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CC 2013-09-10_08.e. Resolution Modifying Underground Utility In Lieu FeeMEMORANDUM TO: CITY COUNCIL FROM: STEVEN ADAMS, CITY MANAGER I SUBJECT: CONSIDERATION OF RESOLUTION MODIFYING THE UNDERGROUND UTILITY IN-LIEU FEE DATE: SEPTEMBER 10, 2013 RECOMMENDATION: It is recommended the Council adopt a Resolution modifying the underground utility in-lieu fee ("in-lieu fee"). IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: Increased revenues will depend upon future project approvals authorized to pay the in-lieu fee. There is no cost or staffing impact from the recommendations. BACKGROUND: In July 13, 2004, the City Council approved an ordinance establishing the in-lieu fee and a resolution setting the fee at $232 per linear foot. The recommended fee was based upon a survey of other cities that had a fee in place. The in-lieu fee was established primarily for smaller residential developments to allow an option for developers in situations deemed appropriate by the City Council. At the December 11, 2012 meeting, the City Council directed staff to update the fee. ANALYSIS OF ISSUES: There were two significant challenges encountered when preparing the analysis to update the in-lieu fee. First, a limited number of jurisdictions were found that utilize the in-lieu fee. Second, costs for undergrounding vary dramatically by project. The survey of cities that have in-lieu fees includes Grover Beach, Pismo Beach and San Jose. Santa Barbara and Agoura Hills were also found to have programs, but the fee was based on a complicated process involving lot size and project costs, which is not recommended. Average cost estimates were also obtained from PG&E and AT&T. In gathering the data, a League of California Cities listserv request was sent to all cities requesting a response from cities that have an underground utility in-lieu fee. Other California cities were contacted that were known to have a fee. Oregon cities Item 8.e. - Page 1 CITY COUNCIL CONSIDERATION OF RESOLUTION MODIFYING THE UNDERGROUND UTILITY IN-LIEU FEE SEPTEMBER 10, 2013 PAGE2 were included in the original survey, but were excluded this time due to differences in regional construction costs. A separate survey of only San Luis Obispo County cities was then prepared through e-mail. Lastly, cities were then contacted randomly to determine if other in-lieu fees existed that staff had not yet determined. The City of Pismo Beach has· a separate fee depending upon whether the project includes PG&E distribution lines, which staff believes is a good practice since this has a dramatic impact on the cost of a project. Staff calculated an average of the city fees, then determined an average of the city fees and utility costs, and then prepared a breakdown of costs by whether or not PG&E distribution lines are included. The breakdown by type of undergrounding was calculated by determining the proportion for each type of undergrounding based upon an average of the fees charged by the City of Pismo Beach and the costs provided by the utilities. All numbers were rounded to the nearest $25. As a result, it is recommended to change the fee from $232 per linear foot to $200 per linear foot for facilities except PG&E electric distribution facilities and $375 per linear foot for PG&E electric distribution facilities. Therefore, if a project requires undergrounding involving all utilities, it would result in a total fee increase from $232 per linear foot of $575 per linear foot. ALTERNATIVES: The following alternatives are provided for the Council's consideration: Approve staff's recommendation; Modify the Resolution to establish a fee based entirely on utility company estimates; Modify the Resolution to establish a fee based entirely on an average of other City fees; Direct staff to prepare additional research; Do not modify the existing fee; or Provide other direction to staff. ADVANTAGES: The increased fee will generate revenue closer to the actual cost of improvements, which will enable the City to better utilize the fee to fund future undergrounding improvements. DISADVANTAGES: The increased fee could make some projects financially infeasible to construct. ENVIRONMENTAL REVIEW: No environmental review is required for this item. Item 8.e. - Page 2 CITY COUNCIL CONSIDERATION OF RESOLUTION MODIFYING THE UNDERGROUND UTILITY IN-LIEU FEE SEPTEMBER 10, 2013 PAGE3 PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, September 5, 2013 and on the City's website on Friday, September 6, 2013. No comments were received. Attachments: 1. Underground Utility In-Lieu Fee Analysis Item 8.e. - Page 3 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE MODIFYING THE AMOUNT OF THE CITY OF ARROYO GRANDE'S UNDERGROUND UTILITY IN-LIEU FEE WHEREAS, the City Council adopted an Ordinance establishing an underground utility in-lieu fee and providing for the setting of the in-lieu amount by resolution of the City Council; and WHEREAS, the amount of the undergrounding in-lieu fee was last established in 2004;and WHEREAS, there has been a significant increase in construction costs for utility undergrounding projects since that time; and WHEREAS, the City has conducted a study to equitably establish an updated amount of the underground utility in-lieu fee per linear feet NOW, THEREFORE BE IT RESOLVED by the City Council of the City of Arroyo Grande that the amount of the underground utility in-lieu fee for residentially zoned subdivisions or developments shall be two hundred dollars ($200.00) per linear foot for all facilities except PG&E distribution facilities and three hundred and seventy-five dollars ($375.00) per linear foot for PG&E electric distribution facilities. On motion of Council Member , seconded by Council Member , and on the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this 2013. day of Item 8.e. - Page 4 RESOLUTION NO. PAGE2 TONY FERRARA, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: STEVEN ADAMS, CITY MANAGER APPROVED TO AS FORM: TIMOTHY J. CARMEL, CITY ATTORNEY Item 8.e. - Page 5 Attachment 1 CITY OF ARROYO GRANDE UNDERGROUND UTILITY IN-LIEU FEE ANALYSIS Comparison Data San Jose: Pismo Beach: Grover Beach: Combined Average: Utilities PG&E: AT&T: Combined Total: Combined Average Total: $409 per linear foot $100 per linear foot for facilities except PG&E electric distribution facilities $300 per linear foot for PG&E electric distribution facilities $300 per linear foot $370 per linear foot $4 75 per linear foot $300 per linear foot $775 per linear foot $575 per linear foot The aver~ge total for the fee was calculated by establishing the city survey list and the utilities as two distinct categories. The combined average of the city list and the combined total from the utility list were then averaged to arrive at the combined average total, which represents the total recommended fee when all utilities would need to be undergrounded. This amount was rounded to the nearest $25 to arrive at the final amount. Recommended Breakdown: $200 per linear foot for facilities except PG&E electric distribution facilities $375 per linear foot for PG&E electric distribution facilities The breakdown by type of undergrounding was then calculated by determining the proportion fo'r each type of undergrounding based upon an average of the fees charged by the City of Pismo Beach and the costs provided by the utilities. This arrived at a proportional cost of 66% for PG&E distribution lines and 44% for other lines. Once again, the numbers were rounded to the nearest $25 to arrive at the final amounts. Item 8.e. - Page 6