D R A F T. Impact Fees

Transcription

1 D R A F T Impact Fees February 14, 2007 Prepared By

2 Table of Contents IMPACT FEE SUMMARY...1 HIGHLIGHTS OF THE MONTANA IMPACT FEE ACT...1 WHY IMPACT FEES?...2 Figure 1 Infrastructure Funding Alternatives...2 BASIC UNDERSTANDING OF IMPACT FEES...2 Figure 2 Fee Methods and Cost Components...4 CURRENT FEES FOR WATER AND SEWER CAPACITY...4 Figure 3 Current Fee Schedule...4 MAXIMUM SUPPORTABLE IMPACT FEES...5 Figure 4 Maximum Supportable Citywide Impact Fees...5 PARK IMPROVEMENTS...6 Figure 5 Park Impact Fee Formula...6 CITYWIDE PARK STANDARDS...6 Figure 6 - Incremental Expansion Cost of Citywide Parks...7 MAJOR RECREATION FACILITIES...7 Figure 7 Cost Recovery for Slash Pool...7 CREDIT EVALUATION...7 PARK FEE CALCULATIONS...8 Figure 8 - Park Impact Fee Schedule...8 CASH FLOW ANALYSIS OF GROWTH-RELATED PARK IMPROVEMENTS...9 Figure 9 Projected Cash Flow for Parks...9 WATER...10 Figure 10 Water Impact Fee Methodology Chart...10 WATER DEMAND ANALYSIS...11 Figure 11 - Water Demand Factors...11 Figure 12 - Annual Water System Demand...12 WATER SYSTEM IMPROVEMENTS...12 Figure 13 - Water System Capital Improvements Plan...13 CREDIT EVALUATION...13 WATER IMPACT FEE CALCULATIONS...14 Figure 14 Water Impact Fees...14 FUNDING PLAN FOR WATER SYSTEM IMPROVEMENTS...15 Figure 15 Cash Flow Summary for Water...15 SEWER...16 Figure 16 - Sewer System Impact Fee Methodology Chart...16 SEWER DEMAND ANALYSIS...16 Figure 17 - Wastewater Average Daily Flow Factors...17 Figure 18 - Projected Annual Sewer System Demand...17 SEWER CONVEYANCE SYSTEM IMPROVEMENTS...18 Figure 19 - Sewer System Capital Improvements Plan...18 COST RECOVERY AND REVENUE CREDIT EVALUATION...19 SEWER IMPACT FEE CALCULATIONS...19 Figure 20 - Sewer System Impact Fee...19 FUNDING PLAN FOR SEWER SYSTEM IMPROVEMENTS...20 Figure 21 Cash Flow Summary for Sanitary Sewer...20 ROAD IMPACT FEES...21 Figure 22 Conceptual Road Impact Fee Formula...21 ROAD IMPACT FEE SYSTEM IMPROVEMENTS...21

3 Figure 23 Map of Proposed System Improvements...22 COST OF GROWTH-RELATED ROAD IMPROVEMENTS...23 Figure 24 Summary of System Improvements...23 TRIP GENERATION...23 Adjustment for Journey-To-Work Commuting...23 Adjustment for Pass-By Trips...23 VEHICLE MILES OF TRAVEL...24 Lane Capacity...24 Average Trip Length on Belgrade System Improvements...24 Trip Length Weighting Factor by Type of Land Use...24 Vehicle Trips to Development in Belgrade...25 Figure 25 Travel Demand Model Inputs...25 Figure 26 Road Impact Fee Calibration...26 CREDIT FOR OTHER REVENUES...26 ROAD IMPACT FEE FORMULA AND INPUT VARIABLES...26 Figure 27 Road Impact Fee Formula...27 Figure 28 Road Impact Fee Input Variables...28 MAXIMUM SUPPORTABLE ROAD IMPACT FEES...29 Figure 29 Road Impact Fee Schedule...29 PROJECTED CASH FLOW FOR ROADS...30 Figure 30 Cash Flow Summary for Roads...30 FIRE-RESCUE...31 Figure 31 Fire-Rescue Impact Fee Methodology Chart...31 COST ALLOCATION FOR FIRE-RESCUE INFRASTRUCTURE...32 Figure 32 Proportionate Share Factors for Fire/EMS...32 FIRE-RESCUE INFRASTRUCTURE STANDARDS...32 Figure 33 Infrastructure Standards for Fire-Rescue...33 CREDIT EVALUATION FOR FIRE-RESCUE INFRASTRUCTURE...34 Figure 34 Principal Payment Credit for Existing Fire Truck...34 FIRE-RESCUE IMPACT FEE CALCULATIONS...34 Figure 35 Fire-Rescue Fee Input Variables...35 MAXIMUM SUPPORTABLE FIRE-RESCUE IMPACT FEES...36 Figure 36 Fire-Rescue Impact Fees...36 FIRE-RESCUE CASH FLOW ANALYSIS...37 Figure 37 Cash Flow Summary for Fire-Rescue Infrastructure...37 CAPITAL IMPROVEMENTS PLAN...38 DEMAND FOR INFRASTRUCTURE...38 Figure 38 Summary of Projections...38 Figure 39 Projected Demand or Service Units...39 PROPOSED MEANS TO MEET THE DEMAND FOR PUBLIC FACILITIES...40 Figure 40 Summary of Infrastructure Standards...40 Figure 41 Capital Improvements Schedule...41 FUNDING SOURCES FOR CAPITAL IMPROVEMENTS...42 Figure 42 Projected Impact Fee Revenue...42 IMPLEMENTATION AND ADMINISTRATION...43 CREDITS AND REIMBURSEMENTS...43 CITYWIDE SERVICE AREA OR BENEFIT DISTRICT...44 NONRESIDENTIAL DEVELOPMENT CATEGORIES...44 APPENDIX A DEMOGRAPHIC DATA...45 POPULATION AND HOUSING CHARACTERISTICS...45 Figure A1 Persons per Household...46 RECENT RESIDENTIAL CONSTRUCTION...46

4 Figure A2 City of Belgrade Housing Units and Population in NONRESIDENTIAL DEMAND INDICATORS...47 Figure A3 Employee and Building Area Ratios...48 JOBS AND FLOOR AREA BY TYPE OF NONRESIDENTIAL DEVELOPMENT...49 Figure A4 Jobs and Floor Area Estimates...49 DEVELOPMENT PROJECTIONS...49 Figure A5 Detailed Demographic Data...50 Figure A6 Summary of Growth Indicators...51 APPENDIX B PASS-BY TRIP ADJUSTMENT FACTORS...52

5 TischlerBise 4701 SANGAMORE ROAD SUITE S240 BETHESDA, MD Fiscal, Economic & Planning Consultants T: F: IMPACT FEE SUMMARY Impact fees are one-time payments used to fund growth-related system improvements. As documented in this report, impact fees for Belgrade are proportionate and reasonably related to the capital facility service demands of new development. Specific costs have been identified using local data and current dollars. With input from City staff, TischlerBise determined demand indicators for each type of public facility and calculated proportionate share factors to allocate costs by type of development. The formulas used to calculate the impact fees are diagramed in a flow chart for each type of public facility. This report documents the specific factors used to derive the impact fees. Impact fee methodologies also identify the extent to which newly developed properties are entitled to various types of credits to avoid potential double payment of capital costs. Highlights of the Montana Impact Fee Act The Montana Impact Fee Act, passed in 2005, only requires simple majority approval by elected officials for water, sewer, road and fire impact fees. The proposed park impact fee will require a two-thirds majority approval of the governing body. For the City of Belgrade to implement impact fees will also require a capital improvements plan (CIP) for growth-related projects. To be funded by impact fees, improvements must have a useful life of at least ten years. The CIP must be updated at least every two years. Therefore, impact fee calculations should be in current dollars (not inflated over time), with the costs updated as part of the regular budgetary process. In Montana, new development may not be held to a higher level of service than existing users although higher standards are acceptable is there is a funding plan to correct the deficiency. The Montana Act also addresses adoption, collection and expenditure of the fees. The main procedural requirement is the involvement of an Impact Fee Advisory Committee that must include at least one representative of the development community and one certified public accountant. To help cover impact fee expenses, Montana allows an administrative surcharge, not to exceed five percent of the total impact fee. 1 TischlerBise

6 Why Impact Fees? Infrastructure funding alternatives force decision-makers to wrestle with a dynamic tension between two competing desires. As shown on the left side of Figure 1, various funding options have a strong-to-weak connection between the source of funds and the demand for public facilities. It is unfortunate that the funding options with the closest nexus to the demand for public facilities also have the smallest revenue base to bear the cost of the public facilities (see the right side of the diagram). For example, only new utility customers pay impact fees. In contrast, all existing customers, plus the new customers that are added each year, pay water and sewer user charges. Therefore, the base of utility user charges continues to increase over time, but the increase in new development is relatively constant from year to year. Figure 1 Infrastructure Funding Alternatives STRONGER Area Specific Assessments SMALLER Impact Fees Nexus with Demand for Public Facilities Special Districts Utility Rates Revenue Base Bearing Cost of Public Facilities Property Tax WEAKER Sales Tax LARGER Source: Paul Tischler, Dwayne Guthrie and Nadejda Mishkovsky Introduction to Infrastructure Financing. IQ Service Report, Vol. 31, No. 3. Washington, DC: International City/City Management Association. In the City of Belgrade, elected officials are considering a policy decision to increase impact fee funding of water and sewer infrastructure, plus add new fees for park, road and fire infrastructure. If the City approves the proposed impact fees, it represents a policy decision to decrease infrastructure funding from broad-based revenues (i.e., property taxes and user charges) and increase revenues that have a stronger nexus between the fee payers and the demand for public facilities. As a dedicated revenue source, impact fees could provide significant funding for growth-related system improvements in Belgrade. Basic Understanding of Impact Fees In contrast to development exactions, which are typically referred to as project-level improvements, impact fees fund growth-related infrastructure that will benefit multiple development projects, or even the entire jurisdiction. The basic steps in a conceptual impact fee formula are illustrated below. The first step (see the left box) is to determine an appropriate 2 TischlerBise

7 demand indicator, or service unit, for the particular type of infrastructure. The demand/service indicator measures the number of demand or service units for each unit of development. For example, an appropriate indicator of the demand for parks is population growth and the increase in population can be estimated from the average number of persons per occupied housing unit (i.e., a household). The second step in the conceptual impact fee formula is shown in the middle box below. Infrastructure units per demand unit are typically called Level-Of-Service (LOS) standards. In keeping with the park example, a common LOS standard is park acreage per thousand people. The third step in the generic impact fee formula, as illustrated in the right box, is the cost of various infrastructure units. To complete the park example, this part of the formula would establish the cost per acre for park improvements. Demand Units per Development Unit Infrastructure Units per Demand Unit Dollars per Infrastructure Unit When applied to specific types of infrastructure, the conceptual impact-fee formula is customized using three common impact fee methods that focus on different timeframes. The first method is the cost recovery method. To the extent that new growth and development is served by the previously constructed improvements, the City of Belgrade may seek reimbursement for the previously incurred public facility costs. This method is used for facilities that have adequate capacity to accommodate new development, at least for the next five years. The rationale for the cost recovery approach is that new development is paying for its share of the useful life or remaining capacity of an existing facility. The second basic approach used to calculate impact fees is the incremental expansion cost method. This method documents the current LOS for each type of public facility in both quantitative and qualitative measures. The City of Belgrade will use impact fee revenue to incrementally expand or provide additional facilities as needed to accommodate new development. A third impact fee approach is the planbased method. This method is best suited for public facilities that have commonly accepted engineering/planning standards or specific improvement plans. Figure 2 summarizes the method(s) used to derive the impact fee for each type of public facility. 3 TischlerBise

8 Figure 2 Fee Methods and Cost Components Type of Fee Cost Recovery (past) Incremental Expansion (present) Plan-Based (future) Parks Major Recreation Facilities Citywide Park Improvements Not applicable Potable Water Not applicable Not applicable Wells, Tanks and Major Lines Sanitary Sewer Not applicable Not applicable Conveyance System Expansion Streets Not applicable Not applicable Arterial & Collector Lane Miles Fire Not applicable Fire Stations and Apparatus Not applicable Current Fees for Water and Sewer Capacity The City of Belgrade has existing fees for water and sewer facilities. The current fee schedule is shown in Figure 3. TischlerBise recommends switching from a flat sewer fee to a fee schedule that varies by meter size. Utility fees based on meter size are commonly used by local governments, are easy to administer and make the fees more proportionate to the demand for service, which is a requirement of the Montana Impact Fee Act. Figure 3 Current Fee Schedule All Development Types Water Sewer TOTAL Per Meter Size 0.75" $585 $150 $ " $825 $150 $ " $1,650 $150 $1, " $2,820 $150 $2, " $4,000 $150 $4, " $6,000 $150 $6,150 4 TischlerBise

9 Maximum Supportable Impact Fees Figure 4 provides a schedule of the maximum supportable impact fees for the City of Belgrade. If elected officials adopt lower fees, it may be necessary to revise the corresponding capital improvement plans or provide additional non-impact fee funding. For residential development, impacted fees will be imposed per housing unit. Water and sewer impact fees for nonresidential development are based on water meter size. The fee schedule provides a reasonable impact fee determination for common types of development. For unique development types, the City may allow or require an independent impact fee assessment. Figure 4 Maximum Supportable Citywide Impact Fees ITE 5% Code Parks Water Sewer Streets Fire Adm TOTAL Residential Per Housing Unit 210 Single Family Detached $831 $5,128 $2,708 $3,856 $917 $672 $14, All Other Housing Types $579 $3,574 $1,887 $2,361 $639 $452 $9,492 Nonresidential Per Meter Size 0.75" $5,128 $2,708 $391 $8,227 * Water and sewer impact 1.00" $8,717 $4,604 $666 $13,987 fees for nonresidential 1.50" $16,922 $8,937 $1,292 $27,151 development are based on 2.00" $27,178 $14,354 $2,076 $43,608 water meter size. 3.00" $54,869 $28,979 $4,192 $88, " $85,637 $45,229 $6,543 $137,409 Per Sq Ft of Floor Area 820 Commercial / Shop Ctr 50,000 SF or less $9.72 $0.99 $0.53 $ Commercial / Shop Ctr 50, ,000 SF $8.11 $0.82 $0.44 $ Commercial / Shop Ctr 100, ,000 SF $6.94 $0.70 $0.38 $ Business Park $1.68 $0.15 $0.09 $ Medical-Dental Office $7.21 $0.66 $0.39 $ General Office 25,000 SF or less $3.66 $0.33 $0.19 $ General Office 25,001-50,000 SF $3.12 $0.28 $0.17 $ General Office 50, ,000 SF $2.66 $0.21 $0.14 $ Hospital $3.50 $0.32 $0.19 $ Mini-Warehouse $0.49 $0.04 $0.02 $ Warehousing $0.99 $0.09 $0.05 $ Light Industrial $1.39 $0.12 $0.07 $ Elementary School $1.91 $0.17 $0.10 $2.18 Other Nonresidential Per Demand Unit 620 Nursing Home (bed) $473 $43 $25 $ Day Care (per student) $429 $39 $23 $ Secondary School (per student) $245 $22 $13 $ Elementary School (per student) $170 $15 $9 $ Lodging (per room) $1,124 $104 $61 $1,289 5 TischlerBise

10 PARK IMPROVEMENTS The park impact fee is derived using the incremental expansion cost method for citywide park improvements and a cost recovery method for major recreation facilities. The incremental expansion cost method documents current infrastructure standards in both quantitative and qualitative measures. As indicated in the park impact fee formula diagram (see Figure 5), cost components were allocated 100% to residential development. The diagram is intended to read like an outline, with lower levels providing a more detailed breakdown of the impact fee components. The park impact fee is derived from the product of persons per household multiplied by the net capital cost per person. The boxes in the next level down, with light-green shading, indicate cost components for two types of infrastructure. Figure 5 Park Impact Fee Formula Residential Development Persons per Household Multiplied by Net Capital Cost per Person Incremental Expansion Cost of Citywide Park Improvements Cost Recovery for Major Recreation Facilities Less Credit for Other Revenues (not applicable) Citywide Park Standards Infrastructure standards are based on an inventory of existing citywide parks and recent expenditures on park improvements. The City of Belgrade will use park impact fee revenue to make improvements to larger parks that have a citywide service area. Smaller, neighborhood scale parks and land for parks will continue to be provided under the State s mandatory dedication requirements for residential subdivisions. As shown in Figure 6, the inventory of improvements represents an investment with a current value of approximately $1.81 million. Park improvements cost an average of $82,000 per acre, or $236 per person. Infrastructure standards are derived using estimated peak population in With 22.2 acres of land for citywide parks, the current standard is 2.9 acres per 1,000 residents. Unit prices and the inventory of various types of park improvements were provided by City staff. 6 TischlerBise

11 Figure 6 - Incremental Expansion Cost of Citywide Parks Softball/ Soccer/ Athletic Shelters Playground Rest Miscellaneous Park Acreage Baseball Football Courts* Equipment Rooms Improvements** Lewis & Clark $160,000 Lions $130,000 Prescott 4.7 $94,000 Sunnyside $60,000 TOTAL Per Acre Cost Unit Price $150,000 $50,000 $35,000 $20,000 $40,000 $100,000 $20,000 Cost of Improvements $750,000 $100,000 $140,000 $60,000 $120,000 $200,000 $444,000 Existing Level of Service Standards Total Improvements $1,814,000 Peak Population in ,659 Acres of Park Land per 1,000 Persons 2.9 Improvements Cost Per Acre $82,000 Improvements Cost Per Person $236 * Basketball, tennis and handball/raquetball courts. ** These costs include items such as parking lots, lighting, landscaping and irrigation. Major Recreation Facilities Belgrade recently completed construction of a new splash pool, at a total cost of $300,000. The splash pool has adequate capacity for at least the next three years, thus the cost factor of $35 per capita is based on the projected peak population in Figure 7 Cost Recovery for Slash Pool Facility City Cost Splash Pool $300,000 TOTAL $300,000 Peak Population in ,478 Capital Cost Per Capita $35 Credit Evaluation Because new development will provide front-end funding of infrastructure, there is a potential for double payment of capital costs due to future principal payments on existing debt for public facilities. A credit is not necessary for interest payments if interest costs are not included in the impact fees. Because the City of Belgrade does not have any debt obligations for parks there is no applicable revenue credit. 7 TischlerBise

12 Park Fee Calculations Infrastructure standards used to calculate park impact fees are shown in the boxed area of Figure 8. The park impact fee is the product of persons per household multiplied by the net capital cost per person. For example, the fee for a detached housing unit is 3.07 x 271, or $831 per housing unit. Figure 8 - Park Impact Fee Schedule Standards: Persons Per Household Single Family Detached 3.07 All Other Housing Types 2.14 Level Of Service Park Acreage per 1,000 People 2.9 Park Land Cost per Acre $0 Land Cost per Person for Citywide Parks $0 Improvements Cost per Person for Citywide Parks $236 Trails Cost per Person $0 Major Recreation Facilities Cost per Person $35 Principal Payment Credit per Person Net Capital Cost Per Person $271 Maximum Supportable Impact Fee per Housing Unit Single Family Detached $831 All Other Housing Types $579 8 TischlerBise

13 Cash Flow Analysis of Growth-Related Park Improvements As shown in the upper portion of Figure 9, the City of Belgrade should receive approximately $367,000 in park impact fee revenue over the next five years, if the maximum supportable fee is imposed. A summary of capital costs for growth-related park improvements is shown in the lower portion of Figure 9. The need for citywide park improvements is derived from the impact fee infrastructure standards and the projected increase in population over the next five years. To accommodate new residential development in Belgrade, the City will spend approximately $312,000 on citywide park improvements. Given the cost recovery methodology for the splash pool, Belgrade will not need improvements to major recreation facilities until the year To the extent the rate of development either accelerates or slows down, there will be a corresponding change in the impact fee revenue and capital costs. See Appendix A for discussion of the development projections that drive the cash flow analysis. Figure 9 Projected Cash Flow for Parks Cumulative Average (Current $ in thousands) Total Annual REVENUES 15 Park Fee - Detached $48 $47 $47 $47 $47 $237 $47 16 Park Fee - Attached $26 $26 $26 $26 $26 $130 $26 Park Impact Fee Subtotal $74 $73 $73 $73 $73 $367 $73 CAPITAL COSTS Citywide Park Improvements $66 $82 $82 $0 $82 $312 $62 Major Recreation Facilities $0 $0 $0 $10 $10 $19 $4 Park System Improvements $66 $82 $82 $10 $92 $331 $66 NET CAPITAL FACILITIES CASH FLOW - Parks Annual Surplus (or Deficit) $8 ($9) ($9) $64 ($18) $37 $7 Cumulative Surplus (or Deficit) $8 ($1) ($9) $55 $37 9 TischlerBise

14 WATER The water impact fees are based on the net capital cost per gallon of system capacity, measured in average day demand. In the City of Belgrade, peak day water demand is approximately 2.2 times the average day demand. To avoid potential double payment for system improvements, the one-time impact fees must be reduced to account for future debt obligations that will be included in monthly utility bills. Applicable credits are subtracted from the cost factors to yield the net capital cost per gallon for system capacity. As shown in Figure 10, the net capital cost is multiplied by a water demand factor per equivalent residential unit. Nonresidential fees are derived from capacity ratios (published by the American Water Works Association) according to the size of the new connection s water meter. The impact fee calculations use average day demand factors but the engineering analysis of system improvements accounts for peak water demand plus fire flow requirements. In Belgrade, peak day water demand is approximately 2.2 times the average day demand. Figure 10 Water Impact Fee Methodology Chart Average Daily Residential Demand (in gallons) Convert Residential Equivalent Demand to Fees by Meter Size Using AWWA Capacity Ratios Multiplied by Net Capital Cost per Gallon of Capacity Water Supply and Storage Projects Plus Water Distribution System Improvements Minus Applicable Credits 10 TischlerBise

15 Water Demand Analysis Water used by residential and nonresidential customers is documented below based on data from the City s utility billing records. The number of water customers and average daily water use for residential and nonresidential development is shown in Figure 11. Over the past three years, the average residential water demand was slightly below the State standard of 400 gallons per day. To be consisted with accepted engineering practice, the impact fees will use the recommended average day demand factor of 400 gallons per residential customer. Figure 11 - Water Demand Factors Avg Gallons Accounts Gallons Per Day GPCD* Per Day Per Account Annual Water Use FY03-04 Residential 887,411 87% 1, Nonresidential 130,962 13% TOTAL 1,018,373 2,130 Annual Water Use FY04-05 Residential 674,159 85% 1, Nonresidential 120,364 15% TOTAL 794,523 2,166 Annual Water Use FY05-06 Residential 801,512 85% 2, Nonresidential 142,096 15% TOTAL 943,608 2,228 Averages Over Three-Years** Residential 797,044 86% 1, Nonresidential 131,141 14% TOTAL 928,185 2,175 * Gallons per capita per day based on an average of 3.07 persons per single-family household. ** Matches recommended state standard of 400 gpd per housing unit. Source: City water billing records. 11 TischlerBise

16 The residential and nonresidential demand factors discussed above were multiplied by projected development in Belgrade to yield the annual water demand data shown in Figure 12. Development projections are documented in Appendix A. Figure 12 - Annual Water System Demand Annual Increase Cumulative Increase CY FY Million Gallons Acre-Feet Utility Accounts MGD Accounts MGD Per Avg Day Per Year Accounts past ,140 2,130 past , past ,060 2, Base ,110 2, future ,140 2, future ,190 2, future ,230 2, future ,270 2, future ,310 2, future ,370 2, future ,410 2, future ,460 2, future ,490 3, future ,530 3, Water System Improvements Growth-related projects necessary to expand the water supply, storage and distribution system are shown in Figure 13. Projects with a marginal cost allocation are needed solely to accommodate new development. The cost per gallon for marginal cost projects is based on the net increase in water system demand over the next five years. For the Belgrade water system, major growth-related capital improvements include an additional well and a new water storage tank. Projects with an average cost allocation will also provide some benefit to existing water customers. Therefore, the cost per gallon for average cost projects is based on total water demand expected at the end of the five-year CIP. 12 TischlerBise

17 Figure 13 - Water System Capital Improvements Plan Year 1 Year 2 Year 3 Year 4 Year 5 Fiscal Year => TOTAL Marginal Cost Allocation of Improvements W1 Water Supply Well $693,000 $693,000 W2 South Water Tank (0.5 MG) $1,600,000 $1,600,000 W3 $0 Subtotal $0 $0 $693,000 $1,600,000 $0 $2,293,000 Water Demand Increase Over Five Years (gal/day) 180,483 Capital Cost per Gallon Increase in System Demand $12.70 Average Cost Allocation of Improvements W4 Water Line Capacity Expansion $50,000 $50,000 $50,000 $150,000 Subtotal $50,000 $50,000 $0 $0 $50,000 $150,000 Water Demand in 2011 (gal/day) 1,170,000 Average Capital Cost per Gallon of System Demand $0.12 Growth-Related CIP (Pay-Go Only) $50,000 $50,000 $693,000 $1,600,000 $50,000 $2,443,000 Total Cost per Gallon of Capacity $12.82 Credit Evaluation The City of Belgrade has no outstanding debt related to the water system. With impact fees covering the cost of growth-related capital improvements, there is no potential double payment from other revenue sources. 13 TischlerBise

18 Water Impact Fee Calculations Standards used to derive the water impact fee are shown in the boxed area of Figure 14. Water impact fees for nonresidential development are based on meter sizes and their respective capacity ratio relative to a 0.75-inch meter. The capacity ratios by meter size are from the American Water Works Association. In the City of Belgrade, the nonresidential water customer typically have a one-inch water meter. Figure 14 Water Impact Fees Standards: Demand Indicators Single Family Detached Persons Per Household 3.07 All Other Housing Types Persons Per Household 2.14 Gallons Per Capita Per Average Day 130 ERU Gallons per Average Day 400 Cost Factors Water Distribution System Cost per Gallon of Capacity $12.82 Revenue Credit per Gallon $0.00 Net Capital Cost per Gallon of Capacity $12.82 Maximum Supportable Impact Fee Residential Per Dwelling Unit Single Family Detached $5,128 All Other Housing Types $3,574 Nonresidential Per Meter Meter Size (inches)* Capacity Ratio 0.75 Displacement 1.0 $5, Displacement 1.7 $8, Displacement 3.3 $16, Compound 5.3 $27, Compound 10.7 $54, Compound 16.7 $85,637 * Fees for meters larger than four inches will be based on annualized average day demand and the net capital cost per gallon of capacity. 14 TischlerBise

19 Funding Plan for Water System Improvements Figure 15 summarizes projected impact fee revenue and expenditures for growth-related water projects over the next five years. Based on the development projections in Appendix A, water fees should yield average annual revenue of approximately $474,000, if implemented at the maximum supportable level. The cash flow analysis assumes the average nonresidential customer requires a one-inch water meter. Even if an apartment developer desires to install a master water meter for a building containing multiple housing units, the City of Belgrade will determine the water impact fee based on the number of housing units permitted. Growth-related capital costs for pay-as-you-go projects average $489,000 per year. To cover the total cost of growth-related capital improvements over the next five years, water user charges will have to contribute approximately $15,000 per year to cover the cost of water line improvements that also benefit existing customers. Figure 15 Cash Flow Summary for Water Cumulative Average (Current $ in thousands) Total Annual REVENUES 17 Water Fee - Res $386 $390 $385 $390 $385 $1,935 $ Water Fee - Nonres $85 $87 $87 $87 $87 $434 $87 Water Impact Fee Subtotal $471 $477 $472 $477 $472 $2,368 $474 CAPITAL COSTS Water System Improvements $50 $50 $693 $1,600 $50 $2,443 $489 NET CAPITAL FACILITIES CASH FLOW - Water Annual Surplus (or Deficit) $421 $427 ($221) ($1,123) $422 ($75) ($15) Cumulative Surplus (or Deficit) $421 $848 $627 ($497) ($75) 15 TischlerBise

20 SEWER Sewer system impact fees are based on planned improvements to the wastewater conveyance system over the next five years. As shown in Figure 16, the capital cost per gallon of capacity was multiplied by a wastewater demand factor (i.e., average daily wastewater flow in gallons) to yield the proportionate impact fee by type of housing. Nonresidential fees are derived from capacity ratios according to the size of the new connection s water meter. Figure 16 - Sewer System Impact Fee Methodology Chart Average Daily Wastewater Flow (in gallons) Persons per Household Multiplied by Gallons per Person Convert Residential Equivalent to Nonresidential Fees Using Meter Size Capacity Ratios Multiplied by Net Capital Cost per Gallon Plus Plan-Based Cost for Conveyance System Improvements Sewer Demand Analysis Wastewater generation rates for both residential and nonresidential customers were determined using the City s utility billing data from fiscal years through Figure 17 indicates the number of sewer customers and the average daily wastewater flow from residential and nonresidential development, based on water use during the winter. Water billing records during winter months, when there is minimal water used outdoors, provide a reasonable proxy for sewer flow. 16 TischlerBise

21 Figure 17 - Wastewater Average Daily Flow Factors Avg Gallons Accounts Gallons Per Day GPCD* Per Day Per Account Annual Sewer Flow During Winter Montsh FY03-04 Residential 467,160 83% 1, Nonresidential 95,255 17% TOTAL 562,415 2,130 Annual Sewr Flow Duriing Winter Months FY04-05 Residential 408,297 81% 1, Nonresidential 94,750 19% TOTAL 503,047 2,166 Annual Sewer Flow During Winter Months FY05-06 Residential 404,382 80% 2, Nonresidential 103,439 20% TOTAL 507,821 2,228 Averages Over Three-Years Residential 426,613 81% 1, Nonresidential 97,815 19% TOTAL 524,428 2,175 * Gallons per capita per day based on an average of 3.07 persons per single-family household. Source: City water billing records for October through April. The residential and nonresidential wastewater generation rates discussed above were multiplied by projected development in Belgrade to yield the annual wastewater flow projections shown in Figure 18. The projected number of nonresidential connections was determined by the 2006 ratio of jobs in Belgrade to nonresidential sewer customers. See the summary of growth-related capital improvements and Appendix A for additional documentation on the development projections. Figure 18 - Projected Annual Sewer System Demand Annual Increase Cumulative Increase CY FY Utility Million Gallons Customers MGD Customers MGD Customers Per Avg Day past , past , past , Base , future , future , future , future , future , TischlerBise

22 Sewer Conveyance System Improvements A summary of Belgrade s CIP for growth-related sewer projects is shown in Figure 19. At the top of the table are the projects that solely benefit new development. The cost of these projects was allocated to the projected net increase in wastewater flow over the next five years, yielding a capital cost of $12.51 per gallon increase in average day wastewater flow. In addition, the City included $100,000 over the next five years for sewer line capacity expansion. Specific projects will be identified during Belgrade s on-going CIP and budget approval process. Because these projects (i.e. line item S5) may also provide some benefit to existing customers, costs were allocated to the average day wastewater flow from all customers anticipated in the year Figure 19 - Sewer System Capital Improvements Plan Year 1 Year 2 Year 3 Year 4 Year 5 Fiscal Year => TOTAL Projects Solely Benefiting New Development S1 Jackrabbit Gravity Line $550,000 $550,000 S2 Lift Station (City Share) $300,000 $300,000 S3 Force Main Lift to Lagoon $525,000 $525,000 S4 $0 Subtotal $0 $0 $550,000 $300,000 $525,000 $1,375,000 Wastewater Flow Increase Over Five Years (gal/avg day) 109,906 Capital Cost per Gallon Increase in Wastewater Flow $12.51 Projects Benefiting Current and Future Customers S5 Sewer Line Capacity Expanion $50,000 $50,000 $100,000 Subtotal $50,000 $50,000 $0 $0 $0 $100,000 Wastewater Flow in 2011 (gal/day) 670,000 Average Capital Cost per Gallon of Wastewater Flow $0.14 Total Growth-Related CIP $50,000 $50,000 $550,000 $300,000 $525,000 $1,475,000 Total Cost per Gallon of Capacity $ TischlerBise

23 Cost Recovery and Revenue Credit Evaluation Belgrade recently completed major expansions to the wastewater treatment plant, plus installation of a major cross-town trunk line. Sewer impact fees could include a cost recovery component for these system improvements that have surplus capacity. Given the bond financing of these improvements, a cost recovery component would also require a revenue credit for future sewer user charges, thus avoiding potential double payment for the same improvements. To simplify the sewer impact fee calculations, TischlerBise excluded the cost recovery items, thereby making it unnecessary to provide a revenue credit for the existing sewer bonds. Sewer Impact Fee Calculations Standards used to derive the sewer system impact fee are shown in the boxed area of Figure 20. Nonresidential fees are based on water meter sizes and their capacity relative to a 0.75-inch meter. Capacity ratios convert the equivalent residential unit impact fee into a proportionate fee for larger meter sizes. The capacity ratios by meter size are from the American Water Works Association. Figure 20 - Sewer System Impact Fee Standards: Demand Factors Single Family Detached Persons Per Household 3.07 All Other Housing Types Persons Per Household 2.14 Gallons Per Capita Per Average Day 70 ERU Gallons per Average Day 214 Cost Factors Conveyance System CIP Cost per Gallon of Capacity $12.65 Cost Recovery per Gallon of Capacity $0.00 Principal Payment Credit Per Gallon $0.00 Net Capital Cost Per Gallon of Capacity $12.65 Maximum Supportable Sewer Fee Residential Per Dwelling Unit Single Family Detached $2,708 All Other Housing Types $1,887 Nonresidential Per Meter Water Meter Size* Capacity Ratio 0.75" 1.0 $2, " 1.7 $4, " 3.3 $8, " 5.3 $14, " 10.7 $28, " 16.7 $45,229 * Nonresidential sewer fees are based on water meter size. Fees for meters larger than four inches will be based on annualized average day demand and the net capital cost per gallon of capacity. 19 TischlerBise

24 Funding Plan for Sewer System Improvements Figure 21 summarizes sewer impact fee revenue and growth-related capital costs for the next five years. Sewer impact fees should generate approximately $250,000 per year for sewer system improvements, if implemented at the maximum supportable amount. The cash flow analysis assumes the average nonresidential customer requires a one-inch water meter. Estimated capital costs for growth-related sewer system improvements average $295,000 per year. The cash flow summary provides an indication of the impact fee revenue and expenditures necessary to meet the projected demand for sewer system improvements. To the extent the rate of development either accelerates or slows down, there will be a corresponding change in the impact fee revenue and capital costs. See Appendix A for discussion of the development projections that drive the cash flow analysis. Figure 21 Cash Flow Summary for Sanitary Sewer Cumulative Average (Current $ in thousands) Total Annual REVENUES 20 Sewer Fee - Res $204 $206 $203 $206 $203 $1,022 $ Sewer Fee - Nonres $45 $46 $46 $46 $46 $229 $46 Sewer Impact Fee Subtotal $249 $252 $249 $252 $249 $1,251 $250 CAPITAL COSTS Sewer System Improvements $50 $50 $550 $300 $525 $1,475 $295 NET CAPITAL FACILITIES CASH FLOW - Sewer Annual Surplus (or Deficit) $199 $202 ($301) ($48) ($276) ($224) ($45) Cumulative Surplus (or Deficit) $199 $401 $100 $52 ($224) 20 TischlerBise

25 ROAD IMPACT FEES The basic steps in a conceptual impact fee formula are illustrated below (see Figure 22). The first step (see the left part of the equation) is to determine an appropriate demand indicator that will measure the number of demand units for each unit of development. For example, an appropriate indicator of the demand for roads is vehicle miles of travel. A vehicle mile of travel is defined as one vehicle trip, one mile in length. Thus VMT measurement requires data on both the number and length of vehicle trips. The second step in the conceptual impact fee formula is shown in the middle section of the equation. Infrastructure units per demand unit are typically called Level-Of-Service (LOS) or infrastructure standards. In keeping with the road impact fee example, a useful infrastructure standard is lane miles per 10,000 VMT. A lane mile is a rectangular area of pavement one lane wide and one mile long. The third step in the conceptual impact fee formula, as illustrated in the right side of the equation, is the cost of various infrastructure units. To complete the road impact fee example, this part of the formula establishes the cost per lane mile for road improvements. Figure 22 Conceptual Road Impact Fee Formula Vehicle Miles of Travel (VMT) per Development Unit Lane Miles Dollars per per 10,000 VMT Lane Mile Road impact fees for the City of Belgrade are derived using a plan-based methodology. This method is best suited for public facilities that have commonly accepted engineering and/or planning standards that are used to identify the need for specific capital improvements. Road Impact Fee System Improvements The preliminary road system improvements to be funded by impact fees are within the geographic extent of the aerial photograph in Figure 23. Growth-related improvements were identified in the Belgrade Area Transportation Plan (Morrison Maierle, 2001) and the preliminary engineering study for the new I-90 interchange in Belgrade. 21 TischlerBise

26 Figure 23 Map of Proposed System Improvements 22 TischlerBise

27 Cost of Growth-Related Road Improvements As shown in Figure 24, Belgrade needs an additional 5.6 lane miles of system improvements to accommodate projected development through The growth-related cost of system improvements is estimated to be approximately $9.24 million in current dollars (not inflated over time). Dividing the total cost by the total lane mile increase indicates an average cost of $1,650,000 per lane mile. A lane mile is a rectangular area of pavement, one lane wide and one mile long. Figure 24 Summary of System Improvements # Location From To Lanes FY06-07 Lanes 2025 Miles Lane-Mi Increase Growth Cost N Pacific Ave Extension N Pacific Ave Gallatin Field Rd $660,000 6 East Main Jackrabbit Airport Access $2,475,000 7 West Main Jackrabbit Bolinger $1,320, Madison/Broadway Jackrabbit Main $660, Jackrabbit Southview Cruiser $2,970,000 Cruiser Jackrabbit Spooner $1,155,000 TOTAL 5.60 $9,240,000 Growth Cost per Lane Mile => $1,650,000 Trip Generation The City of Belgrade road impact fees are based on average weekday vehicle trip ends. Trip generation rates are from the reference book Trip Generation published by the Institute of Transportation Engineers (ITE, 2003). A vehicle trip end represents a vehicle either entering or exiting a development (as if a traffic counter were placed across a driveway). To calculate road impact fees, trip generation rates are adjusted to avoid double counting each trip at both the origin and destination points. Therefore, the basic trip adjustment factor is 50%. As discussed further below, the impact fee methodology includes additional adjustments to make the fees proportionate the infrastructure demand for particular types of development in Belgrade. Adjustment for Journey-To-Work Commuting Residential development has a larger trip adjustment factor of 62% to account for commuters leaving Belgrade for work. According to the 2001 National Household Travel Survey (see Table 29, Federal Highway Administration, published 12/04) home-based weekday work trips are typically 31% of production trips (i.e., all out-bound trips, which are 50% of all trip ends). Also, Census 2000 data from Table P27 in Summary File 3 indicates that 80% of Belgrade s resident workers travel outside the city for work. In combination, these factors (0.31 x 0.50 x 0.80 = 0.12) support the higher allocation of trips to residential development. Adjustment for Pass-By Trips Data contained in Trip Generation Handbook (ITE, 2004) indicate an inverse relationship between commercial building size and pass-by trips. Therefore, appropriate trip adjustment 23 TischlerBise

28 factors have been calculated according to commercial building size (see Appendix B). For commercial developments, the trip adjustment factor is less than 50% because retail development and some services (like banks and day care centers) attract vehicles as they pass by on arterial and collector roads. For example, when someone stops at a convenience store on the way home from work, the convenience store is not the primary destination. For a small commercial building of 10,000 square feet of floor area, the ITE data indicates that on average 52% of the vehicles that enter are passing by on their way to some other primary destination. The remaining 48% of attraction trips have the commercial building as their primary destination. Because attraction trips are half of all trips, the trip adjustment factor is 48% multiplied by 50%, or approximately 24% of the trip ends. Vehicle Miles of Travel A Vehicle Mile of Travel (VMT) is a measurement unit equal to one vehicle traveling one mile. In the aggregate, VMT is the product of vehicle trips multiplied by the average trip length. The average trip length in the Belgrade was calibrated using data on planned lane-miles of arterial and collector roads and a lane capacity standard (discussed below). The infrastructure standard for the road impact fee is defined as lane-miles of arterial or collector roads per 10,000 VMT. Lane Capacity Arterial lane capacity generally ranges from 6,000 to 9,000 vehicles per lane per day. The Belgrade road impact fees are based on a lane capacity standard of 7,000 vehicles per lane. Average Trip Length on Belgrade System Improvements Determining average trip length for the purpose of impact fees requires consideration of the functional classification of roads and the community s criteria for system improvements, as discussed above. A typical vehicle trip, such as a person leaving their home and traveling to work, generally begins on a local street that connects to a collector street, which connects to an arterial road and eventually to a state or interstate highway. This progression of travel up and down the functional classification chain limits the average trip length question to the following, What is the average vehicle trip length on impact fee system improvements (i.e., arterial and collector roads listed in Figure 24 above)? Trip Length Weighting Factor by Type of Land Use The road impact fee methodology includes a percentage adjustment, or weighting factor, to account for trip length variation by type of land use. As documented in Table 6 of the 2001 National Household Travel Survey (published 12/04 by the Federal Highway Administration), vehicle trips from residential development are approximately 122% of the average trip length. The residential trip length adjustment factor includes data on home-based work trips, social and recreational purposes. Conversely, shopping trips associated with commercial development are roughly 68% of the average trip length while other nonresidential development typically accounts for trips that are 75% of the average trip length. The specific weighting factors for each development prototype are shown in the right column of Figure TischlerBise

29 Vehicle Trips to Development in Belgrade The relationship between the amount of development within Belgrade and the projected demand for system improvements is documented in the following two tables. Figure 25 summarizes the input variables used to determine the average trip length on planned system improvements. The pass-by trip adjustment factors are documented in Appendix B. Nonresidential prototypes NR2, NR3, NR4 and NR5 have an assumed building size of 100,000 square feet of floor area. In the table below HU means housing units, KSF means square feet of nonresidential development, in thousands, ITE stands for the Institute of Transportation Engineers and VTE stands for vehicle trip ends. Figure 25 Travel Demand Model Inputs ITE Dev Weekday Dev Trip Trip Length Equiv Type VTE Unit Adj Wt Factor R1 210 SFD HU 9.57 HU 62% 122% R2 230 Other HU 5.86 HU 62% 122% NR1 110 Goods Prod 6.97 KSF 50% 75% NR2 820 Retail KSF 33% 68% NR3 770 Other Com Serv KSF 33% 75% NR4 520 Edu KSF 33% 75% NR5 710 Gov KSF 50% 75% Avg Trip Length (miles) 2.26 Capacity Per Lane 7,000 Cost per Lane-Mile $1,650,000 Projected development in Belgrade over the next 19 years, and the corresponding need for additional lane miles, is documented in Figure 26. The demographic data shown at the top of the table is discussed further in Appendix A. Trip generation rates and trip adjustment factors convert projected development into average weekday vehicle trips, shown with grey shading. As shown in the bottom right corner of the table below, the 19-year need is for 5.6 lane miles of capacity at a cumulative cost of $9.24 million. 25 TischlerBise

30 Figure 26 Road Impact Fee Calibration Year-> Base Year FY Increase DEMAND DATA SFD HU 1,597 1,654 1,711 1,768 1,825 2,111 2,396 2,682 1,028 OTHER HU 1,254 1,299 1,344 1,389 1,434 1,658 1,883 2, GOODS PRO KSF RETAIL KSF OTHER COM SERV KSF EDU KSF GOV KSF SFD TRIPS 9,473 9,812 10,151 10,490 10,829 12,524 14,218 15,913 OTHER RES TRIPS 4,558 4,721 4,884 5,047 5,210 6,025 6,841 7,656 GOODS TRIPS 1,115 1,150 1,220 1,255 1,324 1,603 1,917 2,265 RETAIL TRIPS 3,362 3,362 3,586 3,810 3,810 4,706 5,603 6,723 COM SERV TRIPS 1,221 1,305 1,347 1,390 1,474 1,811 2,148 2,526 EDU TRIPS 1,865 1,960 2,056 2,152 2,247 2,773 3,299 3,873 GOV TRIPS TOTAL VEHICLE TRIPS 21,685 22,402 23,336 24,235 24,986 29,626 34,209 39,140 VMT 51,128 52,878 54,958 56,979 58,786 69,174 79,466 90,314 LANE MILES ANL LN MI ANL CAPACITY COST (millions) $0.50 $0.50 $0.33 $0.50 $0.50 $0.50 $0.50 $9.24 Lane Miles per 10,000 VMT Credit for Other Revenues A credit for future revenue generated by new development is only necessary if there is potential double payment for system improvements. Since road impact fees will be used exclusively for growth-related capacity improvements in Belgrade, there is no need for a credit. General Fund and gas tax revenue will be used for maintenance of existing facilities and correcting existing deficiencies. Road Impact Fee Formula and Input Variables As shown in Figure 27, the road impact fee is derived from trip generation rates, trip rate adjustment factors and the net capacity cost per average length vehicle trip. The cost per average length vehicle trip is a function of the average trip length, trip length weighting factor, costs per lane mile and lane capacity. 26 TischlerBise