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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 10/08/2019 - 2019 FEE UPDATEDATE: STAFF: October 8, 2019 Jennifer Poznanovic, Project and Revenue Manager Lance Smith, Utilities Strategic Finance Director WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION 2019 Fee Update. EXECUTIVE SUMMARY The purpose of this item is to review fee updates associated with Electric Capacity Fees, Water Supply Requirement Fees, Wet Utility Plant Investment Fees (PIFs) and Step III of the 2017 Capital Expansion Fees (CEFs). Coordination of Council approved fees began in 2016 to provide a more holistic view of the total cost impact. Previously, fee updates were presented to Council on an individual basis. After the 2019 fee update, fee phasing will be complete with regular two and four-year cadence updates beginning in 2021. 2019 fee updates include: Electric Capacity Fees, Water Supply Requirement Fees, Wet (Water, Wastewater and Stormwater) Utility Plant Investment Fees and Step III of the 2017 Capital Expansion Fees. Staff proposes the following fee changes: • Wet Utility PIFs as proposed • Electric Capacity Fees as proposed • Water Supply Requirement Fee as proposed • 100% of proposed 2017 Capital Expansion Fees (Step III) • Transportation Capital Expansion Fees (inflation only) Development Review/Building Fees were initially planned to be part of the 2019 update but have been decoupled and will come forward once finalized. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Does Council support fee updates to come forward for consideration in November (effective January 1, 2020)? BACKGROUND / DISCUSSION Since October 2016, staff has worked to coordinate the process for updating all new development related fees that require Council approval. Development related fees that are approved by Council are six Capital Expansion Fees, five Utility Fees and Building Development Fees. October 8, 2019 Page 2 Previously, fee updates were presented to Council on an individual basis. However, it was determined that updates should occur on a regular two and four-year cadence and fees updates should occur together each year to provide a more holistic view of the impact of any fee increases. Fee coordination includes a detailed fee study analysis for Capital Expansion Fees (CEFs), Transportation Capital Expansion Fees (TCEFs) and Development Review/Building Fees every four years. This requires an outside consultant through a request for proposal (RFP) process where data is provided by City staff. Findings by the consultant are also verified by City staff. For Utility Fees, a detailed fee study is planned every two years. These are internal updates by City staff with periodic consultant verification. In the future, fee study analysis will be targeted in the odd year before Budgeting for Outcomes (BFO). In years without an update, an inflation adjustment occurs. Below is the current fee timeline: Phase I of the fee updates included CEFs, TCEFs, Electric Capacity Fees, and Raw Water/CIL and were adopted in 2017. Phase II included Wet Utility PIFs and step II of CEFs and TCEFs, which were approved in 2018. Development review and building permit fees were originally included in Phase II but were decoupled from the 2018 update. Due to the concern in the development and building community around fee changes, Council asked for a fee working group to be created to foster a better understanding of fees prior to discussing further fee updates. In August of 2017, the Fee Working Group commenced comprised of a balanced group of stakeholders – citizens, October 8, 2019 Page 3 business-oriented individuals, City staff and a Council liaison. The Fee Working Group met 14 times and was overall supportive of the fee coordination process and proposed fee updates. The 2019 phase III update includes Electric Capacity Fees, Water Supply Requirement Fees, Wet Utility Plant Investment Fees and Step III of the 2017 Capital Expansion Fees. After the 2019 fee update, fee phasing will be complete with regular two and four-year cadence updates beginning in 2021. Development Review/Building Fees were initially planned to be part of the 2019 update but have been decoupled and will come forward once finalized. The 2019 Fee Working Group is focused on Development Review/Building Fees only and has met four times as of mid-September. The 2019 Fee Working Group consists of a balanced group of stakeholders – citizens, business-oriented individuals and City staff. 2019 Utility Fee Updates The proposed changes to Utility Fees for a single-family, residential home include a 1.7% increase to the Electric Capacity Fee (ECF) and increases to the three Wet Utility Fees ranging between 1.5% and 6.7%. The Water Plant Investment Fee (PIF) is proposed to increase 6.7%, the Wastewater PIF is proposed to increase 1.5% and the Stormwater PIF is proposed to increase 3.3% from current fee levels. The chart below summarizes the proposed Utility Fees for a single-family home, assuming an 8,600 square feet lot and 4 bedrooms: 2019 Capital Expansion Fee Updates The chart below shows the current and proposed fee updates for CEFs: October 8, 2019 Page 4 Step III fees are a 12.6 % increase from current fee levels (Step II). CEF fee increases are 100% of full fee levels recommended in 2017. The CPI-U index for Denver-Aurora-Lakewood is used for CEF inflation. The Engineering News Record for TCEFs. Comparison Charts Fort Collins proposed fees are in the upper-middle of the pack: The following chart shows neighboring cities across water districts with and without raw water. Fort Collins fees are in line with neighboring cities: October 8, 2019 Page 5 Fort Collins fees and the cost of code is leveling as a percentage of median new home sales price: Community Outreach In an effort towards better communication, outreach and notification of impact fee changes, staff met with nine organizations across the City in the summer 2019. Overall, organizations were supportive of the approach and cadence. There was acknowledgement that regular fee updates are necessary. Staff also heard: • Supportive of 2018 fee group recommendations • Progressive fees/if where possible • Investigate revenue alternatives to support parks refresh & maintenance • Explore stronger support for affordable housing • Concerns about attainable housing - it may be less desirable to live here • Policy questions - development standards going forward, alignment on total cost (including operations and maintenance) October 8, 2019 Page 6 Below is the 2019 fee roadmap: ATTACHMENTS 1. 2019 Capital Expansion Fee Update Memo, July 24, 2019 (PDF) 2. Powerpoint presentation (PDF) Economic Health Office 300 LaPorte Avenue PO Box 580 Fort Collins, CO 80522 970.221.6505 970.224.6107 - fax fcgov.com MEMORANDUM DATE: July 24, 2019 TO: Mayor and Councilmembers CC: Darin Atteberry, City Manager; Jeff Mihelich, Deputy City Manager; Jacqueline Kozak-Thiel, Chief Sustainability Officer Josh Birks, Economic Health and Redevelopment Director FROM: Denichiro “Denny” Otsuga, Chair – Economic Advisory Commission; Connor Barry, Vice-Chair – Economic Advisory Commission; and Members, Economic Advisory Commission for 2019 RE: 2019 CAPITAL EXPANSION FEE UPDATE On July 17, the Economic Advisory Commission (EAC) received a presentation from Jennifer Poznanovic, and Randy Reuscher, on the current progress of the 2019 Capital Expansion and Utilities Fee Review and update. The purpose of this memorandum is to support currently proposed fee review and suggest methodologies for systematizing future fee review. Summary of Discussion: The Commission and its members noted the following: • Proposed fees appear to be in line with surrounding cities and that fees as a percentage of median home sales price seem reasonable methodology. - The Commission noted home size classification used should be updated in the future. • Noted the Water Supply Requirement charge of ~24% was an outlier among the other fee adjustments. - The Commission questioned whether the CPI for the Denver-Aurora-Lakewood was suitable and if other measures should be considered in order to smooth any future adjustments. • The changes required for funding continued park maintenance should be given a degree of priority in future updates. The staff responded that such consideration was outside the scope of this study. The Council is aware of the matter, and the changes are being considered for future studies. • The presenters stated that addressing infrastructure need to meet the peak demand continues to be an important factor, of the fee review and for utilities in particular. - The staff responded that the current primary mechanism for addressing user behavior is education while possible technological solutions or incentive structures have not been rigorously explored. - The Commission believes that investigating the role of technology or incentives would be meaningful. An incentive program could encourage adoption of more efficient technologies during the design/construction stage or induce to participate in conservation practices by offering specific rewards for adopting desired use behaviors (installing xeriscaping instead of turf, for example). - The Commissions encourages staff to incorporate a study of technological or incentive solutions as part of future fee reviews. ATTACHMENT 1 1 2019 Fee Update October 8, 2019 Council Work Session ATTACHMENT 2 Agenda 2 • Fee Scope, Timeline & Background • Proposed 2019 Fee Updates – Effective in 2020 • Comparison Charts • Community Outreach Feedback • Council Direction Fee Coordination 3 Objective: • Review fee updates together to provide a holistic view of the total cost impact • Bring impact fees forward per a defined cadence….. 2 - 4 years Type of Fee Fee Name Capital Expansion Neighborhood Park Capital Expansion Community Park Capital Expansion Fire Capital Expansion Police Capital Expansion General Government Capital Expansion Transportation Utility Water Supply Requirement Utility Electric Capacity Utility Sewer Plant Investment Utility Stormwater Plant Investment Utility Water Plant Investment Building Development Development Review, Building Permit & Engineering Fees Fee Timeline 4 Detailed fee studies: • 4 years for CEF, TCEFs & Development fees • 2 years for Utility fees In years without updates, an annual inflation adjustment occurs Phase 1 Phase 2 Phase 3 2019 Fee Group – Development Review/Building Fees only • Four meetings as of early September • Decoupled from 2019 fee update • Plan to bring forward updates once finalized 2016 2017 2018 2019 2020 2021 Capital Expansion Fees Update Step II Step III Update Transportation CEFs Update Step II Update Electric Capacity Fees Update Update Update Water Supply Requirement Update Update Update Wet Utility Fees Update Update Update Building Development Fees Update Update Fee Working Group Active Active Active 5 Utility Fees Utility Fee Current Charge 2020 Charge $ Change % Change Electric Capacity Fee $1,537 $1,563 $ 26 1.7% Water PIF $ 3,826 $ 4,084 $ 258 6.7% Wastewater PIF $ 3,537 $ 3,590 $ 53 1.5% Stormwater PIF $ 1,548 $ 1,600 $ 52 3.3% Water Supply Requirement* $11,160 $13,838 $ 2,678 24.0% • Assumes residential, single-family home with an 8,600 square feet lot and 4 bedrooms *Charges for going over annual water allotment are tied to increase in Water Supply Requirement 6 Water PIFs Customer Class Criteria Current Charge 2020 Charge $ Change % Change Single Family 8,600 sq ft 3,826 4,084 $ 258 6.7% Duplex & Multi-family 3,435 sq ft 1,423 1,546 $ 123 8.6% Commercial Meter Size 3/4" by tap size 7,930 8,790 $ 860 10.8% 1" by tap size 20,960 23,060 $ 2,100 10.0% 1 1/2" by tap size 43,510 45,610 $ 2,100 4.8% 2" by tap size 72,450 78,820 $ 6,370 8.8% WATER Plant Investment Fees 7 Wastewater PIFs 2018 2020 Change in Proposed % Customer Class Volume Volume Volume PIF Change GPD GPD GPD $ Single family residential 230 229 -0.4% 3,590 1.5% Duplex and Multi-family 170 165 -2.9% 2,590 0.1% Commercial Meter Size - inches 3/4 490 492 0.4% 7,710 2.6% 1 1,080 1,096 1.5% 17,190 3.8% 1.5 2,070 2,063 -0.3% 32,350 2.0% 2 4,300 4,281 -0.4% 67,120 2.0% Wastewater Plant Investment Fees 8 Stormwater PIFs Rate Class 2019 2020 $ Change % Change Gross Area Developed (sq ft) 8,600 8,600 Common Area Allocation (sq ft) 6,156 6,156 Base Rate (per acre*) $9,142 $9,447 Runoff Coefficient 0.5 0.5 Total Fee $1,548 $1,600 $52 3.3% Gross Area Developed (sq ft) 43,560 43,560 Base Rate (per acre*) $9,142 $9,447 Runoff Coefficient 0.8 0.8 Total Fee $7,314 $7,558 $244 3.3% Commercial Stormwater Plant Investment Fee Residential Capital Expansion Fees Step III 9 • Step III fees are an 12.6% increase from current fee levels (Step II) • CEF fee increases are 100% of full fee levels recommended in 2017 • Inflation: CPI-U index for Denver-Aurora-Lakewood, Engineering News Record for TCEFs Step III - Full fees proposed in 2017 with inflation Land Use Type Unit N'hood Park Comm. Park Fire Police Gen. Gov't Step III Total w Inflation % Increase w Inflation TCEF Total w Inflation Total % Increase w Inflation Residential,up to 700 sq. ft. Dwelling $1,855 $2,619 $454 $254 $619 $5,801 12.6% $2,336 8.9% Residential,701-1,200 sq. ft. Dwelling $2,483 $3,506 $614 $344 $834 $7,782 12.6% $4,338 8.0% Residential,1,201-1,700 sq. ft. Dwelling $2,712 $3,828 $668 $374 $911 $8,493 12.6% $5,632 7.5% Residential,1,701-2,200 sq. ft. Dwelling $2,740 $3,868 $679 $379 $925 $8,591 12.6% $6,586 7.1% Residential,over 2,200 sq. ft. Dwelling $3,053 $4,312 $756 $423 $1,029 $9,573 12.6% $7,059 7.2% Commercial 1,000 sq. ft. 0 0 $572 $320 $1,564 $2,456 12.6% $8,594 3.1% Office and Other Services 0 0 $572 $320 $1,564 $2,456 12.6% $6,331 3.7% Industrial/Warehouse 1,000 sq. ft. 0 0 $134 $74 $369 $577 12.6% $2,043 3.1% Fee Comparison: For Median New Home Sales Price $488K* 10 Fort Collins Proposed Fees in the Upper-Middle of the Pack Neighboring Cities New Median Sales Comparison with Fees 11 Fort Collins Fees are Inline with Neighboring Cities Fort Collins Fee Stack Median New Home Sales 12 Fort Collins Fees & Code Cost Impact is Leveling % of Median New Home Sales Price Summer 2019 Outreach 13 Organization Affordable Housing Board Building Review Board Economic Advisory Commission Fort Collins Board of Realtors Local Legislative Affairs Committee Northern Colorado Homebuilder's Association Super Issues Forum Energy Board Water Board 2019 Outreach: What We Heard 14 Overall supportive of approach and cadence We also heard: • Acknowledgement that regular fee updates are necessary • Supportive of 2018 fee group recommendations • Progressive fees/if where possible • Investigate revenue alternatives to support parks refresh & maintenance • Explore stronger support for affordable housing • Concerns about attainable housing - it may be less desirable to live here • Policy questions - development standards going forward, alignment on total cost (including operations and maintenance) 2019 Roadmap 15 • All fee categories initially planed to update in 2019 except for Transportation CEFs • Phasing complete after 2019 with regular two and four-year cadence beginning in 2021 • Building Development Fees decoupled from the 2019 update May June/July August October November 1/1/2020 Capital Expansion Fees CFC Outreach CFC Council Ordinance Effective Transportation CEFs Electric Capacity Fees CFC Outreach CFC Council Ordinance Effective Water Supply Requirement CFC Outreach CFC Council Ordinance Effective Wet Utility Fees CFC Outreach CFC Council Ordinance Effective Building Development Fees Working Group Working Group Direction Sought 16 Does Council support fee updates to come forward for consideration in November (effective January 1, 2020)? Backup 17 Why Do We Have Impact Fees 18 Capital Expansion Fees • New developments pays a proportionate share of infrastructure costs to “buy-in” to the level of service • Fee revenue used to build new service capacity • In place since 1996 Development Review Fees • Fees are intended to recoup the cost to the City for ensuring compliance with: • Planning, zoning and architectural/design standards • Adopted master plans • Building codes / resident safety Utility Plant Investment Fees • Provides a mechanism for new development to reimburse existing utility customers for existing infrastructure • Fee revenue used to build additional infrastructure The concept of growth paying for the impact of growth is a policy decision that City Council made and continues to support Fee Revenue Used to Add Infrastructure Needed Because of Growth Fee Overview: Methodologies Different methodologies used across fee categories: • Level of Service or Buy-in: Fees are set by assessing City’s capitalized assets or “level of service” and who’s using the assets. Development “buys in” to that level of service • Plan-based: Fees are set based on a capital improvement plan and development pays a portion of their impact on that plan • Hybrid: fees assessed using aspects of plan and level of service • Cost Recovery: fees are assessed based on recovering all or a portion of the cost of administering a particular program 19 Overview of Fees 20 Fee Methodology Calculation Capital Expansion (CEFs) Level of Service Asset Value/ Who’s Using Transportation Capital Expansion (TCEFs) Plan-based Capital Improvement Plan & Vehicle Miles Travelled, Type of Land Use Utility Plant Investment: Electric PIFs, Stormwater Level of Service Asset Value/ Who’s Using Raw Water/ Cash-in-Lieu Hybrid (recommended) Future water storage + Value of current assets Utility Plant Investment: Water, Wastewater Hybrid Capital Improvement Plan & Current Asset Values Development Review Cost Recovery Cost Recovery at 100% per code 2017 Recap 21 Council directed stepped implementation for CEF & TCEF in 2017 Success Factors: • Bringing fees together was good for understanding the full impact of fees • Formed citizen/staff working group Lessons Learned: • Fee increase recommendations were significant, caused confusion in the community • Difficult to explain with different methodologies and qualitative aspect Fee Status as of October 2017 Next Steps CEFs • 75% of fees implemented • Phased in approach - three steps TCEFs • 80% of fees implemented • Phased in approach - two steps Electric Capacity • 100% of fees implemented • Every two years Raw Water • 100% of fees implemented • Every two years 2017 – Drivers of Fee Increases 22 Capital Expansion Fees (2017 proposed increase 71% to 79%): • Fee based on replacement cost of existing infrastructure • Cost of construction, land, water up significantly since last fee revision Transportation Capital Expansion Fees (2017 proposed changes -32% to 114%): • Cost of construction up since last fee revision • Current transportation plan & calculation shift Electric Capacity Fees (2017 changes approximately -50% to 40%): • Change in methodology from plan-based to “buy-in” Raw Water Fees (effective 1/1/2018): • New fee model - value of the existing water rights portfolio & growth related capital expenses Large Increase Created Significant Business Community Concern 2018 Recap 23 Fee Group overall supportive of the fee coordination process and proposed fee updates • Council asked for a fee working group to foster a better understanding of fees prior to further fee updates • Balanced group of stakeholders – citizens, business-oriented individuals, City staff and a Council liaison • Met 14 times Fee Status as of January 2019 Next Steps CEFs • 90% of fees implemented • Phased in approach - three steps TCEFs • 100% of fees implemented • Phased in approach - two steps complete Utility PIFs • 100% of fees implemented • Every two years 24 • Review of impact fees together is beneficial for understanding the full impact of fee updates • Overall, sound methodologies, calculations and inputs • The third-party fee audit revealed how the City spends and collects impact fees is sound • Impact fee amenities add to property value, but views differ as to what extent they impact housing costs Key Findings • Impact fees are complicated and difficult to communicate across the community • Park impact fees are the only category where impact fees pay for 100 percent of what is built • Need to identify new revenue sources for park refresh and maintenance in the future • If less than recommended is approved, alternative revenue sources will be needed Fee Group Findings Fee Group Validated Integrity in Fee Development and Expenditures 25 Recommendations 1. Better Communication/Outreach & Notice of Fee Changes 2. Repayment of the $130k Identified in the Impact Fee Audit 3. Progressive Fees if/where Possible 4. Explore Additional Revenue Sources for Parks Buildout 5. Investigate Revenue Alternatives to Support Parks Refresh & Maintenance 6. Explore Stronger Supports for Affordable Housing Fee Waivers Fee Group Recommendations Recommendations Reviewed with Council Finance in September…. Implemented as Appropriate Over Time