,514.29 70,811.43
6" 50.00 177,028.57 141,622.86
8" 80.00 283,245.72 226,596.57
5.4 Service Areas
Pursuant to MCA 7-6.1602(1) (t) in the determination of Wastewater Impact Fees, the following
must be considered:
.
"makes a determination as to whether one service area or more than one service
area is necessOlY to estahlish a correlation between impactfees and benefits;"
The City operates the wastewater system as a single integrated utility. This allows all assets to
service all customers.
Based on these factors and a knowledge of the wastewater system, the City has determined that
for the purpose of calculating and imposing Wastewater Impact Fees, that the entire City will be
treated as a single service area pursuant to MCA 7.6.1602(1) (t).
5.5 Calculation of the City's Wastewater Impact Fees
As was discussed in Section 3, the process of calculating impact fees is based upon a four-step
process. In summary form, these steps were as follows:
. Determination of system plalming criteria
. Detem1ination of equivalent dwelling units (EDUs)
. Calculation of the impact fee for system component costs
. Determination of any impact fee credits
Each of these areas is discussed in more detail below.
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Determination of the City's Wastewater Impaet Fees
City of Bozeman, Montana
5.2
.
5.5.1 System Planning Criteria
The number of wastewater equivalent dwelling units (EDUs) was determined based on the
wastewater facilities plan. The wastewater facilities plan determines average daily flow per
capita. The facilities plan documents an average of 89 gallons per capita per day (gpcd) and
incorporates the 2000 Census average number of persons per household of 2.3. This results in a
usage per EDU of204.70.
5.5.2 Calculation of Equivalent Dwelling Units
The planning horizon of this impact fee study was 2005 - 2025. This is the same planning
horizon used in the wastewater facilities plan for which the City's existing wastewater system
and future improvements will provide service to an expanded area.
As a part of this impact fee study, a projection of the number of new/additional EDUs per year
must he determined, along with the total number of EDUs at 2025. The City's total number of
EDUs for each year was detem1ined by dividing the total system average flow by the average
flow per EDU. The total system average flow was based on the flow projections per the
wastewater facilities plan.
A summary of the EDUs for 2005 and 2025 arc presented in Table 5-2. Details of the
determination of ED Us arc provided in Exhibit 1 of the Technical Appendix. .
Table 5-2
City of Bozeman, Montana
Number of Wastewater Equivalent Dwelling Units
Equivalent Dwelling Units - 2005
Equivalent Dwelling Units - 2025
25,403
67,904
After the determination of the total future wastewater EDUs for each year of the planning period,
the focus can shift to the calculation of the impact fee for each plant component. This aspect of
the analysis is discussed in detail below.
5.5.3 Calculation of the Impact Fee for the Major System Components
The next step of the analysis is to review each major functional component of plant in service
and determine the impact fee for that component. In calculating the impact fee for the City, both
existing plant assets with excess capacity, along with planned future improvements were
included within the calculation. Only existing and future assets with a useful life of 10 years or
greater were included in the impact fee calculation. The major components of the City's
wastewater system that were reviewed for purposes of calculating impact fees are as follows:
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Determination of the City's Wastewater Impact Fees
City of Bozeman, Montana
5-3
.
.
.
. Wastewater Treatment Plant
. Collection System
. Administrative Charge
A brief discussion of the impact fee calculated for each system component below.
TREATMENT PLANT - The City currently operates a 5.80 mi\1ion gallon pcr day wastewater
treatment plant. This plant is currently at or near capacity and the City has begun design on an
expansion to the treatment plant to accommodate growth and more rigorous regulatory standards.
The new treatment plant will be constructed in three phases and will bring the total capacity of
the treatment plant to 13.90 mgd. The estimated costs in the wastewater facilities plan were
2005 dollars. To more accurately reflect probable future costs the facilities plan estimates were
increased to 2007 dollars based on the rate of inflation. Those costs which would provide new
capacity were then allocated to the impact fee. A portion of the Phase I improvements were not
included in the impact fee calculation, due to these improvements being required to treat existing
flows to higher level and to correct eurrcnt dcfieieneies at the wastewater treatment plant. The
total cost of new wastewater treatment that would serve new development was divided by thc
additional capacity which resulted in a cost per gallon of $5.21. This cost per gallon was then
multiplied by the usage per EDU to determine the wastewater treatment plant impact fee. Based
on the costs and capacity of treatment plant for the City, the impact fee for treatment is $1,065.73
per EDU. Details of the calculations are provided in Exhibit 2 of Tcehnieal Appendix.
COLLECTION SYSTEM - The City's collection network consists of numerous pipes of varying
diameters. To determine the impact fee for the wastewater collection system, an inventory of the
existing system was undertakcn, as we\1 as those planned improvements, including both priority
projects and expansion projects, as identified in the wastewater facility plan. The historical
investments of the City were adjusted for interest charges up to a maximum of ten years and
allocated to growth based on the number of new EDUs to total EDUs in 2025. A\1lines 8" and
less were excluded from the impact fee calculation. For existing plant it was assumed that all
lines were provided by development and therefore excluded from the impact fee calculation.
The installation of 8" or less represents City minimum standard improvements which are the
obligations of new development or the correction of existing deficiencies that are paid for by
rates. The remaining investments were subsequently divided by the number of new EDUs added
from 2005 to 2025 to determine the cost per EDU. This approach provides that new
development only pay their proportional share to the cost of existing assets providing service.
Future capital improvements were assumed to serve new development for the planning horizon
from 2005 to 2025 and were then divided by the number of new EDUs added over the planning
horizon. Only those improvements that would provide new capacity were allocated to the impact
fee. A linc by linc rcvicw was undertaken of the improvements. For those improvemcnts that
would be oversized and replace an existing line, only new capacity was included in the impact
fee.
In the calculation of the impact fee for collection plant a numbcr of items were excluded. First,
all existing collection system cxpansions that werc contributed by developers, financed through
improvement districts or contributed by grants were excluded from the analysis. Additionally,
for future collection plant, an item by item review was undertaken for future capital
L """'R Determination of the City's Wastewater Impact Fees 5-4
c-J..A. City of Bozeman, Montana
improvements to determine the percentage that would serve new development. Replacements
were also excluded since these arc not growth related and should be paid for through rates.
For extensions to the system, it was assumed that new development would be required to pay for
a pipe size up to 8-inches. This size is the smallest main allowed by the City's Design Standards
and Specifications Policy. In some circumstances an individual project may require more than
the 8 inch sewer main to service its specific needs. Over-sizing beyond the minimum size of pipe
may be paid for by the City through impact fees in compliance with the procedures for
expending impact fee funds. Based on the cost incurred by the City, the impact fee for existing
collection system is $121.21 per EDU. For future collection system expansion, the impact fee is
$1,625.59 per EDU. This results in a total impact fee for collection plant of$1,746.80 per EDU.
Details of the calculation are provided in Exhibit 3 of the Technical Appendix.
ADMINISTRATIVE CHARGE - Under Montana statute, an impact fee may include a fee for the
administration of the impact fee program not to excecd 5% of the impact fee collected. The City
will implement the allowed 5%. The City has included a wastewater administrative charge of
$140.63 per EDU.
5.5.4 Debt Service Credits
.
The final step in calculating the wastewater impact fee was to determine if a credit for payment
on debt service for the City's outstanding bonds. The City currently has no outstanding
wastewater revenue bonds or loans and docs not plan to issue additional revenue bonds to
finance the wastewater treatment plant expansion. Therefore, no credit for debt service is
required. .
5.5 Net Allowable Wastewater Impact Fees
Based on the sum of the component costs calculated above, the net allowable wastewatcr impact
fee can be detcnnined. "Net" refers to the "gross" impact fee, less any debt service credits.
"Allowablc" refers to the concept that the calculated impact fee shown in the following tables is
the City's cost-based impact fce. Thc City, as a matter of policy, may charge any amount up to
the allowable impact fee, but not over that amount. Charging an amount greater than the
allowablc impact fee would not meet the nexus test of a cost-based impact fee. A summary of
the calculated net allowable wastewater impact fees for the City arc shown in the Table 5-3.
Table 5-3
City of Bozeman, Montana
Allowable Wastewater Impact Fee
Plant Component
Wastewater Treatment
Collection
Administrative Charge
Debt Service Credit for Bonds
Total
Fee
$],065.73
1,746.80
]40.63
0.00
$2,953.16
HR
Determination of the City's Wastewater Impact Fees
City of Bozeman, Montana
5.5
.
.
The impact fee for wastewater system is $2,953.16 per EDD. Details of the net allowable impact
fees for the City arc shown in Exhibit 4 in the Technical Appendix. For case of administration,
the recommended maximum allowable chargc for an EDU is $2,955.
Based on the impact fee for "1 EDU", the charges for the various sized service lines would result
in the following impact fecs as shown in Tablc 5-4. Othcr mctcr sizcs are then weighted based
on Amcrican Water Works Association capacity flow ratings.
.'."'mil~iii'!iGij.i~li:
.'Cbarge'
3/4" 1.00 $2,955
I" 2.50 7,388
1-1/2'''' 5.00 14,775
2" 8.00 23,640
r 16.00 47,280
Over 3" I Calculated I
J - The impactfee(or meter sizes over 3" shall be calculated by/irst determining the number of ED Us by dividing
the average annual daiZvflow by 204. 70 gallons per EDU. The impact fee shall then be the number 4EDUs times
the impactfeefor 1 EDU. A strength surcharge shall also apply hased on the numher of pounds.
.
In Table 5-4 the impact fees for the larger meter sizes up to 3" are determined by multiplying the
impact fees for an EDU by the weighting factors. Thc weighting factors reflect the increased
flow that the customer can impose on the system and hence the increased cost required to
provide capacity to the custom cr. For mctcr sizcs over 3", thc wastcwater impact fee is
calculated based on the actual flow and the flow definition for an EDU.
Thc wastewater impact fees as calculated assume a strength level equivalent to a single family
residential unit. To the extent that a commercial or industrial customer has a strength level
greater than a single family residential meter, then the treatment plant component of the impact
fee will be increased in proportion to the increase strength and then multiplied by the EDU factor
to reflect the additional treatment plant costs incurred by the City to treat the customer's
wastewater. See Exhibit 5 for the detailed calculations.
5.6 Key Assumptions
.
In the development of the impact fees for the City's wastewater system a number of key
assumptions were utilized. These are as follows:
. The City's asset records were used to determine the nature and value of existing wastewater
collection and treatment assets.
. The interest rate used for calculating interest on existing investments was 5.0%
. 10 years worth of interest were included in the cost of existing plant.
I-il~
Determination of the City's Wastewater Impact Fees
City of Bozeman, Montana
5-6
. The findings required under MCA 7-6-1602 were provided in the wastewater facilities plan
and this report
.
5.7 Implementation of the Impact Fees
The methodology used to calculate the impact fees takes into account the cost of money or
interest charges and inflation. Therefore, HDR Engineering, Inc. would recommend that the City
adjust the impact fees each year by an escalation factor to reflect the cost of interest and
inf1ation. The most frequently used source to escalate impact fees is the ENR index which tracks
changes in construction costs for municipal utility projects. This method of escalating the City's
impact fee should be used for no more than a two-year period. After this time period, as required
by Montana law, the City should update the charges based on the actual cost of infrastructure and
any new planned facilities that would be contained in an updated facilities plan, capital
improvement plan or rate study.
5.8 Consultant Recommendations
Based on our review and analysis of the City wastewater impact fees, HDR Engineering, Inc.
makes the following recommendations:
. The City implement impact fees for new and expanded connections to the wastewater system
that are no greater than the impact fees as set forth in this report.
. The City update the impact fees calculations based periodically as required by State law and
City ordinance.
.
5.9 Summary
The wastewater impact fees determined and presented in this section of the report are based on
the engineering design criteria of the City's wastewater system, the value of the existing assets,
future capital improvements and "generally accepted" impact fee calculation principles.
Adoption of the proposed impact fees will provide multiple benefits to the system users as well
as the City and create equitable and cost-based charges for new customers connecting to the
City's wastewater system.
.
Jil"
Determination of the City's Wastewater Impact Fees
City of Bozeman, Montana
5-7
_...- -"._-
It
TECHNICAL APPENDIX A
WASTEWATER IMPACT FEES
.
.
Wastewater Impact Fees - Calculation Basis
.
Exhibit 1 - Determination of LOS and Equivalent Dwelling Units
Average Usage per EDU = Average Residential Usage (gpcd) * Persons per Household
EDUs = Average Flow / Average Usage per EDU
Exhibit 2 - Wastewater Treatment Plant Impact Fee
Treatment Plant Impact Fee = Impact Fee Costs / Plant Capaeity * Average Usage per EDU *
High Strength factor [only when applicable - See Exhibit 5]
Exhibit 3 - Collection System Impact Fee
Collection System Impact Fcc = Impact Fee Costs / Number New EDUs Served by
Improvements (per Facilities Plan)
Exhibit 4 - Wastewater Impact Fee
Administrative Impaet Fce = (Treatment Plant Impact Fee + Collection System Impaet Fee) * .05 .
Wastewater Impact Fee = (Treatment Plant Impact Fee + Collection System Impaet Fee - Debt
Service Credit)+ Administrative Impact Fee
Wastewater Debt Service Credit
Debt Service Credit = NPV from Year' to Yearll ofImpact Fce Revenue - Annual Debt Service/
ERUs I ton
.
.
.
.
City of Bozeman, Montana
Impact Fees for the Wastewater System
Determination of LOS and Equivalent Dwelling Units
Exhibit 1
Average Usage Residential 1
Number of Persons per Household 2
89.00 gpcd
2.3
Average Usage 3
204.70 per EDU
1 . See page 2.19 of the Wastewater Facilities Plan.
2 . See page 2.10 of the Wastewater Facilities Plan.
3. Average Usage Residential times number of persons per household.
5/14/2007
City of Bozeman, Montana
Impact Fees for the Wastewater System
Determination of LOS and Equivalent Dwelling Units
Exhibit 1
.
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
5.20
5.47
5.75
6.05
6.37
6.70
7.03
7.37
7.73
8.10
8.50
8.93
9.39
9.87
10.37
10.90
11.44
12.01
12.61
13.24
13.90
25,403
26,724
28,113
29,575
31,113
32,731
34,326
35,999
37,754
39,594
41,524
43,642
45,867
48,207
50,665
53,249
55,902
58,687
61,611
64,681
67,904
1,321
1,390
1 ,462
1,538
1,618
1,595
1,673
1,755
1,840
1,930
2,118
2,226
2,339
2,458
2,584
2,653
2,785
2,924
3,070
3,223
.
1 - See page 2.17 of the Wastewater Facilities Plan.
2 - Average day demand divided by Average Day EDU Usage Factor.
.
2
5/14/2007
.
.
.
City of Bozeman, Montana
Impact Fees for the Wastewater System
Wastewater Treatment
Exhibit 2
,Y..
Future Construction Projects 1,2
2008
2008
2008
2014
2014
2014
2020
2020
2020
Phase 1 - Liquid Treatment Improvements
Phase 1 - Solids Handling and Treatment Improvements
Phase 1 - Engineerin9 Legal and Contract Administration
Phase 2 - Liquid Treatment Improvements
Phase 2 - Solids Handling and Treatment Improvements
Phase 2 - Engineering Legal and Contract Administration
Phase 3 - Liquid Treatment Improvements
Phase 3 - Solids Handling and Treatment Improvements
Phase 3 - Engineerin9 Legal and Contact Administration
Total Future Construction Projects
Total Wastewater Treatment
Plant Capacity (MGD) 3
Cost per Gallon
Requirement per EDU
Impact Fee Wastewater Treatment per EDU
$
38% $ 9,746,348
38% 3,629,393
38% 2,283,663
100% 12,663,954
100% 4,294,099
100% 4,148,537
100% 2,882,756
100% 1,621,550
100% 900,861
$ 42,171,161
$ 42,171,161
8.10
$ 5.21
204.70
$ 1,065.73
23,713,281
8,830,469
5.556,250
11 ,708,537
3,970,136
3,835,555
2,665,270
1,499,214
832,897
1 - Existing plant was not included since treatment plant is at or near capacity.
2 - Future plant is increased from 2005 construction costs by the rate of inflation.
3 - New plant capacity to serve development to 2025.
5/14/2007
City of Bozeman, Montana
Impact Fees for the Wastewater System
Wastewater Treatment Phase 1 Allocation
Exhibit 2
Headworks
Primary Effluent Pumping
Activated sludge system
Secondary Effluent Pumping
Clarification
RAS and WAS pumps
Anaerobic Digestion
Dewatering
Disinfection
Outfa II
$
ImpllcfFM
Rel8t8d
3,159,512 $ 2,155,902 $ 1,003,610
2,822,652 1,926,045 896,607
9,954,787 6,792,678 3,162,109
2,090,854 1,426,700 664,154
2,683,262 2,683,262
2,555,488 1,743,745 811,743
4,530,183 3,091,184 1,438,999
5,807,927 3,963,056 1,844,871
3,682,226 2,512,577 1,169,648
813,110 813,110
38,100,000 $ 23,611,887 $ 14,488,113
38,03%
Total
$
Percent Impact Fee Related
2
5/14/2007
.
.
.
.
City of Bozeman, Montana
Impact Fees for the Wastewater System
Collection System
Exhibit 3
Existing Assets 1
1955 Pipelines $ 62.59% $
1956 Pipelines 6 62.59% 6
1957 Pipelines 62.59%
1958 Pipelines 62.59%
1959 Pipelines 62.59%
1960 Pipelines 62.59%
1961 Pipelines 62.59%
1962 Pipelines 639 62.59% 651
1963 Pipelines 2,262 62.59% 2,306
1964 Pipelines 62.59%
1965 Pipelines 62.59%
1966 Pipelines 62.59%
1967 Pipelines 62.59%
1968 Pipelines 62.59%
1969 Pipelines 26.412 62.59% 26,928
1970 Pipelines 62.59%
1971 Pipelines 62.59%
1972 Pipelines 6,513 62.59% 6,640
1973 Pipelines 3,148 62.59% 3,209
1974 Pipelines 3,790 62.59% 3,864
1975 Pipelines 3,662 62.59% 3,734
1976 Pipelines 1,526 62.59% 1,556
. 1977 Pipelines 28,811 62.59% 29,374
1978 Pipelines 7.451 62.59% 7,597
1979 Pipelines 62.59%
1980 Pipelines 163,527 62.59% 166,720
1981 Pipelines 48.424 62.59% 49,369
1982 Pipelines 62.59%
1983 Pipelines 62.59%
1984 Pipelines 52,236 62.59% 53,256
1985 Pipelines 9,285 62.59% 9,467
1986 Pipelines 17,285 62.59% 17,622
1987 Pipelines 62.59%
1988 Pipelines 48,108 62.59% 49,047
1989 Pipelines 62.59%
1990 Pipelines 4,792 62.59% 4,886
1991 Pipelines 62.59%
1992 Pipelines 199,883 62.59% 203,785
1993 Pipelines 88,959 62.59% 90,696
1994 Pipelines 41,314 62.59% 42,120
1995 Pipelines 173,228 62.59% 176,610
1996 Pipelines 115,547 62.59% 117,802
1997 Pipelines 65,987 62.59% 67,275
1998 Pipelines 5,986 62.59% 5,812
1999 Pipelines 598,373 62.59% 553,338
2000 Pipelines 166,014 62.59% 146,209
2001 Pipelines 93,703 62.59% 78,595
2002 Pipelines 572,358 62.59% 457,213
2003 Pipelines 666,507 62.59% 507,068
2004 Pipelines 62.59%
.
5/14/2007
City of Bozeman, Montana
Impact Fees for the Wastewater System
Collection System
Exhibit 3
.
v.....
2005 Pipelines 62.59%
1955 Manholes 62.59%
1956 Manholes 62.59%
1957 Manholes 62.59%
1958 Manholes 5 62.59% 5
1959 Manholes 78 62.59% 80
1960 Manholes 15 62.59% 16
1961 Manholes 249 62.59% 254
1962 Manholes 391 62.59% 398
1963 Manholes 35 62.59% 35
1964 Manholes 303 62.59% 309
1965 Manholes 179 62.59% 182
1966 Manholes 48 62.59% 49
1967 Manholes 241 62.59% 246
1968 Manholes 3,493 62.59% 3,561
1969 Manholes 62.59%
1970 Manholes 62.59%
1971 Manholes 1,755 62.59% 1.789
1972 Manholes 824 62.59% 840
1973 Manholes 1,751 62.59% 1,785
1974 Manholes 2,202 62.59% 2,245
1975 Manholes 4,982 62.59% 5,080
1976 Manholes 13,946 62.59% 14,219
1977 Manholes 13,498 62.59% 13,762
1978 Manholes 6,998 62.59% 7,135 .
1979 Manholes 53,274 62.59% 54,314
1980 Manholes 1,414 62.59% 1,442
1981 Manholes 6,514 62.59% 6,642
1982 Manholes 1,186 62.59% 1,209
1983 Manholes 30,500 62.59% 31,095
1984 Manholes 39,769 62.59% 40,545
1985 Manholes 21 ,436 62.59% 21,855
1986 Manholes 14,510 62.59% 14,793
1987 Manholes 14,972 62.59% 15,264
1988 Manholes 17,479 62.59% 17 ,820
1989 Manholes 18,755 62.59% 19,121
1990 Manholes 7,483 62.59% 7,629
1991 Manholes 75,778 62.59% 77 ,258
1992 Manholes 24,230 62.59% 24,703
1993 Manholes 34,116 62.59% 34,782
1994 Manholes 179,373 62.59% 182,875
1995 Manholes 82,159 62.59% 83,763
1996 Manholes 159,224 62.59% 162,332
1997 Manholes 88,586 62.59% 90,315
1998 Manholes 113,490 62.59% 110,196
1999 Manholes 336,774 62.59% 311,428
2000 Manholes 165,006 62.59% 145,321
2001 Manholes 415,513 62.59% 348,518
2002 Manholes 272.646 62.59% 217,796
2003 Manholes 195,741 62.59% 148,917
2004 Manholes 65,000 62.59% 47,Q96
2005 Manholes 62.59%
Total Existing Assets $ 5,151,776
EDUs added 2005 to 2025 42,501
Total Existing Collection System Impact Fee per EDU $ 121.21
.
2 5/14/2007
.
City of Bozeman, Montana
Impact Fees for the Wastewater System
Collection System
Exhibit 3
Future Construction Projects 2
Priority Projects 4
2008 Shop Complex $ 4,995,000 19.82% $ 990,009
2008 E8 - Hospital Trunk 1,062,000 70.00% 743,400
2007 -2025 S. Rosuse Trunk: E Babcock to Kagy 970,000 70.00% 679,000
2007 -2025 Mendehall to Tramarack from Grand to Rouse 3,100,000 0.00%
2007-2025 Front Street: T ramarack to Haggerty 1,800,000 70.00% 1,260,000
2007 -2025 College to Babcock from 5th to 11th Avenue 3,400,000 0.00%
2007 -2025 21 inch Interstate CrossinglWal-Mart 600,000 0.00%
2007.2025 Front Street Collector 90,000 55.56% 54,080
2007 -2025 Babcock between Hunter Way and Siver Maple 50,000 55.56% 30,044
2007 -2025 South Black from College South 300,000 0.00%
2007 -2025 Durston between 10th and 11th to 9th and 10th Ave 50,000 0.00%
2007 -2025 Frontage Road Phase I 1,100,000 82.64% 983,204
2007 -2025 Frontage Road Phase II 1,500,000 82.64% 1,340,733
2007.2025 Frontage Road Phase II 1,900,000 86.28% 1,773,142
2007 -2025 Water Treatment Plant Interceptor 500,000 100.00% 540,800
2007-2025 Willson Improvements 200,000 0.00%
2007 -2025 Bridger Canyon Interceptor 400,000 75.00% 324,480
2007 -2025 Trancy and Wilson 300,000 36.00% 116,813
2007 -2025 Lincoln and 19th Replacement 500,000 55.56% 300,444
2007-2025 Mendehall from 3rd to 5th Avenue 80,000 0.00%
. 2007-2025 Lamme/ Plum 100,000 0.00%
2007-2025 Plum/ Davis 100,000 0.00%
2007-2025 S Bozeman/ Garfield 60,000 0.00%
2007-2025 Cottonwood/ East of Wallace 50,000 0.00%
2007-2025 3rd/ Villard 100,000 0.00%
2007-2025 Rouse/ N Frontage Replacement 800,000 0.00%
2007-2025 Upper Rouse Replacement 300,000 0.00%
2007-2025 Fairway Replacement 40,000 0.00%
2007 -2025 Other Annual Projects and Repair 140,000 0.00%
Extensions 5
2011 S15 -Install 21" Sewer Interceptor at Davis/Fowler 843,648 70.00% 590,554
2007-2025 8 inch 24,640,000 0.00%
2007 -2025 10 inch 7,990,000 36.00% 3,111,114
2007 -2025 12inch 15,786,000 55.56% 9,485,632
2007-2025 15inch 13,658,000 71.56% 10,570,539
2007 -2025 18 inch 7,938,000 80.25% 6,889,792
2007 -2025 21 inch 4,584,352 85.49% 4,238,844
2007-2025 24 inch 4,896,000 88.89% 4,707,123
2007-2025 27 inch 1,378,000 91.22% 1 ,359,596
2007-2025 30 inch 1,372,000 92.89% 1,378,429
2007-2025 36 inch 7,847,000 95.06% 8,068,189
2007 -2025 42 inch 34,000 96.37% 35,440
Pump Stations
2007 -2025 Gooch Hill Lift Station and Force Main 1,800,000 100.00% 1 ,946,880
2007 -2025 Hidden Valley Lift Station and Force Main 5,400,000 100.00% 5,840,640
2007 -2025 Spring Hills Lift Station and Force Main 1,600,000 100.00% 1,730,560
Total Future Construction Projects $ 69,089,483
EDUs added 2005 to 2025 42,501
Total Future Collection System Impact Fee per EDU $ 1 ,625,59
. Total Collection System Impact Fee per EDU $ 1,746.80
3 5/14/2007
City of Bozeman, Montana
Impact Fees for the Wastewater System
Collection System
Exhibit 3
'I~F..
....N1... .,
1 - Existing plant is increased by interest charges from the date of construction up to 10 years.
2 - Future plant is increased from 2005 construction costs by the rate of inflation.
3- All lines less than 8 inches excluded and pipe greater that 65 years old.
Allocation for existing plant based on new EDUs/lotal EDUs in 2025. Future plant allocation See 4 and 5 below.
4 - Priority projects allocated to neW development based on increased capacity per master plan.
5 - Extensions allocated to neW development based On capacity above an 8 inch line.
4
icOl1;.".......
007't~'
5/14/2007
.
.
.
.
.
.
City of Bozeman, Montana
Impact Fees for the Wastewater System
Summary
Exhibit 4
wasteWater Impact Fee calculation Results
Wastewater Treatment
Collection
Debt Service Credit
Total
Plus: Maximum Allowable of 5%
Proposed Wastewater Impact Fee per EDU
$
1,065.73
1,746.80
$2,812.54
140.63
$2,953.16
-t~-f..-bY'''t,''iItRCbesJ
-: ~.~-~--.
. ~",-.. ~
:~
-
. :. ~;::. ~ ~ ~
.--,_--, ;~l:-!
Treatment Collection
Meter Size EDU Factor 1 Impact Fee Impact Fee Total Impact Fee
3/4" 1.00 $1,118 $1,837 $2,955
1 2.50 2,796 4,592 7,388
1 1/2 5.00 5,591 9,184 14,775
2 8.00 8,946 14,694 23,640
3 16.00 17,892 29,388 47,280
Over 3,,2 Calculated Calculated Calculated
1 - Weighting factor based on AWWA meter capacity ratings
2 - The impact fee for meter sizes over 3" shall be calculated by first determining the number of EOUs by dividing
the average annual daily flow by 204. 70 gallons per EOU The impact fee shalf then be the number of EOUs times
the impact fee for 1 EOU. A strength surcharge shaff also apply based on the number of pounds.
5/14/2007J
City of Bozeman, Montana
Impact Fees for the Wastewater System
High Strength Summary
Exhibit 5
.
,::::::!I:("
.' '; I :': :::::,: :" i ~ : : : (, ::!)!? ( ( ~ : : : ? ) , : ' : : ;
,:;:::.,,:',1 '
'. I,: i ' ! ; , ' :" " " I ' :;:: "" ~ : : : ~ ; : ' : ,:: i ::: ' l,'.. ;
.1'OW.I..,:j:i$*~h:(.b$,PitdaY11. ......
; i ,'~
'. '(: ~ /: ,:;:: ': ; , ; ,:,! i : Ii::: ! ~ ( \ ' : ,
Meter Size EDU Factor 2 BOD 3,4
3/4" 1.00 0.60
1 2.50 1.50
1 1/2 5.00 2.99
2 8.00 4.78
3 16.00 9.57
Over 3" 5 5
TSS 3,4
0.64
1.61
3.22
5.15
10.30
5
1- Nitrogen and phosphate will be treated in the same manner if required.
2 - Weighting factor based on A WWA meter capacity ratings
3- See page 2-17 of the Wastewater Facility Plan.
4- If loadings exceed these levels, then the treatment plant component of the impact fee
will be multiplied by actuallbs divided by allowable Ibs.
5 - For meter sizes over 3" the EOU factor and allowable pounds of BOD and TSS will be
equal to the number of EOUs determined by dividing the average annual daily flow by 204.70
gallons per EOU times the allowable pounds per 1 EOU.
.
.
.
.
.
7 -6-1601. Definitions.
Page 1 of I
Montana Code Annotated 2005
Prelolous Section MCA Cont.ents
Part Contents Search
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.
7-6-1601. Definitions. As used in this part, the following definitions apply:
(I) (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) onsitc or off<;ite 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 capita] 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-]602.
(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 medica] rescue, or fire protection facility; and
(t) 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.
History: En. Scc. 1, Ch. 299, L. 2005.
Ptovidod by Abn/ana LegitJativa $eIViQ:IIS
.
http://data.opi.state.mt.us/bills/mca/7/6/7-6-1601.htm
1/4/2006
7-6-1602. Calculation of impact fees n documentation required n ordinance or resolution -- requirement... Page 1 of 1
Montana Code Annotated 2005
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7-6-1602. Calculation of impact fees -- documentation required -- ordinance or resolution -- requirements for
impact fees. (I) For each publie facility for which an impact fee is imposed, the governmental entity shall prepare and
approve documentation that:
(a) describes existing conditions of the facility;
(b) establishes level of service standards;
(c) foreeasts future additional needs for service for a defined period of time;
(d) identifies capital improvements necessary to meet future needs for service;
(e) identifies those capital improvements needed for continued operation and maintenance of the facility;
(f) makes 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) makes 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) establishes 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) establishes the methodology that the governmental entity will use to exclude operations and maintenance costs
and eorrection of existing dcticicncies from the impact fee;
(j) establishes the amount of the impact fee that will be imposed for each unit of increased service demand; and
(k) has a component of the budget of the governmental entity that:
(i) schedules construction of public facility capital improvements to serve projected growth;
. (ii) projects costs of the capital improvements;
(iii) allocates collected impact fees for construction of the capital improvements; and
(iv) covers at least a 5.year period and is reviewed and updated at least every 2 years.
(2) The data sources and methodology supporting adoption and calculation of an impact fee must be available to the
public upon request.
(3) 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.
(4) The ordinance or resolution adopting the impact fee must include a time schedule for periodically updating the
documentation required under subsection (1 ).
(5) 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 devclopment's
share of the cost of infrastructure improvements made necessary by the new devclopmcnt.
(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 foHowing 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 devclopmcnt; 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 dcvclopment may not be held to a higher level of service than existing users unless there is a mechanism in
place for the existing users to make improvements to the existing system to match the higher level of service.
(e) Impact fees may not include expenses for operations and maintenance of the facility.
. History: En. Sec. 2, Ch. 299, L. 2005.
Provided by At>ntana tAgisaJilJ8 S8MmiS
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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 thc impact fees are not collected or spent in accordance with the impact fee ordinance or resolution or in
accordance with 7-6- J 602, any impact fees that were collected must be refunded to the person who owned the property
at the time that the refund was due.
(2) All impact fees imposed pursuant to the authority granted in this part must be paid no earlier than the date of
issuance of a building permit if a building pemlit 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 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- J 602 in a manner that demonstrates the need for the excess capacity. This part docs 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 govcrnmcntal
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) Governmcntal entities may accept the dedication ofland 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 usc by the govemmental entity;
(c) formulas or procedures for deternlining the worth of proposed dedications or constructions arc 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 ofland 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( I )Cj). If impact fees arc 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 arc consistent with the provisions of 7 -0-1602 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 inelude a mechanism whereby a person charged an impact fee may
appeal the charge if the person believes an error has been made.
History: En. Sec. 3, eh. 299, L. 2005.
.
Profided by /dlnhma Lttgi$fatiw S8rvi08S
http://data.opi.state.mt.us/bills/mca/7 /6/7 -6-1603.htm 1/4/2006
7-6-1604. Impact fee advisory committee.
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7-6-1604. Impact fee advisory committee. (I) A governmental entity that intends to propose an impact fee
ordinance or resolution shall establish an impact fee advisory committee.
(2) An impact fee advisory committee must include at least one representative of the development community and
one certified public accountant. The committee shall review and monitor the process of calculating, assessing, and
spending impact fees.
(3) The impact fee advisory committee shall serve in an advisory capacity to the governing body of the
governmental entity.
History: En. Sec. 4, Ch. 299, L. 2005.
Provided by M:Wana Logislatiw SeMcos
.
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http://data.opi.state.mt.us/bills/mea/7 /6/7-6-1604.htm
1/4/2006