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Home My WebLink About03.c. Review Draft Position Paper to receive a customer's request to amend the Capacity Fee Schedule for ADUS less than 500 Square feetPage 1 of 4 Item 3.c. BOARD OF DIRECTORS POSITION PAPER MEETING DATE: APRIL 16, 2024 SUBJECT: REVIEW DRAFT POSITION PAPER TO RECEIVE A CUSTOMER'S REQUEST TO AMEND THE CAPACITY FEE SCHEDULE FOR ADUS LESS THAN 500 SQUARE FEET SUBMITTED BY: GEOFF MICHALCZYK, MANAGEMENT ANALYST THOMAS BRIGHTBILL, SENIOR ENGINEER INITIATING DEPARTMENT: ENGINEERING AND TECHNICAL SERVICES- PDS-RATES AND FEES REVIEWED BY: DANEA GEMMELL, PLANNING & DEVELOPMENT SERVICES DIVISION MANAGER GREG NORBY, DEPUTY GENERAL MANAGER - OPERATIONS PHILIP LEIBER, DEPUTYGENERAL MANAGER -ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER ISSUE Changes to the Schedule of Capacity Fees, Rates, and Charges require a public hearing as well as the review and approval of the Board of Directors BACKGROUND Capacity Fee Overview The Central Contra Costa Sanitary District (Central San) charges a capacity fee when properties first connect to the public sewer in recognition that such units create an added burden to the wastewater collection and treatment system. A capacity fee is also charged when an expansion or change of use occurs on a non-residential parcel. Each year this buy -in fee is updated based on changes to the value of Central San's assets and the number of Central San's customers. Prior to the start of each fiscal year, staff updates the Schedule of Capacity Fees, Rates, and Charges to reflect the new Capacity Fee in dollars per Residential Unit Equivalent (RUE), where 1 RUE represents the wastewater flow and strength from one single-family residence. The current capacity fee is $8,182 per RUE. April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 82 of 150 Page 2 of 4 Capacity Fees for ADUs Separate capacity fees for ADUs were first adopted in 2017 in response to new legislation. Under Central San's Schedule of Capacity Fees, Rates, and Charges, the new construction of ADUs is charged a Capacity Fee of 0.425 RUEs per 1,000 square feet. For the new construction of an AD U that is 500 square feet, the capacity fee is (500/1,000 square feet) x (0.425) x $8,182 = $1,739. As required by State Law, ADUs developed within the existing space of a developed structure are not charged a capacity fee. Requested Review On January 8, 2024, an owner of a parcel in Central San's service area requested that Central San consider amending the Capacity Fee schedule to waive capacity fees forADUs under 500 square feet. The owner of this parcel had applied for a permit to develop a 462-square-foot AD U, which included a capacity fee of $1,607. The property owner has paid the fees including the Capacity Fee and the permit has been issued. Staff took the following steps to review such a change: Staff reviewed the Water Environment Federation (WEF) Manual of Practice 27 (Financing and Charges for Wastewater Systems) which recommends wastewater agencies set capacity fees that are fair and equitable. Waiving a fee for ADUs less than 500 square feet would be noncompliant with this standard, as ADUs less than 500 square feet would connect to Central San's collection system without paying their fair share. Staff surveyed neighboring wastewater districts to determine if there is a common practice for the region. Based on the table below, thirteen of the fifteen agencies surveyed do not waive capacity fees for AD Us less than 500 square feet. Only two agencies waive capacity fees for ADUs under 500 square feet, which does not provide sufficient justification for the practice. Castro Valley Sanitary District No waiverfor small ADUs Crockett Sanitary Department No waiverfor small ADUs Dublin San Ramon Services District No waiverfor small ADUs East Bay Municipal Utility District No waiverfor small ADUs Fairfield -Suisun Sewer District No waiverfor small ADUs Ironhouse Sanitary District No waiverfor small ADUs Mt View Sanitary District No waiverfor small ADUs Napa Sanitation District Waives fees for under 500 sq feet Novato Sanitary District No waiverfor small ADUs Oro Loma Sanitary District No waiverfor small ADUs Rodeo Sanitary District No waiverfor small ADUs Stege Sanitary District No waiverfor small ADUs Union Sanitary District No waiverfor small ADUs Vallejo Sanitation and Flood Control Waives fees for under 500 sq feet barest County Wastewater District No waiverfor small ADUs Staff reviewed State laws governing the practice of collecting capacity fees for AD Us. Government Code section 65852.2 (f)(5) states (emphasis added): April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 83 of 150 Page 3 of 4 For an accessory dwelling unit that is not described in subparagraph (A) of paragraph (1) of subdivision (e), a local agency, special district, or water corporation may require a new or separate utility connection directly between the accessory dwelling unit and the utility. Consistent with Section 66013, the connection may be subject to a connection fee or capacity charge that shall be proportionate to the burden of the proposed accessory dwelling unit, based upon either its square feet or the number of its drainage fixture unit (DFU) values, as defined in the Uniform Plumbing Code adopted and published by the International Association of Plumbing and Mechanical Officials, upon the water or sewer system. This fee or charge shall not exceed the reasonable cost of providing this service. Nevertheless, the parcel owner holds that State law exempts ADUs less than 750 square feet from impact fees. Government Code section 65852.2 (f) states: (A) A local agency, special district, or water corporation shall not impose any impact fee upon the development of an accessory dwelling unit less than 750 square feet. Any impact fees charged for an accessory dwelling unit of 750 square feet or more shall be charged proportionately in relation to the square footage of the primary dwelling unit. However, the next paragraph of this section states (emphasis added): (B) For purposes of this paragraph, "impact fee" has the same meaning as the term "fee" is defined in subdivision (b) of Section 66000, except that it also includes fees specified in Section 66477. "Impact fee" does not include any connection fee or capacity charge charged by a local agency, special district, or water corporation. Based on staff research, Central San's practice of charging capacityfees forADUs less than 500 square feet is a common practice for the region and is compliant with State laws and industry standards. ALTERNATIVES/CONSIDERATIONS 1. Consider revision of the Schedule of Capacity Fees, Rates and Charges to eliminate capacity fees for ADUs less than 500 square feet as part of the staff's annual review process. This process takes place annually in April and May and involves both Board and Committee review. Annual revisions are effective each July 1. 2. Central San makes no revisions to the Schedule of Capacity Fees, Rates and Charges that outlines the capacity fees for AD Us. 3. Provide other direction to staff. FINANCIAL IMPACTS Adoption of a waiver for ADUs less than 500 square feet is expected to have a small fiscal impact to Central San. Central San anticipates that about 40 ADUs less than 500 square feet will be developed each year. That would result in a loss of revenue of about $62,000 each year, assuming no change in the per RUE capacity fee. Other alternatives will have no fiscal impact to Central San. COMMITTEE RECOMMENDATION The Finance Committee reviewed this matter at its April 16, 2024 meeting and recommended April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 84 of 150 Page 4 of 4 RECOMMENDED BOARD ACTION Receive the update. Provide direction to staff as appropriate. Strategic Plan Tie -In GOAL ONE: Customer and Community Strategy 2 - Promote initiatives to advance affordable and equitable access to services April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 85 of 150