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HomeMy WebLinkAboutIR 7020 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7020 I fo May 14, 1985 �k�fo)?;.' To the Mayor and Members of the City Council 4 Subject: COMMUNITY FACILITIES AGREEMENTS AND WATER AND SEWER CAPITAL RECOVERY FEES Introduction Recent discussions and Council workshops exploring strategies for growth management have made it clear that continued development of the City may impose unfair fiscal burdens on current City residents. For the con- struction of new water and sewer facilities, this burden is borne ulti- mately by the rates customers pay for water and wastewater services. In recent months, Water Department staff has begun examining the methods available to lessen the fiscal impact of new development on the existing ratepayers of the water and sewer system. Two areas of study have proved promising: (1) the current Water and - Sewer Installation Policy that is part of the City's Policy for the Installation of Community Facilities; and, (2) the development of water and sewer capital recovery fees to help reduce the growth of debt service. Both of these approaches can be initiated in the near future, while the comprehensive examination of City development policies continues. 000, Community Facilities Agreements During periods of rapid growth the-City's financial exposure increases due to the front-end sharing of infrastructure costs, while the benefits of new development, such as increased tax base and economic activity, lag somewhat behind. Currently, the City shares the burden of building streets, expanding water and sewer facilities, and providing park land through community facilities agreements with the developer. Upon signing the community facilities agreement in its current form, the City is financially obligated for a five-year period. The existing Water and Sewer Installation Policy, a part of the City's Policy for the Installa- tion of Community Facilities, technically obligates the City of Fort Worth to encumber the City's estimated financial contribution for five years from the time the agreement is signed. Conversely, the policy does not require the developer to submit a lette of credit, bond or other similar financial commitment until just prior to beginning construction. Under the existing policy it is possible for the Water Department's share of the community facilities funds to be set aside for up to five years with no similar obligation imposed on the developer. The sum of all the City's outstanding commitments, however, translates into a sizeable long-term obligation in the calculation of the water and sewer rate base. It is anticipated that the ongoing review of the City's development policies will result in a restructuring of the City's financial partici- pation. To reduce the Water Department' s financial exposure until com- -N, prehensive development policies are adopted, it is recommended that the -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7020 - P.2 a FORT To the Mayor and Members of the City Council May 14, 1985 00"1 .X C> Subject: COMMUNITY FACILITIES AGREEMENTS AND 1073 WATER AND SEWER CAPITAL RECOVERY FEES term of agreement on future water and sewer community facilities agree- ments be shortened from five years to two years. As the contract term is not established in the Sub-Division Ordinance or any other approved departmental development policies, the five-year contract term could be readily amended through administrative revision. Accordingly, the Water Department is preparing an amended Water and Sewer Installation Policy and will bring the proposed changes before the Council for action within the next few weeks. Capital RecoveEX Fees A second approach for reducing long-term financial burdens on the water and sewer rate base is the implementation of a capital recovery fee schedule. Up-front capital contributions from developers and builders for off-site water and sewer system improvements have been identified by the City Council as a potential growth management strategy, and several Texas communities have either implemented or are seriously investigating capital recovery fees. The experiences of these communities can be instructive for other cities contemplating a capital recovery fee. McAllen, Texas, attempted to implement a wastewater plant recovery fee but was challenged 'in court. The city ultimately was enjoined from imposing the fee until developers, builders, and city officials could reach agreement on how to calculate and administratively collect the fee. The City of Austin developed a water and sewer capital recovery fee model several years ago which was challenged by community interests before it could be implemented. In response, Austin worked for more than a year with an active ad hoc com- mittee of diverse community members to recalculate the technical and procedural means of implementing an equitable capital recovery fee. These examples demonstrate three common characteristics in the success- ful development of capital recovery fees: (1) involvement of an inde- pendent consultant to originally develop a fee schedule; (2) the active participation of the building and development community in the prepara- tion and review of the fee schedule; and, (3) a lengthy period of time -- usually more than a year -- to begin implementation. Attempts to circumvent any of these requirements may result in a program lacking broad-based community acceptance and support. As a first step, the Water Department staff is preparing a request for proposals for development of a capital recovery fee study. Once a con- sultant is chosen, Fort Worth community participation in the study will be a critical factor in devising and implementing a workable water and sewer capital recovery fee program. A recommendation concerning selec- t tion of a qualified consulting firm will be submitted to the City Coun- cil in the near future. LISSUED BY THE CITY MANAGER FORT WORTH, TEXAS �NFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7020 --.p.3 I.,Aiok1eo To the Mayor and Members of the City Council May 14, 1985 Subject: COMMUNITY FACILITIES AGREEMENTS AND WATER AND SEWER CAPITAL RECOVERY FEES Conclusion As a result of study to date, the Water Department plans to take two steps toward limiting the fiscal impact of new development on customers' water and sewer rates. First, the staff will request City Council approval of an amended Water and Sewer Installation Policy. Under the amended policy, future community facilities contracts would financially obligate the City for a two-year period only. Secondly, a request for proposals to conduct a capital recovery fee study is being prepared. When these proposals have been evaluated, the City Council will be asked to approve a consulting firm to begin developing an equitable fee sche- dule. The implementation of the capital recovery fee program will take place only after input and review by the building and development com- munity. uglas� Harman 6City Manager DH:jcnn ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS