Executive
Summary
Impact fees are one-time payments used to construct system
improvements needed to accommodate development.
As documented in this report,
Impact fees for
For each type of public facility included in this Impact
Fees report,
There are three basic approaches used to calculate the
impact fees for the public facilities addressed in this report. The first method is a replacement cost method.
This method documents the current Level of Service (LOS) for each type
of public facility in both quantitative and qualitative measures. The term “replacement cost” essentially
describes how the LOS standards are determined (i.e., similar to the practice
used by property insurance companies).
However, in contrast to insurance practices, the City will not use the
funds for renewal and/or replacement of existing facilities. Rather,
The second basic approach used to calculate impact fees is
the plan-based method. This method is works well for public
facilities that have commonly accepted engineering standards to guide capital
facilities plans.
A third impact fee calculation approach is the buy-in method. To the extent that new growth and development
is served by the previously constructed improvements,
Another general requirement that is common to development fee methodologies is the evaluation of credits. There are two distinct types of credits that should be considered when implementing impact fees. First, revenue credits should be determined to avoid potential double payment situations arising from the payment of a one-time development impact fee and then subsequent payments of other revenues that may also fund growth-related capital improvements (e.g. gas taxes for roads). Revenue credits for each type of public facility have been evaluated and included in this report.
The second type of credit is a site-specific credit for system improvements that have been included in the impact fee calculations. Specific policies and procedures related to site-specific credits will be addressed in the ordinance that establishes the City’s fees. However, the general concept is that developers may be eligible for site-specific credits only if they provide system improvements that have been included in the City’s impact fee calculations. Project improvements normally required as part of the development approval process are not eligible for credits against impact fees.
Figure 1: Existing Fee Schedule
Figure 2 provides a schedule of the maximum supportable
impact fees for
Figure 2: Impact Fee Schedule
Land
Use and Demographic Assumptions
This section of the report documents the demographic and land use assumptions used to calculate impact fees. Figure 3 is a summary of the development projections and demographic data used in the impact fees study. Supporting documentation for these projections can be found in Figures 4 through 9.
Figure 3: Annual Development Projections
TA and City staff evaluated several population projection
alternatives (see Figure 4) and selected the linear projection method as the
most appropriate for
Figure 4: Alternative Population Projections
The residential impact fees have been calculated on a
per-housing-unit basis for Single Family Detached and All Other Housing
Units. These residential categories were
determined after an evaluation of demographic data for
Figure 5: Persons Per Household
Projections of nonresidential development have been derived
from an inventory of nonresidential floor area and building permit data from
1994 through 2006. City staff prepared a
complete list of existing nonresidential buildings in
Figure 6: Alternative Projections of Nonresidential Floor Area
Employment by place of work (i.e., “Jobs” as shown in Figure 7) was derived from the nonresidential floor area data. The square feet per employee multipliers shown below are based on national data, as documented in Figure 8.
Figure 7: Nonresidential Floor Area and Job Estimate
Nonresidential development impact fees has been determined for the following three general types of development: Commercial / Shopping Center, Office / Institutional and Industrial. General employee and building area ratios used in the impact fees study are presented in Figure 8.
Figure 8: Employee and Building Area Ratios
The projected increase in both population and nonresidential
floor area was converted to annual development projections, as shown in Figure
9. The average annual increase in
housing units and nonresidential floor area (in thousands of square feet, or
KSF) is consistent with recent development trends in
Figure 9: Average Annual Increase in Development
Parks and Recreation
New residential development creates a need for additional
park land and recreation improvements in
Capital costs include community parks and trails land, plus
park/recreation and trails improvements.
The recommended replacement cost methodology will enable
The Parks and Recreation impact fee uses a methodology based
on the existing inventory of park land and improvements, as shown in Figure 11
and trails as shown in Figure 12. The
existing inventory of park land includes 44.7 acres of improved parks and 66.8
acres of undeveloped park land. Also
shown in Figure 11 is the capital improvement plan to maintain roughly the same
LOS for park land and facilities. As
shown in Figure 12, the existing inventory of trails includes 5.14 miles of
trails of which 2.60 miles are improved.
The trails include land either owned by the city for planned trails or
places where the city owns trail easements on privately owned properties. The capital improvement plan includes the
City’s plan to acquire additional park land and trails to accommodate future
development as well as developing existing land. The replacement cost approach has been used
for the Parks and Recreation impact fee maintaining the current LOS and using
the population of
Figure 11: LOS
for
Figure 12: LOS for
The cost of maintaining the current LOS standards upon which the Parks and
Recreation impact fee is based is shown in Figure 13. The impact fee varies by type of housing and
is based on the respective household size for Single Family Detached and All
Other housing units per the 2000 census.
Figure 13: Parks and Recreation Impact Fee
To accommodate projected development in
Roads
The road impact fee for
Figure 14: Road Impact Fee Methodology Chart
The demand for additional roads will be generated by vehicle
trips. Figure 15 lists the road segments
and bridges that will need improvements to accommodate the transportation
demand in
Figure 15: Roads Capital Facilities Plan Summary
The impact fee methodology for roads includes a credit for
future gas tax revenue that will be used by
Figure 16: Gas Tax Credit
Although sales tax revenue is part of the General Fund and
is not legally restricted to road construction projects,
In order to derive the sales tax credit, the projected sales
tax revenue dedicated for road improvements over the next 20 years was
allocated 12% to residential development and 88% to commercial / shopping
center development. This allocation was
based on an estimate of local expenditures from the 2001-02 Consumer
Expenditure Survey of the western region of the
Figure 17: Estimated Local Expenditures and Analysis of Gross Taxable Sales
Figure 18 indicates residential development’s allocation of projected sales tax revenue to be used for road capacity improvements and the projected increase in average daily residential vehicle trips over the next twenty years. The net present value of the annual sales tax contribution per vehicle trip results in a credit of $22.21 per unit of trip capacity.
Figure 18: Sales Tax Credit per Residential Vehicle Trip
Figure 19: Sales Tax Credit per KSF of Commercial / Shopping Center Development
Maximum supportable development impact fees for roads are
shown in Figure 20. The LOS standards
include Average Weekday Vehicle Trip Ends from the reference book, Trip
Generation, published by the
To calculate road impact fees, trip generation rates are adjusted to avoid double counting each trip at both the origin and destination points. For Office/Institutional and Industrial development, the trip factor is 50%. For Commercial/Shopping Center development, the trip factor ranges from 23-34%. Trip adjustment factors are less than 50% because retail uses attract vehicles as they pass by on arterial and collector roads. For example, when someone stops at a convenience store on the way home from work, the convenience store is not their primary destination. The Trip Generation manual indicates that on average, 43% of the vehicles entering shopping centers, in the size range of 75,000-150,000 square feet, are passing by on their way to some other primary destination. The remaining 57% of attraction trips have the shopping center as their primary destination. Because attraction trips are half of all trips, the Commercial / Shopping Center trip adjustment factor is 57% multiplied by 50%, or approximately 29% of the trip ends.
For Residential uses, the trip adjustment factor is 62%
because many of the employed residents of
The road impact fee methodology includes a 8.96% reduction for discretionary General Fund taxes. As shown in Figure 40, this reduction is based on the expenditure of locally generated taxes that may be spent at the discretion of City Council.
Figure 20 indicates the sales tax credit for commercial/shopping center development is $2,169.38 per 1,000 square feet of building. This credit is not given on a per trip basis due to the lack of development projections by shopping center size.
Figure 20: Road Impact Fee
Water System
The Water System impact fees are primarily determined by the
capital cost per gallon of capacity for distribution system improvements. As shown in Figure 21, four basic steps have
been used to determine the net capital cost per gallon of capacity. The major cost factor is for growth-related
capital improvements needed to accommodate additional demands on the water
system. Capital projects are summarized
in a five-year Capital Facilities Plan (CFP).
If
In recognition of the value of the City’s existing water system, the second component in the impact fee methodology is the buy-in component. The city has included the cost of recent water system improvements that were oversized to accommodate future development.
The third major step in calculating utility impact fees was the evaluation of funding mechanisms for capital improvements. To avoid any potential double payments, the one-time impact fees were reduced to account for future principal payments from monthly utility bills. The credit for principal payments on existing bonds was subtracted from the cost factors to yield the net capital cost per gallon of water system capacity.
As shown in the chart below, the net capital cost was multiplied by a consumption standard to yield the proportionate impact fee for a one-inch water meter. Impact fees for all other meter sizes were derived from capacity ratios published by the American Water Works Association.
Figure 21: Water System Impact Fee Methodology Chart
Water use for residential and nonresidential customers was determined from 1996 billing records. The water use data shown in Figure 22 were used to project future water demand from both residential and nonresidential development.
Figure 22: Culinary Water Average Daily Demand Factors
The residential and nonresidential demand factors discussed
above were developed from the actual and projected water usage in
Figure 23: Annual Water System Demand
A summary of
Figure 24: Water System Capital Facilities Plan Summary
Utah’s Impact Fee Act states that local political
subdivisions may impose an impact fee for public facility costs previously
incurred by a local political subdivision to the extent that new growth and
development will be served by the previously constructed improvement (see
11-36-202.(3)(b)). Almost every year
Figure 25: Water System Buy-In Cost Component
Figure 26: Principal Payment Credit for Water System Improvements
The LOS standards used to derive the Water System impact fee are shown in the boxed area of Figure 27. The net cost of capital improvements for new growth is $7.21 per gallon of capacity or usage. The typical usage per residential connection is 460 gallons. Multiplying these two numbers provides the impact fee for a typical residential customer. Water system impact fees for users requiring larger meters are based on the water meter sizes and their capacity relative to a standard one-inch meter. The capacity ratios by meter size are from the American Water Works Association.
Figure 27: Water System Impact Fee
Wastewater Collection System
Wastewater collection system impact fees are based on the net capital cost per gallon of system capacity. As shown in Figure 28, three basic steps have been used to determine the net capital cost per gallon of capacity. The major cost factor is for growth-related capital improvements needed to accommodate additional demands on the wastewater collection system. The cost of growth-related capital improvement projects was divided by the incremental increase in system capacity (i.e., a marginal cost approach).
In recognition of the value of the City’s existing
wastewater collection system, the second component in the impact fee
methodology is the buy-in component.
The third major step in calculating utility impact fees was the evaluation of funding mechanisms for capital improvements. To avoid any potential double payments, the one-time impact fees were reduced to account for future principal payments on existing sewer bonds. This credit was subtracted from the cost factors to yield the net capital cost per gallon of sewer system capacity.
As shown below, the net capital cost was multiplied by a wastewater generation rate for a typical residential unit. Wastewater collection impact fees are derived from capacity ratios according to the size of the new connection’s water meter.
Figure 28: Wastewater Collection Impact Fee Methodology Chart
Total wastewater generation from residential and nonresidential customers was determined from the City’s wastewater treatment bills for the years from 2000 through 2006. The proportionate share factors by type of development are based on the water billing records as of September 2006.
Figure 29: Wastewater Average Daily Demand Factors
The residential and nonresidential wastewater generation
rates discussed above were multiplied by projected development in
Figure 30: Annual Wastewater Collection System Demand
A summary of
Figure
31: Wastewater Collection System Capital
Facilities Plan Summary
Utah’s Impact Fee Act states that local political subdivisions may impose an impact fee for public facility costs previously incurred by a local political subdivision to the extent that new growth and development will be served by the previously constructed improvement (see 11-36-202.(3)(b)). Recent sewer line projects that were oversized for future growth are listed in Figure 32. The cost of oversizing was allocated to the projected wastewater collection system’s capacity in 2025. This 20-year time frame represents 40 percent of the typical useful life of major sewer lines.
Figure 32: Wastewater Collection System Buy-In Cost Component
Figure 33: Principal Payment Credit for Sewer System Improvements
The LOS standards used to derive the wastewater collection system impact fee are shown in the boxed area of Figure 34. Fees for the 0.75 and 1.00 inch water meters are based on the assumption that most single-family residences will have either the standard 3/4 - 5/8 inch or a 1.00 inch water meter. The fees for sewer connections for locations with larger than this standard sizes water meter are based on the relative capacity of the larger water meter with respect to the base size 1.00 inch meter.
Figure 34: Wastewater Collection System Impact Fee
Cash
Flow Analysis
The general parameters shown in Figure 35 are used to
calibrate TA’s proprietary software program that uses local demographic and
fiscal data to analyze cash flow to
Figure 35: General Parameters
A profile of new development characteristics is presented in
Figure 36. The five development
categories were selected as being representative of the majority of new
developments expected in
Figure 36: New Development Profile
The capital facility demand and cost inputs for parks and recreation are shown in Figure 37. The CFP for the water system, wastewater collection system and roads have been direct entered into the model using the capital cost data already presented in the Impact Fees report. All capital facilities will be funded on a pay-as-you-go or cash basis.
Figure 37: Capital Facility Demand and Cost Inputs
Revenue inputs used in the cash flow model are shown in Figure 38. Rows 1-13 are the Impact Fee (IF) amounts from the maximum supportable fee schedule (see Figure 2). The water and sewer impact fee amounts for all nonresidential development are derived using an equivalent residential connection approach. Based on the AWWA capacity ratios, most nonresidential connections will require either a 1.0 or 1.5 inch water meter.
Rows 14-19 in the table below indicate the non-impact fee revenues that will be used to fund capital improvements. The base year budget amounts are projected to increase over time at the same rate of growth as new development.
Figure 38: Revenue Inputs
The cash flow analysis summary is presented in Figure 39. The top portion of this table indicates projected revenues from impact fees, general fund contributions, utility rates and gas taxes. The summary of expenses, shown in the middle of Figure 39, indicates the cost of capital facilities for parks and recreation, roads and the City’s water and wastewater collection systems.
The net capital facilities cash flow for parks and recreation, water and sewer systems, and roads can be found at the bottom of Figure 39. Dollar amounts in the cash flow analysis are in thousands of constant dollars (i.e., not inflated over time). Annual deficits are indicated by parentheses ($) around the dollar amount.
Figure 39: Net Capital Facilities Cash Flow Summary
Proportionate
Share Analysis
Impact fees for North Logan City are proportionate and reasonably related to the capital facility service demands of new development. The written analysis of each impact fee methodology and the cash flow analysis have established that impact fees are necessary to achieve an equitable allocation of the costs, borne in the past and to be borne in the future, in comparison to the benefits already received and yet to be received.
The Impact Fees Act requires that certain factors are used in evaluating the fairness of the impact fees to be charged. The analysis of these factors is discussed below.
1) The
impact fees for North Logan City are based on the cost of existing public
facilities. The water and wastewater
collection impact fees include minor buy-in components that were derived from
the actual construction costs of specific capital improvements by
2) The impact fee analysis has identified the manner of financing existing public facilities, which includes user charges, bonds, general taxes, and intergovernmental transfers. These revenue sources are summarized in the cash flow analysis found at the end of this report.
3) The extent to which properties in the municipality may have already contributed to the cost of existing public facilities has been estimated and a credit for past contributions has been addressed in the impact fee methodology. The maximum supportable impact fees include a percentage reduction for General Fund contributions. This reduction is based on an analysis of North Logan’s budget over the past five years, as shown below in Figure 40.
4) The relative extent to which properties will make future contributions to the cost of existing public facilities has also been addressed in the principal payments credits that have been included in the impact fee calculations. These credits for water system improvements and wastewater collection system improvements lower the maximum supportable impact fees for new development.
5) North Logan City will evaluate the extent to which newly developed properties are entitled to a credit for common facilities that have been provided by owners or developers as compared to common facilities provided by the City in other parts of the municipality. These “site-specific” credits will be available for system improvements identified in the Capital Facilities Plans, as summarized in this report. Administrative procedures for site-specific credits will be addressed in the impact fee ordinance.
6) Citywide service areas are appropriate for the types of public facilities included in the impact fees study. Therefore, separate geographic zones for the collection and expenditure of impact fees are not necessary in North Logan. Extraordinary costs, if any, in servicing the newly developed properties will be addressed through administrative procedures that allow independent studies to be submitted to the City. These procedures will be addressed in the impact fee ordinance.
7) The time-price differential inherent in fair comparisons of amounts paid at different times has been addressed in the evaluation of credits for each type of impact fee. All costs in the impact fee calculations are given in current dollars with no assumed inflation rate over time. Necessary cost adjustments can be made as part of the annual evaluation and update of impact fees.
Figure 40: General Fund Expenditures for Capital Improvements
Implementation
and Administration
Impact fees should be evaluated and updated to reflect recent data. One approach is to adjust for inflation in construction costs by means of an index like the Engineering News Record (ENR). This index would be applied against the calculated impact fee. If cost estimates change significantly the City should evaluate an adjustment to the fee.
Another possible change in calculation will occur if the City begins financing any of the facilities included in this impact fee report, through the issuance of new bonds. Should that take place, new development should be credited for the debt service it will pay for these capital facilities. Those credits will need to be deducted from the maximum supportable impact fees.
As specified in the Impact Fees Act, there are certain accounting requirements that will be met by North Logan City. Impact Fees must be deposited in separate interest bearing ledger accounts. Fees must be spent within six years of when they are collected, with the expenditures limited to system improvements identified in the CFP.
There are also administrative procedures required by the
Impact Fees Act. For example, a local
political subdivision shall ensure that the impact fee enactment contains a
provision authorizing adjustment of the standard impact fee in response to
unusual circumstances in specific cases and to ensure that the impact fees are
imposed fairly. Also, there may be
adjustment of the amount of the impact fee based upon studies and data
submitted by the developer.