STAFF REPORT

Council Meeting, March 27, 2008

Development Fee Review Update (AD08-013)
Informational summary prior to receiving additional public input regarding potential increases to water, sewer and transportation development fees

 

Speaker:  Scott Fogleman, Budget Director

 

From:  Scott Fogleman, Budget Director

           Tim Bailey, Director of Engineering
Prepared by:  Scott Fogleman, Budget Director

                     Tim Bailey, Director of Engineering

Approved by:  William B. Coleman, Jr., Town Manager
Approved by:  Benjamin T. Shivar, Assistant Town Manager

BACKGROUND:

Development fees are one-time charges on new development that are used to fund a proportional share of the costs of capital infrastructure necessary to serve the development.  The Town of Cary utilizes three types of development fee systems:  transportation, sewer, and water (including irrigation meter fees). The Town of Cary converted to a water and sewer development fee system from an acreage fee system in 1998.  North Carolina general statutes 160A-314 and 153A-277 give enterprises the authority to charge fees for infrastructure and the NC General assembly granted Cary specific authority to institute transportation development fees (TDFs) in 1987.

Development fees must meet a number of criteria in order to be utilized:

·        Fees must be legally defensible (meet the rational nexus test)

·        Fees must be based on the “cost to serve”

·        Revenue generated by fees may only be spent on growth-related capital improvements

·        Reimbursements and fee credits should be made available to developers

When embarking on the most recent review of its development fee structures in the spring of 2007, the Town set the following goals to guide the process:

·        Development pays fees to offset all or a portion of related infrastructure costs

·        Simple systems with low administrative costs

·        Systems similar to those of adjacent communities to prevent confusion

·        Fees set considering adjacent communities

·        Fee system should be legal (meet rational nexus test, treat similar customers equally, link fees to impact)

·        Meet the Town’s development goals

·        Adjust for a rational utility system so each community pays its share but no more

·        Allow fees to be adjusted on an annual basis via the budget process to reflect cost variability in capital projects needed to provide new capacity

Two independent consulting firms were hired to prepare and present to Council an updated analysis of the Town’s development fee structures.  The results of the studies were presented to Council during a work session on December 18, 2007.    The studies identified the “maximum” allowable rate structures for transportation, water, and sewer development fees.  These are the fee levels that have been calculated based on an analysis of the cost to provide capacity for each type of property.  The maximum fees as compared to the existing fees by property type are summarized in tables 1 through 4 below:

Table 1          

Table 2

Table 3

Table 4

Each consultant noted that these recommendations represent maximum levels only.  It is a policy decision of the Town Council regarding the level of fees to adopt as long as the levels do not exceed those identified in the report.

RECOMMENDATIONS:

Water, Sewer, Transportation and Irrigation

Staff’s recommendation regarding development fee changes is to adjust fee levels to 75% of the maximum calculated fees for each category (water, sewer, transportation development fees and irrigation meter fee) effective July 1, 2008.

For transportation development fees, the “75% of maximum” adjustment would apply only to the Base Zone.  Minimal fee adjustments would be applied to the Central Zone effectively leaving its transportation development fees unchanged.  The Central Zone transportation development fees would be restated as 57% of the maximum to remain consistent with the updated cost of capacity as calculated in the transportation development fee study.

Staff also recommends increasing all development fees by 3% annually in conjunction with each budget process (beginning in fiscal year 2010 on July 1, 2009).

Reclaimed Irrigation Meter

Staff also recommends that a reclaimed irrigation meter fee be adopted beginning July 1, 2008 at a level equal to 50% of that decided upon for the potable irrigation meter fee.  This fee would be used to recover some of the capital costs associated with providing the reclaimed water system.

Tables 5-8 below compare the recommended rate structures to the Town’s existing fees levels.

Table 5

Transportation Development Fees – BASE Zone

Table 6

Transportation Development Fees- CENTRAL Zone

Table 7

Water Development Fees