Transcript Impact Fees and Colorado’s Water and Wastewater Utilities

Impact Fees and Colorado’s
Water and Wastewater
Utilities
Presented by:
Jason Mumm, Sr. Consultant, Integrated Utilities Group
Carol Malesky, Sr. Consultant, Integrated Utilities Group
WWW.IUG.COM
Agenda
• What are “Impact Fees”
• 2 Significant Legal Developments
– Krupps v. Breckenridge San. Dist.
– Senate Bill 15
• Major Concepts & Methodologies
• Aligning Policy with Methods
What is an Impact Fee?
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Different Names – Same Purpose
Legal and Technical Definitions
The Simple Version
Capital vs. Revenue
Different Names – Same Purpose
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System Development Charges
System Development Fees
Tap Fees
Impact Fees
Construction Fees
Improvement Fees
Buy In Fees
Plant Investment Fees
Others?
The Legal Definition
• Colorado Revised Statutes 29-20 says impact
fees meet the following criteria:
– Legislatively adopted
– Generally applicable to a broad class of property
– Intended to defray the projected impacts on capital
facilities caused by proposed development
A Technical Definition
From AWWA
“…a contribution of capital toward existing or
planned future back-up plant facilities necessary
to meet the service needs of new customers to
which such fees apply…”
The Simple Version
• One time capital charge,
• Assessed to new connections to the water and/or
sewer system,
• Aimed at recovering costs associated with
providing facilities/infrastructure
Capital vs. Revenue
• Reported as contributed capital and NOT as
operating or extraordinary revenue
Recent Legal Developments
• Colorado Supreme Court (Krupps v.
Breckenridge San. Dist.)
• Senate Bill 15 (CRS 29-20)
Krupps v. Breckenridge
• Impact fee must be:
– “reasonably related…” to the costs of providing
facilities
– “…fairly calculated and rationally based…”
– And, must demonstrate a “reasonable…and
consistent” application
• Impact fee that meets these criteria does not
constitute a “takings” under Nollan/Dolan
Krupps v. Breckenridge
Other Notes
• District had codified policy: “growth pays for the full
costs of growth”
– Noted by the Court
– Importance related to the method used to calculate the fee
• Breckenridge case is expected to serve as legal
precedent in neighboring jurisdictions
– California
– Oregon
Senate Bill 15 (CRS 29-20)
• Amends Title 29 of the Colorado Constitution
– Expressly allows municipalities under Title 29 to
assess an impact fee
– First time authority has been expressly granted
– However, this is also the first time limitations on
impact fees have been expressly given by Colorado
legislature
Limitations and Ambiguities of
CRS 29-20
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Impact fees are limited in order to:
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Prevent double-charging on a single project
Protect low income projects
Protect projects already in progress
Ambiguities are an invitation to court
challenges. Some examples:
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Can capital equipment be included?
Is the issue truly of statewide concern?
General Recommendations
• There is no true “grandfather clause.”
• Existing impact fees are allowed.
• However, they must be made to comply with CRS 2920’s criteria and should be carefully examined.
• Special Districts may be impacted in the near
future with similar legislation amending Title
32.
• While the bill does grant permission to the use
of impact fees, it also places new constraints on
them.
Major Methodologies
• The Buy-In Method
• The Replacement Method
• The Market-Based Method
The Buy-In Method
Existing Facilities
New
Customers
New Facilities
The Full Costs of
Growth
Buy-In Method
Fee
Function
Reimbursement Fee
Existing Infrastructure
Improvement
Fee
Capital Costs Assoc.
With Growth
Buy-In Method
Existing Equity
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Existing
Equivalent
Taps
Reimbursement
Fee
Buy-In Method
Total Growth-Related Capital
Improvements Planned
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Projected No. of Equivalent
Taps at CIP Build Out
Improvement Fee
Buy-In Method
Results
• New customers pay reimbursement fee, which brings
their investment in the system on par with other
customers.
• New customers finance ALL capital improvements
required to serve them with no additional contributions
from existing customers.
• Result: new customers pay the full cost of growth – but
have relatively more equity in the system on an
equivalent tap basis.
The Replacement Method
• Examines the cost required to reconstruct the
entire system
– To serve all existing customers, and
– All new customers (ie. Growth)
• Divide the cost of the reconstruction by total
equivalent taps served in the “new” system
Replacement Method
Results
• New customers pay a fee that equates their
relative level of capitalization with that of
existing customers
– Measured in current dollars
– Without allowances for actual depreciation
• At the end of the build-out period, new customer
equity per equivalent tap is on par with that of
the existing customers’
The Market-Based Method
• Compares tap fees of neighboring or other
similar utilities
• Not generally recommended because
– Is not consistent with Breckenridge guidelines
– Inconsistent with CRS 29-20
• Only used when NO financial or system data is
available for analysis
Market-Based Method
Results
• A fee is established, but
– No correlation to actual costs
– Lack of rational basis makes it difficult to defend
• Possible applications
– Economic incentives?
– Affordable housing?
Aligning Methods to Match the
Policy
Major Policy Objectives
• Growth pays for the full costs of growth
• Equity
• Economic development
• Affordable housing
• Compliance with applicable law
Methods Match Policies
General Observations
• There is no preferred method, but
– Of the three, the Buy-in and Replacement Methods
are the most acceptable general approaches
– The Market-Based Method is to be avoided
• Selection of method is dependent on larger
policy objectives
• Matching the method to the policy is important
in establishing a proper fee
General Observations (cont.)
• Legal challenges to impact fees continue to be a
concern/issue nationwide, but particularly in the
growing population centers in the western U.S.
• Municipalities and Special Districts should
closely examine existing and proposed impact
fees for legal compliance.
Questions and Answers
Integrated Utilities Group, Inc
5200 DTC Parkway, Suite 530
Greenwood Village, CO 80111
(303) 267-0200 | www.iug.com