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23 Last year, the state passed N.C. Session Law 2017-138 which authorizes public water and 1 sewer utilities to charge system development fees using one of three different methodologies. 2 With the help of rate consultants, OWASA staff evaluated the statute’s options for calculating 3 the fees and chose the method most appropriate for OWASA and its customers. The method 4 chosen also resulted in lower fees than the other options. As required by the new statute: 5 • A report on the new system development fees has been posted on OWASA’s website. 6 • We have invited and are accepting comments on the proposed changes up to and 7 through a public hearing scheduled for May 24, 2018. 8 • OWASA’s Board of Directors will consider approving the new system development fees 9 on June 14, 2018. 10 • The new fees must be in-place by July 1, 2018. 11 12 Combined 10% to 51% Reduction in System Development Fees from Last Year 13 The new fee development methodology results in a proposed reduction of 10% to 40% of 14 current system development fees, depending on the type of development. The proposed 15 changes are outlined in Table 1. The proposed fees also include a new lower-tier rate for 16 homes 800 square feet or smaller. In addition to the proposed reductions shown in Table 1, in 17 October 2017, we also reduced system development fees, based on an updated analysis of 18 costs and rates. 19 20 In total, the reductions made in October 2017 combined with those proposed to take place July 21 2018, OWASA’s system development fees will be 10% to 51% less than they were prior to 22 October 2017. 23 Information about OWASA’s system development fees was included in a December 18, 2017 24 letter to Mayor Hemminger, Mayor Lavelle and Chair Dorosin (Attachment 2). 25 System Development Fee Comparison 26 • System development fees are known by a variety of names, e.g. availability fees, impact 27 fees. These are one-time fees for new connections, such as new residences and 28 businesses, to the community’s water and sewer system. System development fees 29 recover the cost of the capacity needed to provide water and sewer services to these 30 new properties. 31 • Utilities use a variety of methods to calculate these type fees: 32 o Size of meter serving the property 33 o Square footage 34 o Type of property 35 • OWASA was one of the first utilities to use square footage in determining fees 36 applicable to residences. 37 • Table 2 shows a comparison of system development fees neighboring utilities charge for 38 a 1,600-square foot residential property. (Rates shown for OWASA are proposed based 39 on the new NC law. The other utilities listed must go through the same process so their 40 rates may also change.) 41 • Number of accounts is noted because in a capital-intensive industry, such as water and 42 wastewater, economies of scale (or lack thereof) can significantly impact cost-of-service 43 fees. 44 45 Council Member Parker said he applauds the creation of the lower tier, and bringing the 46 rates down. He referred to tiny homes, which are typically 500 square feet or less, and asked if 47 it would be possible to have an even lower tier just geared towards tiny homes. He said many 48 of the tiny homes use compost toilets, and asked if it would be possible to get a special 49 discount on the sewer rates, if the standard amount of sewerage is not being used. 50