Loading...
Item T03 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: July 18, 2002 Division:County Administrator/Growth Management Bulk Item: Yes No X Department: N/ A AGENDA ITEM WORDING: Approval of a resolution adopting policies and guidelines for establishment of "reasonable" wastewater connection fees and monthly service charges including levels of public financial assistance to wastewater treatment systems and economically disadvantaged households. ITEM BACKGROUND: At its June 20, 2002, regularly scheduled meeting, the BOCC directed staff to begin preparation of a programmatic implementation plan for the Sanitary Wastewater Master Plan. As significant element of this plan is policies and guidelines on what constitute "reasonable" connection fees and monthly user charges for wastewater systems to provide the policy basis for determining the level of public financial assistance to individual wastewater treatment projects and economically disadvantaged households. The staff has prepared a report with a draft resolution that establishes specific policies and guidelines for these fees and charges and financial assistance to projects and economically disadvantaged households. PREVIOUS RELEVANT BOCC ACTION: N/A CONTRACT/AGREEMENT CHANGES: N/A STAFF RECOMMENDATIONS: Approval TOTAL COST: N/A BUDGETED: Yes: N/A No: COST TO COUNTY: N/A REVENUE PRODUCING: Yes No X AMOUNT PER MONTH Year APPROVED BY: County Atty ~ DOCUMENTATION: Included Risk Management _ DIVISION DIRECTOR APPROVAL: cGarry, AI CP To Follow Not Required_ AGENDA ITEM # :?C? DISPOSITION: AGENDA ITEM WITH LATE DOCUMENTATION ~ -Act nvUvlisk{J7/r/ DIVISIOb~ vt{~~ DEPARTMENT rf fA SUBJECT 650LuJtoL Jo QC{ Opt 'POLL~ ~ ~cuLv1iO -CpA) WA.">~~ CO"-Ud\~ DA TE ITEM WILL BE AVAILABLE -c - ~ -' 02- AGENDA ITEM NUMBER County of Monroe Growth Mana!Zernent Division 2798 Overseas Highway Suite 410 Marathon, florida 33050 Voice: (305) 289 2500 FAX: (305) 2892536 Board of County Commissioners Mayor Charles "Sonny" McCoy, Dist. 3 Mayor Pro Tern Dixie M. Spehar, Dist. 1 Comm. Bert Jimenez, District 4 Comm. Murray Nelson, District 5 Comm. George Neugent, District 2 MEMORANDUM TO: Board of County Commissioners FROM: Timothy J. McGarry, AICP Director of Growth Management DATE: July 15, 2002 SUBJECT: Proposed Policies on "Reasonableness" of Central Wastewater Connection Fees and User Charges and Public Financial Assistance to Wastewater Systems and Economically Disadvantaged Households Overview At its June 20, 2000, meeting, the Board of County Commissioners directed staff to prepare a recommended Programmatic Implementation Plan for the Sanitary Wastewater Master Plan. A significant element in preparing the Plan is the adoption of specific policies establishing standards for reasonable central wastewater connection fees and monthly service charges and levels of public financial assistance to be provided specific wastewater systems and economically disadvantaged households. This memorandum presents staff issue analysis and recommendations for establishing these policies, including a draft adopting resolution (attached) for consideration by the BOCC. Issues Background The Sanitary Wastewater Master Plan calls for several hundred million dollars in wastewater improvements to be implemented within a relatively short period of time. These improvements are to be all completed by 2010. Unfortunately the County has insufficient funding commitments from the federal and state governments to substantially finance these improvements and, therefore, must rely upon its scarce revenue sources and the financial capabilities of its residents. As is well documented in the Sanitary Wastewater Master Plan, the capital cost for these improvements will vary from an average of $14,000 for on-site systems to anywhere from $4,000 C:\ TEMP\policyrates.doc Page I of6 to $15,000 for central systems. The average capital per EDU cost for central systems throughout the County in 2002 dollars is estimated to be approximately $10,880. [This figure does not include the estimated average cost to property owners of $1,750 to decommission existing on-site systems and connect to central sewer at their property lines.] The capital costs for central systems vary considerably depending upon the level of treatment, number of users and compactness of the collection system. Excluding charges for any debt service, the Sanitary Wastewater Master Plan estimates that the the operations and maintenance costs for on-site systems will range around $125 per month. Monthly charges for central sewers, which are dependent upon the size of the treatment plant, its level of treatment, and number of users, will range from $30 to $75 per month. In general, the more users on a system the lower per EDU operating costs. Recognizing that the County is not in a position to further delay the construction of needed wastewater improvements while waiting to receive up-front funding commitments from federal and state sources, the County needs to develop a Programmatic Implementation Plan that schedules and programs wastewater projects based on wastewater priorities and amount of anticipated federal, state, and local funding available. To more efficiently and equitably allocate and program its scarce financial resources to needed projects, it is highly desirable that the BOCC establish specific policies on standards of "reasonableness" for connection fees and monthly service charges. These policies would then provide the foundation for setting policies on the levels of public financial assistance to wastewater system and economically disadvantaged households. . Policy Objectives for Establishment of Standards of "Reasonableness" The establishment of such standards of "reasonableness" by the BOCC is intended to accomplish the following policy objectives: o To encourage the initiation and sponsorship by the BOCC through the FKAA of cost effective wastewater improvements by providing a quantitative basis for evaluating and comparing projects as to their viability and priority for government financial support. o To achieve some uniformity in connection/impact fees and user charges throughout unincorporated Monroe County to equitably offset the higher cost of implementation presented by smaller and more remote areas. o To enable the BOCC to more efficiently and effectively allocate federal/state grants and County financial resources to projects in order to optimize the number of projects that can be undertaken and the number of cesspits and substandard systems replaced. o To provide a basis for determining the level and type of public financial assistance required for wastewater systems and for economically disadvantaged households on a project by project basis. C :\TEMP\policyrates.doc Page 2 of6 -'~~;f~;i:"i''''.'' o To provide a policy basis for FKAA to undertake projects and establish its rate and connection fee structure for wastewater projects. Standard of Reasonableness for Costs What constitutes "reasonable" costs for a wastewater system is a subjective and a policy issue. The u.S. Environmental Protection Agency defines "reasonable costs" as 2% of the median annual household income for an area. This reasonable cost standard assumes no up-front hook-up fee, but spreads these costs over a 20-year period including monthly operating and maintenance costs. U sing the 2001 median annual household income for Monroe County of $52,100, the threshold for reasonable costs would be $1,042 or approximately $87 per month. For example, using the estimated costs for Bay Point prepared by CH2MHill in its report to the BOCC last month, the projected monthly costs for each household in this system would be $68 based on the total costs of following: (1) costs per EDU to connect and replace existing on-site systems amortized at 6% for 20 years-$23 per month ($1,360 for connection fees and $1,750 for decommissioning of on-site systems and connections at property line); and, (2) per monthly EDU operational and maintenance (O&M) costs of $45. This total figure of $68 per month would be $19 less than the "reasonable" threshold set by EP A. The EP A recommended standard represents a good starting point for setting policy standards for connection fees and monthly charges, especially when it is recognized that monthly wastewater treatment costs in the Florida Keys, as documented in the Sanitary Wastewater Master Plan, are significantly higher than the rest of the United States. However, rather than use a single dollar threshold for the standard, the staff believes it would more appropriate and useful to establish individual standards for up-front capital costs and monthly charges with an overall limit on the total monthly costs to users (EDUs). These standards should be treated as desirable "target" levels which the County should try to meet. They are intended to be applied with some discretion for the BOCC and FKAA in addressing differing circumstances and situations. Therefore, based on the cost information provided in the Sanitary Wastewater Master Plan and cost information provided for projects now under development, the staff recommends the following standards for connection fees, monthly charges, and total user charges: Connection Fees: Connection fees should be no more than approximately $4,500 per EDU (approximately 41 percent of estimated per EDU average costs County-wide) after any federal/state grants or County funds are applied. Some of these costs may be financed through monthly user chargers. These costs do not include the estimated $1,750 in out-of- pocket costs to property owners to pay for decommissioning of their on-site systems and installation of lateral connections to property line for connection to the central sewer. Monthlv User Chare:es: The standard monthly user fee per EDU should be $45 or less per month, excluding debt service. Without considering debt service, the monthly O&M C: \TEMP\po I icyrates. doc Page 3 of6 costs should not be more than $60 per month Any systems that have O&M costs higher than $60 per month may be of insufficient size to warrant sponsorship, except in special situations. Total Fees and Chare:es: After discounting for federaVstate grants and County funding assistance, total fees and charges by EDU should be no more than $87 per month, including the amortized costs borne by the property owner to pay for decommissioning of existing on- site systems and connection to central system at property line. The following costs should be totaled to determine the total fees and charges by EDU: (I) connection fees amortized for 20 years at 6%; (2) $1,750 for decommissioning of existing on-site systems and connection to the central sewer system amortized for 20 years at 6% [$12.54 per month]; and (3) monthly service charges including any debt service costs. [It should be recognized that on-site systems are considerably higher than this $87 per month threshold.] Therefore, by adding the standard of $4,500 for connection fees and the estimated $1,750 paid out-of-pocket by the property owner (decommissioning of the existing on-site system and installing lateral to sewer system at the property line) amortized at 6% for 20 years to the standard of $45 per month for O&M costs, the total user charges would be approximately $86 per month. [The Little Venice facility with a $4,700 connection fee per EDU and an estimated monthly service charge of $50 would not meet this standard without further public subsidy.] Public Financial Assistance Policies Policies for public financial assistance should address three grant categories: (1) level of public grant assistance to projects to achieve specific reasonableness standards for connection fees, which reflect the capital costs of the project; (2) provision of "interest" free or "low-interest" revolving loan funds to be used to write down the financing costs of project including providing a " financial guarantee" to project sponsors; and, (3) provision of grants to eligible households earning 80 percent or less of the median household income. The following are specific policies recommended by the staff for each of the three specific areas: Public Grant Assistance: The BOCC should provide grant assistance and/or secure grant assistance from federal/state sources for wastewater projects at a level sufficient to meet wastewater project connection fees standards of no more than $4,500 per EDU and a monthly user charge of $45 or less. [It should be noted that public assistance can only write down capital costs (connection fees) not O&M costs.] Should the proposed project have estimated monthly user fees per EDU of more than $60 per month (assuming no debt service) or results in total user fees and charges per EDU of more than $87 per month, the BOCC may want to seriously reconsider the merits of the project as proposed. Public Revolvine: Loans: Where necessary to guarantee a project that provides a public benefit and where sufficient capital is required to underwrite a project, the BOCC should establish revolving loan fund or escrow accounts using 304 Funds (Infrastructure Tax). Although the details would have to finalized on such funds, such as draw-down and C :\TEMP\policyrates.doc Page 4 of6 -. ':-:l<:'; ~~"t~}.it)'l'_~,'lt~':..'4'-. -:-=.'" payback procedures that would sufficiently meet close legal, risk management, and financial scrutiny, such revolving funds accounts could be used to provide FKAA or a regulated utility such as Key West Resort Utility with working capital to guarantee and reduce the financing costs of wastewater treatment facilities (iflegal under Florida law). Public Grant Assistance to Households: The BOCC should establish a policy for providing direct financial assistance with County funds or federal/state grants (such as Community Block grant program) to assist economically disadvantaged households in reducing their connection fees and costs to decommission their existing on-site system and connect with central sewer. The staff suggests that the proposed level of funding support should be based on taking 2% of the annual household income divided by 12 for low income households (80 percent of median household income) and very low income households (100 percent of the median household income) and comparing it with the total fees and charges for the project. The eligible household would receive either the difference between the two figures times 240 (20 years times 12 months) or the amount of the connection fees and on-site property costs ($1,750) amortized at 6% for 20 years, whichever was less. [This limitation reflects that fact that only capital costs are to be subsidized not operating and maintenance costs.] For example, in the case of the Bay Point project, the total fees and charges are estimated to be $68 per month. Under the reasonable threshold of 2% per annual household income, a low income household would be able to afford a rate of $69.47 per month, which is more than the $68 per month costs for the Bay Point project. Therefore, these households would not be eligible for any public grant assistance. However, for very low income households the reasonableness threshold of 2% of annual income would be only $43.42 per month. Therefore, very low income households would be eligible for public grant assistance under the Bay Point example. Under the Bay Point example for very low income households, the amount of the grant would be calculated by taking the difference between the reasonableness threshold and projected total fees and charges ($68 minus $43.42). This difference of $24.58 per month when carried out over 20 years is $5,899. Therefore the property owner would be eligible for reimbursement of the full connection fees ($1,360) and on-site costs (decommissioning and lateral connection) of $1,750 for a total of $3,110. [In detailing the specifics of this program, some consideration should be given to whether or not it is desirable to provide further subsidy to property owners where on-site out-of-pocket costs are higher than the average $1,750; however, any such consideration would increase the complexity and costs of the grant program. ] The BOCC should also establish policies that require that for a property owner to be eligible for this grant, that the property owner must meet the income guidelines and be homesteaded. In situations where renters meet the income requirements of this grant, the C:\ TEMP\policyrates.doc Page 5 of6 property owner would be eligible to receive the grant, if that property owner agrees to place a 20-year restrictive affordable housing covenant on the residence(s) to be connected. In the proposed resolution, the staff has recommended a broad policy statement indicating the BOCC's intentions. Full details on the program will need to be developed to implement such a program, including grant administration. Recommendation The staff recommends that the BOCC adopt the attached resolution, which includes the above policies and standards for establishing reasonable connection fees and user charges and public financial assistance to projects and economically disadvantaged households. Attachment C: \TEM P\policyrates.doc Page 60f6 RESOLUTION -2002 A RESOLUTION OF THE MONROE COUNTY BOARD OF COUNTY COMMISSIONERS ADOPTING POLICIES AND GUIDELINES ON STANDARDS OF REASONABLENESS FOR CENTRAL SEWER CONNECTION FEES AND MONTHL Y CHARGES AND PUBLIC FINANCIAL ASSISTANCE TO WASTEWATER SYSTEMS AND ECONOMICALLY DISADV ANT AGED HOUSEHOLDS WHEREAS, on June 20, 2002, the Board of County Commissioners (BaCC) directed its staff to prepared a Programmatic Implementation Plan to guide the funding and scheduling of wastewater projects identified in the Sanitary Wastewater Master Plan; and, WHEREAS, a significant element of the Programmatic Implementation Plan is the establishment of policies on the standards of "reasonableness" for connection fees and monthly user charges and the level of public assistance to be provided wastewater projects and economically disadvantaged households; and, WHEREAS, the County staff has identified the following policy objectives for the establishment of such standards: o To encourage the initiation and sponsorship by the BaCC through the FKAA of cost effective wastewater improvements by providing a quantitative basis for evaluating and comparing projects as to their viability and priority for government financial support; o To achieve some uniformity in connection/impact fees and user charges throughout unincorporated Monroe County to equitably offset the higher cost of implementation presented by smaller and more remote areas; o To enable the BaCC to more efficiently and effectively allocate federal/state grants and County financial resources to projects in order to optimize the number of projects that can be undertaken and the number of cesspits and substandard systems replaced; o To provide a basis for determining the level and type of public financial assistance required for wastewater systems and for economically disadvantaged households on a project by project basis; and o To provide a policy basis for FKAA to undertake projects and establish its rate and connection fee structure for wastewater projects; and C:\ TEMP\feestandards-resol.doc Page lof4 WHEREAS, the U.S. Environmental Protection Agency has recommended in its publications standards of "reasonableness" on the costs of wastewater projects; WHEREAS, The U.S. Environmental Protection Agency defines "reasonable" costs as no more than 2% of the annual median household income for the area, which include monthly service charges and capital costs amortized over a 20-year period; and, WHEREAS, the median annual household income for Monroe County in 200 I was $52,100, which means that the threshold for "reasonable" costs for households with median incomes would be $87 per month; and, WHEREAS, the County staff has prepared policies on standards of "reasonableness" of costs for central wastewater projects and economically disadvantage households based on the U.S. Environmental Protection Agency's recommendations; WHEREAS, the County staff has also prepared specific policies on levels and types of public financial assistance to wastewater projects and economically disadvantaged households based on these above standards; and, WHEREAS, the BaCC has reviewed the proposed policies on standards and public financial assistance prepared by the County staff to achieve the above policy objectives; now therefore BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS, MONROE COUNTY, FLORIDA THAT: Section 1. The BaCC endorses the policy objectives for establishment of standards of "reasonableness" for costs related to central wastewater projects. Section 2. The BaCC approves the following standards for connection fees, monthly charges, and total user charges for central wastewater systems: A. 2.., 700 Connection fees should be no more than approximately $4;5eO per Equivalent Dwelling Unit (EDU) after any federal/state grants or County funds are applied. 35 The monthly service charge per EDU should be $45- or less per month, excluding debt service costs. vi" B. / C. The total fees and user charges per EDU should not be more than $87 per month. These total fees and charges include all connection (capital) costs amortized at 6% over 20 years; the out-of-pocket costs to property owners, estimated at an average cost of $12.54 per month [estimated average cost of $1,750 amortized at 6% over 20 years], for the decommissioning of existing on-site systems and installation of laterals to connect at property c:\ TEMP\feestandards-resol.doc Page 2 of4 .,,,:, >:;!({ line with central sewer system; and, monthly operations and maintenance costs including any debt service costs. Section 3. The BOCC recognizes that the above standards are intended to be desirable "target" levels which the County should endeavor to meet; however, differing circumstances and situations warrant discretion in their strict application. Section 4. The BOCC establishes a policy that the level of public grant assistance both local and federal/state to be provide4..p~cts shall be sufficient to ensu~hat per EDU connection fees are no more than ~O and monthly user charges are ~ or less, excluding any debt service. The BOCC states that in provision of this grant assistance, the County's policy shall be to solely reduce the capital costs for such systems not operations and maintenance (O&M) costs. The BOCC further states that except for such assistance that may be provided to disadvantaged households, the out-of-pocket costs incurred by property owners for the decommissioning of on-site systems and installation of laterals to the property line, shall be borne by the property owner. Section 5. The BOCC directs the staff to undertake all tasks necessary, including the resolution of any financial, legal, and risk management issues, to establish a revolving loan fund or escrow accounts using 304 Funds that would help underwrite or guarantee wastewater projects and/or provide working capital. Section 6. The BOCC establishes a policy of providing financial assistance to economically disadvantaged households based on the 2 percent of annual median income household "reasonableness" standard. The two classes of economically disadvantaged households are "low income" (annual household income of between 80 to more than 50 percent of area median annual household income) and "very low income" (annual household income of 50 percent or less of the area median annual household income). Section 7. The BOCC directs the staff in coordination with the FKAA to develop specific recommended administrative policies and procedures to implement a financial grant assistance program for economically disadvantaged households. Section 8. The BOCC directs the staff to transmit a copy of this resolution to the Florida Keys Aqueduct Authority. [THE REMAINDER OF THIS PAGE IS LEFT INTENTION ALL Y BLANK] C: \ TEMP\feestandards-reso I. doc Page 3 of 4 ..;..>.~."'~'1.:"":pc,,., ./ IJJooj /~ as PASSED AND ADOPTED by the Board of County Commissioners, Monroe County, Florida at a regular meeting of said Board held on the _ day of July, A.D., 2002. BOARD OF COUNTY COMMISSIONERS MONROE COUNTY, FLORIDA Mayor Charles "Sonny" McCoy Mayor Pro Tern Dixie Spehar Commissioner George Neugent Commissioner Bert Jimenez Commissioner Murray Nelson BY: MA YOR/CHAIRPERSON (SEAL) ATTEST: DANNY K. KOLHAGE, CLERK BY: DEPUTY CLERK C: \ TEMP\feestandards-resol.doc Page 4 of 4