CITY COUNCIL REGULAR MEETING AGENDA PACKET 7-21-26

City of Pleasanton Sewer Rate Study Report Water Resources Economics 58 4. CONNECTION FEES 4.1 CONNECTION FEE OVERVIEW New customer connections to the City’s sewer system are subject to a sewer connection fee, which is necessary to ensure that existing users are not unfairly burdened by costs incurred to provide capacity for new users. The overall purpose of a connection fee is to equitably recover capital costs incurred by the agency to provide system capacity to new users. Sewer connection fees in California are typically developed based on one of three common methodologies outlined by the AWWA in its Manual of Water Supply Practices M1: Principles of Water Rates, Fees and Charges, Seventh Edition. The three methodologies include: 1. Buy-In Method: The Buy-In Method establishes connection based on the value of the system’s existing capital assets and is typically most appropriate when a system’s current capacity is sufficient to serve both short-term and long-term projected demands. The rationale underlying the Buy-In Method is that new customers should pay to “buy-in” to existing system capacity funded by past and current users. 2. Incremental Cost Method: The Incremental Cost Method establishes connection fees based on the cost of planned capital expenditures required to expand system capacity and is typically most appropriate when a system’s current capacity is already fully utilized by existing users. The rationale underlying the Incremental Cost Method is that new users should fund planned capital projects that are necessary to accommodate growth. 3. Hybrid Method: The Hybrid Method 14 establishes capacity charges based on a combination of the Buy-In Method and the Incremental Cost Method. The Hybrid Method is typically most appropriate when some existing capacity is available to new users, but capacity expansion is still necessary to accommodate long-term demands. WRE recommends the Buy-In Method for the City’s sewer connection fees as the existing system has remaining capacity to serve new customers. 4.2 BUY-IN METHOD EXISTING SYSTEM VALUE The Buy-In component, shown in Table 4-1, calculates the value of the existing sewer system. The existing system value (Line 3) is determined based on the value of fixed assets (Line 1) and O&M, Replacement, and CIP cash balances (Line 2; from Table 2-18 and Table 2-19, sum of Line 1) as of FY 2027. 14 The Hybrid Method is referred to by the AWWA as the “Combined Cost Approach.” Page 210 of 923