2022-01 Increasing Water Capacity Charges RESOLUTION 2022-01
A RESOLUTION OF THE BOARD OF DIRECTORS
OF THE SAN DIEGUITO WATER DISTRICT
INCREASING WATER CAPACITY CHARGES
ON APRIL 1, 2022, OCTOBER 1, 2022,APRIL 1, 2023 AND OCTOBER 1, 2023
WHEREAS, the San Dieguito Water District (District) is an irrigation district operating
under the Irrigation District Law, commencing with section 20500 of the California Water Code;
WHEREAS, the Board of Directors determined to conduct a public hearing to evaluate
the need for changes in the District's Capacity Charges;
WHEREAS, the Board of Directors directed the District Clerk to provide notice of said
public hearing as statutorily required;
WHEREAS, notice has been given that a public hearing be held on January 19, 2022 on
the necessity to increase Capacity Charges on April 1, 2022, October 1, 2022, April 1, 2023 and
October 1, 2023;
WHEREAS p g said notice of public hearing was done in accordance
ance with California
Government Code Section 66000 et seq. and all other statutory requirements;
WHEREAS, the District Clerk was further authorized.and directed to make available for
inspection, prior to the public hearing, data showing the nexus between the proposed Capacity
Charges and the cost of providing the water facilities; v
WHEREAS, such hearing was duly convened at the Council Chambers of the City of
Encinitas on January 19, 2022 at the date and time set for the public hearing and considered the
comments of all persons appearing at the public hearing and all written comments submitted prior
to the close of the public hearing;
WHEREAS,the Board of Directors desires to increase its Capacity Charges;
WHEREAS, the Board of Directors has been presented data showing the nexus between
the proposed Capacity Charges and the cost of providing water facilities;
WHEREAS, "Capacity Charge" means a charge for facilities in existence at the time a
charge is imposed or charges for new facilities to be constructed in the future that are a benefit to
the person or property being charged;
WHEREAS,the District,receiving payment of a Capacity Charge as specified above,shall
deposit the Capacity Charge in a separate capital facilities fund with other Capacity Fees received;
WHEREAS, the District shall expand those Capacity Charges solely for the purpose for
which the charges were collected and any interest income earned from the investment of moneys
in the capital facility find shall be deposited in that fund;
WHEREAS, California Government Code Section 66000 et seq. sets forth the authority
to impose Capacity Charges and states that the local agency shall identify the purpose of the fee
and determine that there is a reasonable relationship between the fee's use and the charges to
development; and
WHEREAS,the study set forth in Exhibit`B"is hereby adopted by reference in its entirety
and satisfies the requirements of Government Code Section 66000 et seq;
NOW, THEREFORE, IT IS HEREBY RESOLVED, DETERMINED, AND
ORDERED by the Board of Directors of San Dieguito Water District as follows:
1. The matters set forth in the Recitals to the Resolution are true and correct
statements.
2. The increase to the Capacity Charge is not subject to the California Environmental
Quality Act.
3. The Board of Directors finds that the schedule of "Capacity Charge" attached
hereto as Exhibit "A" and incorporated herein by this reference, will result in
revenue to the District, taking into consideration the estimated reasonable cost of
providing water facilities and the sources of revenue available to.the District to
cover the cost of such facilities and services, which will not exceed the estimated
cost of the facilities for which the Capacity Charge is charged.
4. The Board of Directors finds that the Capacity Charge, taking into consideration
the reasonable cost of providing all facilities by the District and the sources of
revenue therefore,will result in a fair and reasonable facilities program, reasonably
allocating the cost of water facilities to those who benefit therefore, without undue
subsidy to those who pay the Capacity Charge.
5. The Board of Directors finds that the Capacity Charge adopted by this Resolution
is imposed only as a condition of extending or initiating service upon request of a
customer and is not imposed upon real property or upon persons as an incident of
property ownership.
6.- The District Capacity Charge shall be increased in accordance with Exhibit "A"
which is attached hereto and made a part of.
7. The Capacity Charge shall become effective no sooner than sixty (60) days
following adoption of this Resolution.
8. The Capacity Charge(s) shall become effective on April 1, 2022, October.1, 2022,
April 1, 2023 and October 1, 2023.
PASSED, APPROVED AND ADOPTED this 10 day of January 2022,by the Board of
Directors of the San Dieguito Water District.
&NIos a, President
ATTEST:
Pamela Antil, Secretary to the Board
APPROVED AS TO FORM:
es ie E. Devaney, Gener Counsel
CERTIFICATION: I, Kathy Hollywood, Board Clerk of the San Dieguito Water District, California,
do hereby certify under penalty of perjury that the foregoing Resolution was duly adopted at a regular
meeting of the Board on the 19th day of January, 2022 by the following vote:
AYES: Blakespear, Hinze, Kranz, Lyndes, Mosca
NOES: None
ABSENT: None
ABSTAIN: None
Kathy Hollywood, TAoard Clerk
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Exhibit"A"
CAPACITY CHARGE SCHEDULE
Meter Size Current Capacity Effective Effective Effective Effective
(inches) Charge 4/1/22 10/1/22 4/1/23 10/1/23
3/4" $ 3,300 $ 4,760 $ 6,220 $ 7,680 $ 9,140
3/4"- 1" $ 3,300 $ 4,760 $ 6,220 $ 7,680 $ 9,140
1" $ 5,280 $ 7,616 $ 9,952 $ 12,288 $ 14,624
11/2" $ 9,900 $ 14,280 $ 18,660 $ 23,040 $ 27,420
2" $ 17,160 $ 24,752 $ 32,344 $ 39,935 $ 47,527
3" $ 31,680 $ 45,696 $ 59,712 $ 73,728 $ 87,744
4" $ 54,120 $ 78,064 $ 102,008 $ 125,951 $ 149,895
6" $ 99,000 $ 142,800 $ 186,600 $ 230,399 $ 274,199
8" $ 171,600 $ 247,520 $ 323,439 $ 399,359 $ 475,278
10" $ 257,400 $ 371,279 $ 485,159 $ 599,038 $ 712,917
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EXHIBIT "B"
.......................... . .
2625 Alcatraz Ave, #602
MIN BA.RTLE WELLSASSOCIATES Berkeley, CA94705
INDEPENDENT PUBLIC FINANCE ADVISORS Tel 510 653 3399
www.bartlewells.com
December 16th, 2021
Isam Hireish, Director of Utilities/General Manager
San Dieguito Water District
City of Encinitas, CA
RE: Water Capacity Fee Study
Bartle Wells Associates (BWA) is pleased to submit the attached Water Capacity Fee Study.The
report develops updated water capacity fees that are designed to equitably recover the costs of
infrastructure and assets benefiting new development.
The District's current capacity fees are based on a fee study adopted June 27th1 2007, which
recommended charging capacity fees by meter size for all customer classes. Larger meters pay
more in proportion to the American Water Works Association standard schedule of meter
ratios.The District's fee schedule is aligned with the San Diego County Water Authority (CWA)
charges based on meter size and utilizes the same ratios. BWA's proposed fee methodology
maintains the District's current practices for the water capacity fees.
Proposed fees are calculated under a buy in methodology and are consistent with the
methodology used in the 2007 study. This method is widely used among regional agencies and
is appropriate given that the District is largely built-out and does not require significant capacity
related capital improvements to accommodate new development. A summary of proposed fees
is shown on Table 2 of this report.
Existing assets are included as the sole basis of the fee calculation. The fees are based on
existing District assets including land as identified in the District's 2021 Technical Memorandum.
No. 3 Asset Valuation Study and 2022 Water System Master Plan.
Proposed Fee- (Single Family Home):
o Water: $9,140
We enjoyed working with the District on this assignment and appreciate the input and
assistance received from District staff throughout the project. Please contact us anytime if you
have questions about this report or related capacity fee issues.
BARTLE WELLS ASSOCIATES
Douglas Dove, PE, CIPFA Michael DeGroot
Principal/President / Consultant
CONTENTS
1. Background, Objectives, &Government Code..................................................................3
Background ...........................................................................................................................3
Objectives..............................................................................................................................3
GovernmentCode.................................................................................................................4
Summary of Proposed Capacity Fees ....................................................................................6
2. Capacity Fee Calculations.................................................................................................7
General Fee Calculation Methodology..................................................................................7
FeeMethodology Alternatives..............................................................................................7
FacilityCost Valuation...........................................................................................................8
Water Enterprise Valuation...................................................................................................8
Water Capacity Fee Nexus.....................................................................................................9
Tables
Table 1—Current Water Capacity Fees -
Table 2—Current and Proposed Water Capacity Fees
Table 3—Cost Estimates
Table 4—Proposed Capacity Charges—Buy In Method
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1. Background, Objectives, & Government Code
Background
The San Dieguito Water District (SDWD) is a special District located in San Diego County providing clean water
to the communities of Leucadia, Old Encinitas, Cardiff and portions of New Encinitas;the remainder of
Encinitas served by the Olivenhain Municipal Water District. The District's water sources are Lake Hodges and
the San Diego County Water Authority. Potable (drinking) water is treated at the R.E. Badger Filtration Plant,
Table 1 shows the District's current water capacity fee schedule. In addition to the SDWD Capacity Fee, new
connections within the District also pay a fee to the San Diego County Water Authority (CWA).The District
levies capacity fees on new development within the District's service area.These capacity fees are generally
designed to recover costs for capacity in existing system infrastructure.This report develops updated capacity
fees for new and expanded connections to the District's water systems.
Table 1
San Dieguito Water District
Current Water Capacity Fees
SDWD
Size(Inches) Capacity Fees*
3/4 (Typical Single-Family Dwelling) $3,300
1 $5,280
11/2 $9,900
2 $17,160
3 $31,680
4 $54,120
6 $99,000
8 $171,600
10 $257,400
*Excludes CWA capacity fee charge
Objectives
Key objectives of the study include:
■ Develop updated capacity fees that:
o Recover the costs of infrastructure, assets, and water supply that benefit new development as
evaluated in the latest engineering documents;
o Equitably recover costs from new connections to the District's service area;
o Are consistent with industry-standard practices and methodologies;
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o Comply with government code.
This report presents key findings and recommendations as well as final capacity fee recommendations for
District consideration.The recommendations presented in this report incorporate input from District staff.
Government Cade
Development impact fees are governed by California Government Code Section 66000 et. seq. commonly
known as A131600.The Code refers to impact fees as capacity charges since their purpose is to recover an
equitable share of costs for capacity in infrastructure.
Section 66013 of the Code specifically governs water and sewer capacity charges and states that the fee "shall
not exceed the estimated reasonable cost of providing the service for which the fee or charge is imposed"
unless approved by a two-thirds vote.
The Code also states that "Capacity charge means a charge for public facilities in existence at the time a charge
is imposed or charges for new public facilities to be acquired or constructed in the future that are of
proportional benefit to the person or property being charged."The Code does not detail any specific method
for determining an appropriate fee.
Section 66013 also identifies various accounting requirements for capacity fee revenues, notably that such
revenues cannot be co-mingled with other City revenues and must be used solely for the purpose for which
the fee was imposed. Section 66016 of the Code identifies the procedural requirements for adopting or
increasing a water or sewer capacity charge. Key procedural requirements include the following:
"Prior to levying a new fee or service charge, or prior to approving an increase in an existing fee or service
charge, a local agency shall hold at least one open and public meeting, at which oral or written presentations
can be made, as part of a regularly scheduled meeting.
Any action by a local agency to levy a new fee or service charge or to approve an increase in an existing fee or
service charge shall be taken only by ordinance or resolution. The legislative body of a local agency shall not
delegate the authority to adopt a new fee or service charge, or to increase a fee or service charge. .
'For any fee, notice of the time and place of the meeting, including a general explanation of the matter to be
considered, and a statement that the data required by this subdivision is available shall be mailed at least 14
days prior to the first meeting to an interested party who files a written request with the city, county, or city
and county for mailed notice of a meeting on a new or increased fee to be enacted by the city, county, or city
and county.
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Any written request for mailed notices shall be valid for one year from the date on which it is filed unless a
renewal request is filed. Renewal,requests for mailed notices shall be filed on or before April 1 of each year. The
legislative body of the city, county, or city and county may establish a reasonable annual charge for sending
notices based on the estimated cost of providing the service. The legislative body may send the notice
electronically.
At least 10 days prior to the meeting, the city, county, or city and county shall make available to the public the
data indicating the amount of cost, or the estimated cost, required to provide the public facilities and the
revenue sources anticipated to fund those public facilities, including general fund revenues.
The new or increased fee shall be effective no earlier than 60 days following the final action on the adoption or
increase of the fee, unless the city, county, or city and county follows the procedures set forth in subdivision (b)
of Section 66017."
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Summary of Proposed Capacity Fees
Table 2 shows a summary of the current and proposed water capacity fees.The total increase for a typical
single family home amounts to$5,840.
Table 2
San Dieguito Water District
Current and Proposed Water Capacity Fees
Water Capacity Fees
CustomerType a CurFentFee Proposed Fee $lncrepse:' �►ncrease
Meter Size (inches)
3/4 (Typical Single-Family"Dwelling) $3,300 $9,140 $5,840 177.0%
1 $5,280 $14,624 $9,344 17ZO%
11/2" $9,900 $27,420 $17,520 1770°0
2" $17,160 $47,527 $30,367 177OY6
3" $31,680 $87,744 $56,064 17Z O%
4" $54,120 $149,895 $95,775 177.0%
6" $99,000 $274,199 $175,199 177.0%
8" $171,600 $475,278 $303,678 177.0%
10" $257,400 $712,917 $455,517 177.0%
To mitigate impacts to new development, the fee could be implemented in a phased schedule.Three
scenarios were presented to the Board of Directors on November 17th, 2021.The Board of Directors selected
Scenario#3.
• Scenario #1: would implement a single one-time capacity fee increase. The capacity fee for a %-inch
p g P Y P Y
water meter would increase by$5,840 no earlier than 60 days following the final action on the increase
of the fee.
• Scenario #2: would implement a phase-in capacity fee increase over a two-year period (once per year).
The capacity fee for a %-inch water meter would increase by $2,920 no earlier than 60 days following
the final action on the increase of the fee, with a second increase of $2,920 one year after initial
implementation.
• Scenario#3 (Selected):would implement a phase-in capacity fee increase over a two-year period (twice
per year). The capacity fee for a 3/-inch water meter would increase by $1,460 no earlier than 60 days
following the final action on the increase of the fee, with a second, third, and fourth increase of$1,460
six months after each implementation.
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2. Capacity Fee Calculations
This section details the calculation of updated capacity fees under the buy in approach.The fees were
calculated and designed to be simple and straightforward to implement.
General Fee Calculation Methodology
The general methodology used in this report is summarized below.
r r.
Determine the recovefable;cost of facilities and.assets„benefitmg new
development that will be recovered by the impact fees
0 ® ® Q x
k
Identify the corresponding capacity of facilities and;assets identified m Step 1
N,_saw
1,54
z
I ;. , .
DR 10
Calculate;the cost per unit of capacity by d vidsng;the costs ident►fied'for fee recovery
theca acitof those facilities Jdentffied �n Step 2 in Step 1 bar {� y
Apply the unit cost for capacity to the;demands of each n'ew development to _
Determine anAequitable capacity fee per'development
a .. . .A..- _....s �. .... _.__...._ . .. K,,., s
Fee Methodology Alternatives
There are many methods for calculating capacity fees.This section explores the various approaches.
Buy-In Only Approach (Recommended)
Under this approach, the fee is based on the value of existing facilities and assets divided by the capacity of
the existing water system.The buy-in approach is more commonly used by agencies that are mostly built
out with water systems that require minimal future facility improvements or water supply needs.
Alternative A: Buy-In + Expansion Cost Approach
Under this approach, the capacity fee includes two components: a) a buy-in component to recover an
equitable share of costs for existing facilities available to serve new development (in current dollars), plus
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b) an expansion component to recover the cost of capacity in future facilities needed to serve projected
new development.
Alternative B: Expansion or Marginal Cost Approach
Under this approach,the fee is based on the cost of future expansion-related improvements (in current
dollars) divided by the increase in system capacity associated with those improvements. Fees calculated
under this approach represent the marginal cost of adding a unit of expansion.This approach excludes cost
recovery for existing facilities and assets that provide benefit to new development.
The alternative approaches were not recommended because San Dieguito Water District is mostly built out
and requires minimal future facility improvements or water supply needs.
Facility Cost Valuation
The fees are based solely on existing asset valuations, as identified in the District's 2021 Technical
Memorandum No. 3 Asset Valuation Study and 2022 Water System Master Plan.
Estimated Replacement Cost Less Estimated Depreciation—The current (or replacement)value of existing
facilities is estimated based on an inventory of existing assets (e.g. pipelines by linear footage) and the current
estimated costs of constructing those facilities based on engineering estimates.These estimates were
developed in the 2021 Technical Memorandum No. 3 Asset Valuation Study and 2022 Water System Master
Plan. Accumulated depreciation is estimated by factoring in age and useful life from the District's fixed asset
list.
Water Enterprise Valuation
Table 3 shows the water enterprise valuation. Based on the 2021 Technical Memorandum No. 3 Asset
Valuation Study and 2022 Water System Master Plan, the total replacement cost of District assets amounts to
approximately$582.3 MM.The Facilities Replacement costs include the reservoirs, pressure reducing stations
and joint facilities owners in conjunction with Santa Fe Irrigation District. BWA conducted an analysis of the
water system's accumulated depreciation based on the District's capital asset inquiry list and estimates
depreciation amounts to 70.7%of the Districts facilities and water pipelines. Adding the real property value to
the replacement cost new less depreciation (RCNLD) value of the depreciable assets derives a system value of
$175.8 MM.
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Table 3
San Dieguito Water District
Cost Estimates
Description Cost Estimate (2021) Percent Depreciated RCNLD*
Real Property Valuation $7,474,114 0% $7,474,114
Depreciable Fixed Assets
Water Pipe Replacement Cost $490,100,000
Facilities Replacement Cost $84,690,000
Subtotal $574,790,000 70.7% $168,366,931
Total Cost Basis $582,264,1141 1 $175,841,045
*Replacement Cost New Less Depreciation
Water Capacity Fee Nexus
BWA calculated the cost per unit of system capacity by first determining the existing and future capacity of the
system. 2020 water usage amounted to 5,240 Acre feet per year(AFY), with future average annual demands in
2040 estimated to be 6,403 AFY.The valuation of District assets of$175,841,045 is divided by the total
estimated system capacity in 2040 of 6,403 to determine a unit rate of$27,462 per AFY.
BWA calculated the actual demand of an average customer with a 3/4" meter to be 297 gallons per day(GPD)
or 0.33 AFY based on the District's actual water consumption. Applying the unit rate to the average demand of
the 3/4" meter derives the proposed capacity fee of$9,140. BWA proposes increased fees for larger meters
based on American Water Works Association (AWWA) standard meter equivalent ratios.
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Table 4
San Dieguito Water District
Proposed Capacity Charges-- Buy In Method
Supply and Demand Analysis 202UUltimate42040)*,
Average Annual Demand(AFY) 5,2401 6,403
*Source: District staff
Real Property+Facilities Value $175,841,045
$/AFY $27,462
IVleter AWWA Ave rage Demand
Size : _ Meter Ratios` (AFY)** Proposed Fee'
�3/4, 1.0 0.33 $9,140
3/4-1 1.0 0.33 $9,140
1 1.6 0.53 $14,624
1.5 3.0 1.00 $27,420
2 5.2 1.73 $47,527
3 9.6 3.20 $87,744
4 16.4 5.46 $149,895
6 30.0 9.98 $274,199
8 52.0 17.31 $475,278
10 1 78.0 1 25.961 $712,917
**Based on current average demand of^297 gallons per day per meter equivalent.
Chart A shows a comparison survey of San Dieguito Water District's capacity fee for a 3/4" meter (typical
single family dwelling) with regional agencies.The fee survey excludes the CWA capacity fee of$5,460.The
District's current fee of$3,300 is the lowest in the survey.The survey average was$7,986, while the highest
fee was $17,636.
ICI
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Chart A. Regional Capacity Fee Survey - 3/4" Meter*
Conducted October2021
__... .w... . ...... ..._. ._.._____.....M... . ...._._..____..___.____ _ ..__. $1..___..__._..._.____._.. __..___..__..-.
$18,000 7636,
$16,000 Fverage=$7,986 _
14,493--
$14,000 ------ --------
$12,000
$10,000 ............ ... ... .. _._._._. .... $9,140.......
$7,935 $8;520
$6,308 $6,453
$6,000 _ $4;950...:$5,024 -$5,240_.._.._
.3,300
$2,000
O O O O
� o
o a v •�
0met C�
°
� J
*Excludes CWA capacity fee charge of$5,460
:..._..... .. ............._ .... ........................................ ._............_........................................................................... .. .... .... ..._. ....................... ........... .. ................ . ..
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