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CC 2024-01-23_09.c. Sewer Connection FeesItem 9.c. MEMORANDUM TO: City Council FROM: Nicole Valentine, Administrative Services Director BY: Lynda Horejsi, Accounting Manager SUBJECT: Consider Adoption of a Resolution Approving the Annual Adjustment of Sewer Connection Fees DATE: January 23, 2024 SUMMARY OF ACTION: Adoption of a Resolution approving the annual adjustment of Sewer Connection Fees to increase fees by 2.7%, consistent with the Engineering News Record (ENR) Construction Cost Index (CCI). IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: Adoption of the Resolution will increase the Sewer Connection Fees charged for new development projects, effective March 25, 2024. The revenue generated from this adjustment is dependent on the amount of new development in the community during the coming year. RECOMMENDATION: 1) Adopt a Resolution approving the annual adjustment to the City’s Sewer Connection Fees based on changes in the Engineering News Record Construction Cost Index; and 2) Determine that adopting this Resolution is not subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, Cal. Code Regs., tit. 14, §§ 15060, subd. (c)(2)-(3), 15378.). BACKGROUND: Ordinance 528 C.S. amended Section 13.12.190 of the Arroyo Grande Municipal Code to provide that, for each connection of a building to a public sewer, a connection fee will be charged and that the amount of the fee shall be set by resolution. Resolution No. 3567 authorized that the sewer connection fees be adjusted each year in accordance with the percentage increase in the annual average ENR CCI. Page 27 of 56 Item 9.c. City Council Consider Adoption of a Resolution Approving the Annual Adjustment of Sewer Connection Fees January 23, 2024 Page 2 The previous rate increase of 7.2% was approved by Council on January 24, 2023, and became effective on March 27, 2023. ANALYSIS OF ISSUES: Sewer Connection Fees, enacted pursuant to Section 13.12.190 of the City Municipal Code, are collected to help pay for improvements and future sewer system capacity as necessary to meet the needs of the City resulting from growth and expansion. The calculation shown below provides documentation that the ENR CCI warrants a 2.7% increase in the City’s Sewer Connection Fees. The calculation adjusts the fees as follows: 1 + Current Index – Base Index for Date of Adoption = Factor Base Index for Date of Adoption For the current year, the calculation is as follows: 1 + 13,358 – 13,007= 1.027 = 2.7% 13,007 The existing and proposed fees implementing a 2.7% ENR CCI increase are set forth in Exhibit A to the attached Resolution. If approved, the effective date of the new fees will be March 25, 2024. ALTERNATIVES: The following alternatives are provided for City Council consideration: 1. Adopt the Resolution approving the annual adjustment to the City’s Sewer Connection Fees based on changes in the Engineering News Record Construction Cost Index; 2. Do not adopt the Resolution and request further information; or 3. Provide other direction to staff. ADVANTAGES: By approving the recommended fees, the City will be able to recover the estimated cost of providing infrastructure and services to new development. DISADVANTAGES: The only disadvantage identified in relation to this recommendation is an increased cost to new development. Page 28 of 56 Item 9.c. City Council Consider Adoption of a Resolution Approving the Annual Adjustment of Sewer Connection Fees January 23, 2024 Page 3 ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. Attachments: 1. Proposed Resolution Page 29 of 56 ATTACHMENT 1 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE ADJUSTING SEWER CONNECTION FEES BY THE CHANGE IN THE ENGINEERING NEWS RECORD CONSTRUCTION COST INDEX AND FINDING THE ACTION EXEMPT FROM CEQA WHEREAS, the City Council adopted Ordinance No. 528 C.S. amending Section 13.12.190 of the Municipal Code regarding sewer connection fees; and WHEREAS, pursuant to Section 13.12.190, the City Council may by Resolution establish the amount of the sewer connection fees; and WHEREAS, Resolution No. 3567 authorizes an annual adjustment in the sewer connection fees based on the changes in the annual average Engineering News Record (ENR) Construction Cost Index (CCI); and WHEREAS, it is determined that an increase of 2.7% of the ENR CCI has been calculated to warrant an adjustment to the City sewer connection fees, effective March 25, 2024; and WHEREAS, this resolution is not subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct , or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, Cal. Code Regs., tit. 14, §§ 15060, subd. (c)(2)-(3), 15378.) NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Arroyo Grande hereby adopts the sewer connection fees set forth in Exhibit “A” attached hereto and incorporated herein by this reference as though set forth in full. This Resolution shall take effect sixty (60) days after its adoption. 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 23rd day of January, 2024. Page 30 of 56 RESOLUTION NO. PAGE 2 CAREN RAY RUSSOM, MAYOR ATTEST: JESSICA MATSON, CITY CLERK APPROVED AS TO CONTENT: MATTHEW DOWNING, CITY MANAGER APPROVED AS TO FORM: ISAAC ROSEN, CITY ATTORNEY Page 31 of 56 RESOLUTION NO. PAGE 3 2020 2021 2022 2023 2024 ENR Index 11281 11455 12133 13007 13358 Residential - per dwelling unit Single Family 1,364$ 1,445$ 1,530$ 1,640$ 1,685$ Multifamily (a)1,011 1,071 1,135 1,216 1,249 Trailer Park/Mobile Home 1,119 1,185 1,255 1,346 1,382 Non-Residential - per water meter size (b) 5/8 inch 1,364$ 1,445$ 1,530$ 1,640$ 1,685$ 3/4 inch 2,045 2,166 2,295 2,460 2,526 1 inch 3,413 3,615 3,829 4,105 4,216 1 1/2 inch 6,827 7,231 7,659 8,210 8,432 2 inch 10,923 11,569 12,254 13,137 13,491 3 inch 20,481 21,694 22,978 24,633 25,298 4 inch 34,136 36,157 38,298 41,055 42,164 6 inch 68,271 72,313 76,594 82,108 84,325 8 inch 136,544 144,627 153,189 164,219 168,652 10 inch 204,815 216,940 229,783 246,327 252,978 12 inch 300,394 318,177 337,014 361,278 371,033 (a) Multifamily includes duplex, triplex, apartments, and condominiums Adjustment Formula: Adjusted Fee = (Current Fee) x (Current Year ENR index) / (Prior Year ENR index) Adjusted Fee = (Current Fee) x (13358) / (13007) The connection fees shall be increased each year with the annual percentage increase of the annual average ENR Construction Cost Index as established in the Engineering News Record publication. EXHIBIT A SEWER CONNECTION FEES EFFECTIVE 3/25/2024 For each connection of a building sewer to a public sewer, a connection fee shall be collected by the City before the permit for the connection work is issued. The amount of the fee collected is as follows: Connection Fee (b) For meter sizes larger than shown, connection fee determined based on the ratio of the maximum safe operating capacity of the meter to that of a 5/8 inch meter. Page 32 of 56