Laserfiche WebLink
<br /> WATER CAPACITY AND MISCELLANEOUS FEE STUDY 10 <br />difficult to project growth and required facilities with precision accurately. Figure 1 shows the framework for <br />calculating a Buy-In connection fee. <br />Figure 1: Formula for Buy-In Approach <br /> <br /> <br /> <br />INCREMENTAL COST METHOD <br />The Incremental Cost Method is forward-looking and states that new development (new users) should pay for the <br />additional capacity and expansions necessary to accommodate them. This method is typically used when specific <br />capital improvements are needed to facilitate growth for new development. Under the Incremental-Cost Method, <br />growth-related capital improvements are allocated to new development based on their estimated usage or capacity <br />requirements, irrespective of the value of past investments made by existing customers. <br />For instance, if it costs X dollars ($X) to provide water for 100 3/4” meter equivalent connection and a new <br />connector uses one of those equivalent units, then the new user would pay $X/100 to connect to the system. In <br />other words, new customers pay the incremental cost of capacity based on the estimated cost of the new facilities. <br />This method is generally used when detailed future facilities have been identified to meet the capacity required to <br />serve new customers and limited existing system capacity is available for development. While California Code <br />66013 (b)(3) does not define a specific period to include future projects, these periods can be as long as a master <br />planning period. Figure 2 shows the framework for calculating an incremental cost connection fee. <br /> <br />Figure 2: Formula for Incremental-Cost Approach <br /> <br /> <br /> <br />HYBRID METHOD <br />The hybrid method is typically used where some capacity is available to serve new growth, but additional <br />expansion is necessary to accommodate new development. Under the hybrid method, the connection fee is based <br />on the existing capacity value and the costs of necessary expansions (i.e., the Buy-In component and the <br />Incremental-cost component). Capital improvements that expand system capacity to serve future customers may be <br />included proportionally to the percentage of the cost specifically required for expansion of the system versus the <br />percentage of cost incurred in repair and replacement of existing capacity (and therefore benefitting existing users). <br />Figure 3: Formula for Hybrid Approach summarizes the framework for calculating the Hybrid connection fee. <br /> <br />Page 157 of 893