Agenda - 06-12-2007-3d - Laserfiche WebLink

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Attachment #2 Orange Water and Sewer Authority Proposed Service Availability Fees OWASA's Service Availability Fees are established to recover the proportionate share of the capital costs OWASA incurs to provide the "backbone" water supply, treatment and distribution facilities, and wastewater collection, treatment and disposal facilities necessary to meet a new customer's capacity requirements. The Service Availability Fees were last updated in 2001, with annual adjustments made thereafter at the same percentage as annual water and sewer rate increases. Since the 2001 study was completed, significant capital improvements have been made. The scope of the 2007 Rate Study included an update of both the water and sewer Service Availability Fees to ensure that the fees recover the full cost of service and that growth pays for growth. The prior update used the System Buy-In methodology to calculate the Service Availability Fees. The System Buy-In method excludes all debt funded capital from the service availability calculation and therefore understates the true cost of the assets that will serve new customers. After evaluation of OWASA's current system and Capital Improvements Plan it was determined that aPlant-in-Service methodology for determining water and sewer availability fees would be most appropriate for OWASA. The Plant-in-Service method utilizes a cost basis comprised of the Reconstruction Cost New Less Depreciation (RCNLD) value of the existing system assets as well as the cost of the five-year CIP (in current year dollars). This cost basis is then divided by the total system capacity upon completion of the projects included in the five-year CIP to determine a unit cost of the system. Finally, a credit is deducted from the unit cost of the system to reflect the present value payments of the principal portion of future debt service payments new connections will make once they connect to the system via monthly user fees in order to avoid a double recovery of capital costs. This methodology is considered the fairest methodology of the alternative methodologies considered because it provides for a reasonable method to include all eligible assets in the service availability fee calculation while avoiding double counting the asset value of original projects and their replacement by including all assets, even rehabilitation and replacement assets, and depreciating all assets.