CITY COUNCIL REGULAR MEETING AGENDA PACKET

7 CITY OF PLEASANTON Introduction Connection fees are also commonly known as developer fees, development impact fees, capacity fees, tap fees, and system development charges, among others. This report uses the term connection fees reflecting the nomenclature used by the City. Connection fees are one-time capital charges assessed against new development to recover the proportional share of capital facility investment previously constructed by a utility (or to be constructed) to accommodate growth. Connection fees are codified in the California Government Code Sections 66000-60025. Connection fees must reflect the link between the fee imposed on, and the benefit received by, a new connection to the system. The fee charged may not exceed the reasonable share of costs associated with providing the service. Broadly, utilities use one of three different methodologies to calculate capacity fees: Buy-In, Incremental, and Hybrid. Variations of each are dictated by local community and system characteristics and policy objectives. Utilities have broad latitude in the method and approach used to calculate fees, provided the fees reflect the cost and do not exceed the reasonable costs for providing service to the connection. These fees are designed to be proportional to the burden placed on the system by new connections. Background and Legal Framework Background of the Study The City revised its water connection fees in 1992, wastewater connection fees in 2008, and recycled water connection fees in 2015. The adopted connection fees have not consistently been adjusted annually for inflation. The City engaged Raftelis in 2024 to conduct a connection fee study to examine the existing approach against alternatives that may better reflect current community conditions, system characteristics, and policy objectives. Raftelis worked collaboratively with City staff throughout the study to calculate the proposed connection fees. This report documents the findings, analyses, and proposed changes to the City’s water and wastewater connection fees. The updated connection fees documented in this report are in accordance with the rules and regulations of California State Government Code Section 66013. This report is the formal technical documentation supporting modifications to the water and wastewater connection fees within the City’s service area, including data sources, methodology, results, and comparisons. Economic and Legal Framework For publicly owned systems, most of the assets are typically paid for by the contributions of existing customers through rates, charges, securing debt, and taxes. In service areas that incorporate new customers, the infrastructure developed by previous customers is generally extended towards the service of new customers. Existing customers’ investment in the existing system capacity allows newly connecting customers to take advantage of unused surplus capacity. To further economic equality among new and existing customers, new connectors will typically “Buy-In” to the existing and pre-funded facilities based on the existing assets, effectively putting them on par with existing customers. In other words, the new users are buying into the existing system based on the replacement costs of existing assets to continue providing the same service level to new customers through repairs, expansions, and upgrades to the system. Page 154 of 893