New utility impact fees heading for implementation this spring

Submitted by Suanne Z. Thamm

Reporter - News Analyst

February 5, 2015 4:04 p.m.

About an hour and a half into its February 3, 2015 meeting, the Fernandina Beach City Commission (FBCC) turned its attention to the first reading of proposed code amendments that would establish new sewer and water system capacity fees, commonly known as “impact fees.”  Assuming final approval at the next regular FBCC meeting in 2 weeks, the rates would become effective for new users on May 17, 2015.

City attorney Tammi Bach deferred to Eric Grau, the representative of Burton & Associates, the consultant firm that prepared for the city of Fernandina Beach a Final Report of the Water and Sewer System Capacity Fee Study and Revenue Sufficiency Analysis. The FBCC commissioned this study to fulfill legal requirements needed to enable the city to charge service fees for water and sewer usage. Such fees, according to the study, are assessed against new development in an attempt to recover the cost of providing capital facilities (infrastructure) needed to serve new development. These fees are the mechanism by which new growth can “pay its own way” and minimize the extent to which existing customers must bear the cost of new or expanded facilities needed to serve new customers.

The city’s current water impact fee of $1,500 per equivalent residential unit (ERU) was adopted in 2003 based upon the terms of the Florida Public Utilities (FPU) Purchase Agreement, while the city’s current sewer impact fee of $1,385 per ERU was adopted earlier. Given the time that has passed since adoption of the current fees, the city engaged the services of Burton & Associates to determine the full cost recovery water and sewer impact fees based upon updated available information and to propose updated water and sewer capacity fees.

The Final Report consists of 66 pages of detail and analysis and may be found on the city’s website as part of the package for Items 8.1 and 8.2 on the February 3, 2015 Agenda.

The Final Report recommended that the proposed impact fees reflect 95% of cost recovery. The report notes that the city has discretion regarding the percentage of cost recovery it seeks, up to and including 100%. In consultation with city staff, the consultants recommended 95% to allow for an added measure of conservatism, enhancing the defensibility of the calculated impact fees.

At the request of Commissioner Robin Lentz the consultant prepared an added document that reflected increased monthly utility costs to existing customers, should the city adopt lower recovery rates. At 50%, utility users would pay an additional $20 per month; at 30%, that rate would rise $30 per month.

The city would maintain its current relative position to all other communities surveyed if the proposed fees are adopted, despite the overall increase being proposed.

Fernandina Beach Utilities Director John Mandrick explains fees to FBCC.

The city maintains that by adopting recommendations in this study, its capacity or impact fee structure satisfies requirements set by the courts and state statutes, specifically 1) the fair share allocation rules, 2) the first prong of the dual rational nexus test which is “the capacity fee must be proportionate to the benefit received by the new connection” (the second prong of the dual rational nexus test, which is “the capacity fee funds collected must be used to fund assets benefitting the new connection” is satisfied by the use of capacity fees to pay for debt service associated with excess capacity, and 3) recognition of “credit” allowances via offsets to the fees.

City Attorney Bach said that this study was done from scratch. She said that the new rates must be advertised for 90 days in advance of their imposition, or May 17, 2015.

The vote on both Ordinances 2015-35 (Sewer) and 2015-36 (Water) on first reading was 5-0. No one from the pubic requested to be heard. The second hearing of the ordinances and code amendments is scheduled for February 17, 2015. It will be advertised and require public hearings.

Commissioners thanked the consultants and city staff for their work on this project.

Editor's Note: Suanne Z. Thamm is a native of Chautauqua County, NY, who moved to Fernandina Beach from Alexandria,VA, in 1994. As a long time city resident and city watcher, she provides interesting insight into the many issues that impact our city. We are grateful for Suanne's many contributions to the Fernandina Observer.