System Development Fees Definition House Bill 436 Fee

System Development Fees Definition House Bill 436 Fee Adoption Process Fee Calculation & Administration Next Steps

System Development Fees Definition: One-time charge assessed against “new development” as a way to pay for “facilities” needed to support growth or to recoup costs for existing facilities.

System Development Fees Applicability “New Development” Subdivision of land “Facilities” Construction, redevelopment, conversion, etc. Use of land that increases service units This Photo by Unknown Author is licensed under CC BY-SA

System Development Fees Ratification of NC House Bill 436 “An Act to provide for uniform authority to implement system development fees for public water and sewer systems in North Carolina and to clarify the applicable statute of limitations. ” ● Signed into law on July 20, 2017 ● Amended Chapter 162 A, Article 8 of the General Statutes “System Development Fees” ● Authorizes local governmental units to adopt a SDF for water or sewer service ● Sets forth process for establishing system development fees ● Requires preparation by a “financial professional or licensed professional engineer…” ● Requires compliance by July 1, 2018

System Development Fees Fee Adoption Process ü Calculate system development fees based on written analysis ü 45 days prior to consideration of adoption, post written analysis on Web site and solicit written comments - Post no later than April 2, 2018 ü Preparer to consider written comments ü Conduct public hearing to adopt system development fees – scheduled for May 17, 2018 ü Adopt and publish system development fees in annual budget, rate plan, or ordinance (replaces Sewer Acreage Fees and Water/Sewer Capacity Fees) ü Update written analysis at least every 5 years

System Development Fees Fee Calculation Methodologies Incremental/ Marginal Cost Approach - Focuses on additional facilities required to meet anticipated growth Buy-in Approach - Focuses on existing facilities with available capacity to serve new customers - Analysis based on capital improvement plan - Analysis based on fixed asset records Combined Approach - Blend of Buy-In and Incremental Methods - Focuses on existing and future facilities

System Development Fees Fee Calculation Process ü Determine methodology to be used ü Identify cost of facilities ü Consider/make adjustments as necessary ü Derive System Development Fee per service unit ü Establish equivalency or conversion table for various categories of demand

System Development Fees Revenue Use & Accounting Incremental/ Marginal Cost Approach - Revenues may be used to pay for costs of constructing capital improvements, professional fees for SDF analysis, or, if no capital improvements are planned for construction within 5 yrs, principal and interest on existing capital improvement debt. Buy-in Approach - Revenues may be used to pay for costs of previously completed capital improvements for which capacity exists and for capital rehabilitation projects Revenue Administration - Revenues shall be accounted for by means of a capital reserve fund established pursuant to NC General Statutes, Chapter 159 Part 2, Article 3.

System Development Fees Proposed Fees – Combined Approach Water Sewer Meter Size Meter Capacity Conversion Factor System Development Fee by Meter Size 3/4" 1. 00 $ 724 3/4" 1. 00 $881 1" 1. 67 $1, 209 1" 1. 67 $1, 471 1. 5" 3. 33 $2, 411 1. 5" 3. 33 $2, 934 2" 5. 33 $3, 859 2" 5. 33 $4, 696 2. 5" 7. 30 $5, 285 2. 5" 7. 30 $6, 431 3" 10. 67 $7, 725 3" 10. 67 $9, 400 4" 16. 67 $12, 069 4" 16. 67 $14, 686 6" 33. 33 $24, 131 6" 33. 33 $29, 364 8" 53. 33 $38, 611 8" 53. 33 $46, 984 10" 80. 00 $57, 920 10" 80. 00 $70, 480 12" 144. 58 $104, 676 12" 144. 58 $127, 375 16" 225. 00 $162, 900 16" 225. 00 $198, 225 Note: Fees based on 166 gallons of water and 159 gallons of wastewater per day per equivalent dwelling unit

System Development Fees Next Steps ü Post written analysis on Web site and solicit written comments by April 2, 2018 ü Preparer to consider written comments ü Conduct public hearing to adopt system development fees – scheduled for May 17, 2018 ü Adopt and publish system development fees in annual budget, rate plan, or ordinance (replaces Sewer Acreage Fees and Water/Sewer Capacity Fees) ü Update written analysis at least every 5 years