DRAFT
(Contact the town clerk's office at 919-469-4011 for official minutes)
Work Session Minutes of the Town of
Present: Mayor Harold
Weinbrecht, Mayor Pro Tem Julie Robison, Council Members Gale Adcock, Don
Frantz, Ervin Portman, and Jennifer Robinson
Mayor Weinbrecht called the
meeting to order at
Council Member Jack Smith
arrived late and his arrival is noted in the minutes.
Scott Fogleman of the Budget
Department reviewed the work session agenda.
He introduced consultants Clancy Mullen of Duncan Associates and Lex
Warmuth of Raftelis Financial Consultants.
Mr. Fogleman defined water
development fees, reviewed development fee basics, commonly accepted objectives
of development fees, the basis for cost justification using the rational nexus
test (something that has a proportional relationship to how much you are paying
for what you are getting), Cary’s development fee review goals, and a briefly
history of development fees. Mr. Fogleman
said that
Mr. Smith arrived at
Transportation Development
Fees
Mr. Mullen provided information
on the history of
Mr. Mullen stated that Duncan
Associates recommendation is to merge the southeast zone into the base zone.
He said there is a six percent difference in the fees and there’s no
cost basis for the difference.
Mr. Portman asked about the
rational for the fee between the collector standard and thorough fare standard.
Mr. Mullen said a credit is given for anything beyond the collector
equivalent. Tim Bailey of the
Engineering Department added that if it’s shown on the thoroughfare plan
it’s required to be built to the thoroughfare.
Mr. Bailey said that the credit is for what exceeds the collector
standards.
Mayor Weinbrecht said combining
the southeast zone into the base zone is a big mistake.
He wants to treat the southeast region differently and have different
fees for retail, lower fees for office, and the residential can match.
He said areas that have failing levels of service or projected to have
failing levels of service should be treated similarly and have different zones. He
said that the development fee can be used to help control and manage the impact.
Mr. Mullen said they calculated maximum fees Townwide.
If council wants fees higher in the southeast they need to be lowered
elsewhere.
Mrs. Robinson asked if Mayor
Weinbrecht was suggesting using the transportation development fee as a means to
discourage development. Mayor
Weinbrecht responded that it was to discourage and encourage development; he is
looking at the fees as a way to limit retail.
Mr. Mullen responded that singling out retail is not charging
proportional cost.
Mrs. Robinson said they may
want to focus on the land use plan to encourage the type of development council
wants in different locations rather than using the fee structure.
She said that the fee structure should be used to capture the share of
use for the needs that arise in development and the land use plan should be used
to help drive land use decisions. She
said council needs to be careful to not arbitrarily set fees at a certain rate
in order to try to guide development. She
said the fees are supposed to be a tool for recovering costs.
Mr. Portman said they should
drive the big decisions off of the land use plan.
Mrs. Robinson they shouldn’t be using development fees to drive land
use. Mayor Weinbrecht said
development fees should be used to cover a true impact.
Mr. Bailey said that the
biggest cost for development-related transportation is what is required to meet
the Town’s Adequate Public Facilities Ordinance.
The road improvement cost is much more significant to a retail
development than the fee level set.
Mr. Smith said the land use
planning can provide consistency, but he questioned whether it will meet the
intended goals set by council. Mayor
Pro Tem Robison said one of the goals is to have a simple system where there is
no ambiguity, no mystery and where our structure and our formula is similar to
our neighbors. She said the second
goals is that the
Mr. Frantz said he is concerned
with doubling the fees in the downtown area. He
said they should be reducing fees downtown to as an incentive to lure people
downtown to build. Mr. Mullen
said their preference would be to do some percentage of the new maximum.
Mayor Weinbrecht asked council
if they wanted to go from three to two zones.
Mr. Weinbrecht and Mr. Frantz indicated they wanted to stay with three
zones. The rest of the council
agreed with the recommendation to move from three to two zones.
Mayor Weinbrecht asked council
members if they wanted to go with using percentages.
Mr. Frantz said he would like to see the fees lower in downtown as
an incentive to lure people to the area. Mrs.
Robinson said she wants to maintain simplicity.
She stated that going with the percentage across the board will result in
a lower fee downtown. Mr. Portman
suggested council adopt whatever percent would hold revenue neutral to the
current fees tying them to the new maximum.
Mayor Pro Tem Robison asked for
Mr. Coleman’s opinion. Mr. Coleman
responded that staff’s approach to impact fees has been to try to relate it to
what’s going on in the region, to position
Mr. Portman suggested that
impact fees be done on a per unit fee basis for the central zone.
Mr. Smith said they are not giving enough credit to the perception
of downtown. Mayor Weinbrecht asked
council if they were in favor of the impact fees being done on a per unit fee
basis for the central zone. With the
exception of Mr. Frantz council members agreed.
Mr. Fogleman asked when the
fees would become effective and suggested make them effective with the new
budget cycle.
ACTION:
Mayor Pro Tem Robison moved to have the fees become effective with
adoption of the next budget. Mrs.
Robinson provided second and council granted unanimous approval.
With the exception of Mayor
Weinbrecht, council members said they would like to do the same for the base
zone. Mayor Weinbrecht said with the
base fee
Mr. Weinbrecht asked if council
members were in favor of raising base zone fees 25 percent. Mr. Smith,
Mayor Pro Tem Robison, Mrs. Adcock and Mr. Frantz agreed to raising the fees 25 percent.
Mrs. Robinson and Mr. Portman disagreed.
Water and Sewer Development
Fees
Mr. Warmuth provided
information on the history of Cary’s water and sewer development fees,
methodologies endorsed by the AWWA/WEF, methodology conceptual objectives,
common water and sewer development fee assessment methods, Cary’s approach to
fees, current calculation method, current residential water and sewer
development fees, recommended methodology and results, billing data analysis
observations, recommendations for water and sewer residential development fees,
recommended cost justified residential development fee by house size, water and
sewer development fee rates for Morrisville, and water and sewer development fee
comparisons. (Staff’s PowerPoint
Presentation is attached to and incorporated herein as Exhibit C; Raftelis Financial Consultants’ December 10, 2007
Water and Sewer Development Fee Review Study, Final Report is attached to and
incorporated herein as Exhibit D.)
Mr. Warmuth said that
everything needs to be cost based and cost driven.
He said that water and sewer are a little different.
He said that Cary’s system is progressive—one of only a half a dozen
places that actually charges residential customers based on housing size—being
more equitable and recognizing, in theory, that a smaller house is going to have
lower water usage than a larger house.
Mr. Warmuth said to get to a
cost per gallon per day the town took the projected cost—just for the capacity
component of the Capital Improvement Plan which is all in future
dollars—discounted that back, looked at what was expected to be paid for with
the debt of each of those projects and discounted that back, subtracted the
total debt service component from the cost of the projects and came up with the
net present value numbers for the project costs of capacity; that is divided by
how many millions a gallon a day you would get.
Mr. Warmuth said all of the
capacity is not being paid for with debt. He
said that most of the debt is going to be paid by the existing customer base.
He said the existing users pay for a portion and that’s why they are
given a proportional credit for what in the future part of that debt might be
recovered through their rates and usage.
Mrs. Robison asked about the
water loss on the irrigation practices. Mr.
Warmth said the fee is based on the cost of the treatment capacity at the waste
water treatment plant and the lines to take that water to the plant.
He said anything running off from misused irrigation water doesn’t
affect the cost. He said you
wouldn’t see an irrigation meter charge for sewer.
Mr. Portman asked if the rate
is based upon capacity, rather than consumption. Mr.
Warmuth said it is based on the actual consumption projected for customers
because the debt has to be paid. He
said they calculated each gallon share of that debt on a gallon per day basis
and then discounted that.
Mr. Warmuth said that the
recommended methodology provides the appropriate level of credit to meet the
rational nexus test requirements. It’s
a reasonable test, not an exact number, and it give a much stronger cost basis.
The cost basis sets the maximum; council will determine how much toward
that maximum they want to raise or adjust the fees.
He said the cost is put in terms of cost per gallon per day because the
customer’s demand is based on how many gallons per day each customer needs.
It has to be in a daily consumption amount to match up with the customer
needs. Mr. Bailey added that it’s
how much water you can produce in a day. He
said staff always look at it as dollars per gallon to provide the treatment
capacity. He said that the time
doesn’t matter; each customer needs so much in gallons per day and you get a
unit cost back out of that.
Mr. Warmuth said their
recommendation is to keep the fee based on an average and have a separate fee
for irrigation meters. Mrs. Robinson
asked if you are required to install an irrigation meter if putting in an
irrigation system. Mr. Warmuth
responded yes.
Mr. Warmuth said the cost basis
has gone up and the ration between houses has been shifted.
He said in focusing on mid-size houses the Town is looking at a 50
percent increase in the maximum fee that could be charge for water and about an
80 percent potential increase for the maximum fee for sewer.
He said figuring out the percentage of the maximum cost per day and let
that flow through all the rates to maintain a sense of equity and the linkage
between the cost and capacity.
Mr. Portman asked if the intent
at the maximum would be to recoup all the incremental cost of growth.
Mr. Warmuth said that the growth comes in over time.
He said some of that capacity may not be used for 30 years and some may
be used in 10 years. He said there
is no direct correlation between growth and increments of capacity.
Mr. Portman said he is
interested in the projected water and sewer rate on the average user, holding
that relatively constant, and then pushing the amount that can’t be held
constant in the impact. Mr. Warmuth
said it will be included as part of the budget and rate projections.
He said the bond covenants require that debt service be covered by user
rates and charges. He said that
impact and development fees do not count as revenues for calculating debt
service coverage.
Mr. Frantz asked if the
residential rates were partially subsidized by the business community. Mrs.
Mills said marginally in the irrigation rate only.
She said that while the theory of collecting fees up front is the goal,
the reality is that we need to build the plant, borrow the money, and the debt
service has to be paid back. She
said it can only be paid back through the rates.
Mr. Warmuth said the proposed
rate maximum for
Mayor Pro Tem Robison said that
council needs to provide direction as to the percentage of fees to be charged.
Mayor Weinbrecht added that it should probably be a percentage of maximum
since its been recalculated. Mr.
Frantz asked if there was a happy medium between the highest in Apex or
Morrisville, but above
ACTION:
Mr. Portman moved to go to the maximum. Mrs.
Robinson provided the second. Mr.
Smith voted “no.” All others
voted “aye” and the motion passed by majority vote.
Mr. Fogleman asked about the
effective date. Mr. Coleman said
some notice needs to be given.
Mayor Pro Tem Robison asked if
a public hearing is needed. Mr.
Coleman said it’s not necessary, but if council wants to have one they can.
Mayor Pro Tem Robison said it would be reasonable to instruct the staff
to go ahead with a public review. Mr.
Coleman said that a public hearing can be held in held in January and then
council can decide on the effective date.
Mr. Weinbrecht said it needs to
be very clear that they are talking about development fees, not rates.
He asked how much the fees are being raised.
Mr. Warmuth said it’s about 50 percent on the water and about 80
percent on the sewer.
Mr. Portman asked staff to
provide a projection over the next 5 years as to what the utility rates would be
with and without the change. Mr.
Coleman asked if it’s with the assumption that all of the impact fees are
going to be applied to the cost of the waste water treatment plant. Mayor
Weinbrecht said water and wastewater. Mr.
Portman asked if they were two separate utilities.
Mr. Coleman said sewer impact fees would be applied to the sewer plant
and the water fees to the water plant. The
assumption is that all of the impact fees would be applied to the plants.
Mr. Frantz asked about the
commercial water fees. Mr. Warmuth
said the commercial would go up based on their projected usage. They would
provide estimates to staff gallons per day usage and it becomes that same cost
per gallon per day that council suggested.
Mr. Frantz said if a small
business in downtown expanded it would results in them going to a bigger meter
and having to pay thousands in fees. Mr.
Warmuth stated that if their water usage goes up significantly then their fees
would increase. He said that the
meter doesn’t affect the fees, the amount of water they want to access is what
affects the fees. Mr. Bailey added
that it’s based on usage and depends on the demand.
He said that the $15,000-$20,000 range would be more likely if they have
a substantial increase; if they have a small increase it may not have any.
ACTION:
Ms. Adcock moved to reconsider Mr. Portman’s original motion to go to
the maximum. Mrs. Robinson provided
the second. Mayor Weinbrecht and Mr.
Frantz voted “no.” All others
voted “aye” and the motion passed by majority vote.
ACTION:
Mr. Portman moved to vote his original motion down and come back with
another motion to go to a public hearing. Mr.
Smith provided the second.
Mr. Portman asked if they have
to revote on raising the fees. Mrs.
Adcock said yes.
ACTION:
Mayor Weinbrecht called for a vote on the motion to raise the fees to the
maximum amount. Mr. Frantz and
Mayor Weinbrecht voted “aye”. All
others voted “no” and the motioned failed for lack of a majority.
ACTION:
Mr. Portman moved to have public a hearing at the earliest possible time
to gain public input on the subject before council for consideration of raising
fees. Mr. Smith provided the second
and council granted unanimous approval.
Mayor Weinbrecht said council
needs to keep in mind what they want to do with Morrisville if they don’t go
to the maximum.
Mr. Warmuth asked whether
council wanted to change the housing factor to be consistent with
Mr. Fogleman provided a summary
of council actions:
Water Development Fees:
Hold a public hearing in January 2008 to get citizen input on raising the
fees to the newly calculated maximum, which are 43% above current rates.
The effective date of any changes has yet to be determined.
Sewer Development Fees:
Hold a public hearing in January 2008 to get citizen input on raising the
fees to the newly calculated maximum, which are 75% above the current rates.
The effective date of any changes has yet to be determined.
Transportation Development Fees
(TDF): The following fee adjustments
for all zones will become effective