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HomeMy WebLinkAboutCAP 2010-02-18 MinutesMINUTES OF THE REGULAR MEETING OF THE CAPITAL IMPROVEMENTS ADVISORY COMMITTEE OF THE CITY OF NORTH RICHLAND HILLS, TEXAS February 18, 2010 1. CALL TO ORDER The meeting was called to order by Vice Chairman Bill Schopper at 6:30 p.m. 2. ROLL CALL PRESENT Vice Chair Secretary ABSENT Chairman CITY STAFF Chief Planner Asst. Planner Asst. Dir. of Public Works Recording Secretary Bill Schopper Don Bowen Steven Cooper Mark Haynes Mike Benton Dianna Madar Randy Shiflet Kathy Luppy Eric Wilhite Chad VanSteenberg Greg Van Nieuwenhuize Gina Pastre 3. CONSIDERATION OF THE MINUTES FROM THE JANUARY 21, 2010 MEETING APPROVED Steven Cooper motioned to approve the minutes of January 21, 2010, seconded by Dianna Madar. The motion was approved (6 -0). 4. Consideration and /or action regarding approval of the Impact Fee Rates. Greg Van Nieuwenhuize said the impact fee program has to be updated in three steps. The first is to review and approve the land use assumptions. The second Page 1 01/21/10 Capital Improvement Advisory Committee is to review and approve the capital improvement plans for water and waste water as they pertain to the impact fee portion. The final step is to approve the rates. By approving the rates you will be asked to approve a maximum and then it will go to the City Council and let them determine what they want to charge between 0 and the maximum. I think that it is appropriate that we give them the ability to charge the maximum. I will briefly go through where we are to date. We have already approved the land use assumptions and the capital improvement plans. We have briefly seen what the impact fees could be and tonight it will be appropriate to approve those fees. The land use assumptions we are recommending and what was approved for the next 10 years is for a population increase just over 2 percent. At 2 percent it is weighted towards 2014 -2019 as to now. In the economic climate we are in currently we are expecting it to be pretty flat for awhile yet. Based on the residential growth rate just accounts for the residential side. The commercial growth will dictate how much water and sanitary sewer will be needed. Once we know what the growth rates are then we can determine what the loads need to be on the sanitary sewer side and also look at what the usage will be on water side. Once we have all of that information we put that into hydraulic models and that will dictate what size the sanitary sewer and water mains will be. Based on that information we have our 2009 and 2019 results. Our average to date presently we are using just under 11 million gallons per day. For 2019 we are anticipating just over 12 million gallons per day. On the waste water side we are presently using just under 8'/Z million gallons per day and in 2019 we are expecting to use just over 9 million gallons a day. Greg Van Nieuwenhuize went over the projects that are necessary between now and 2019 based on the land use assumptions. Not all of these projects are based strictly on future growth. It could be that some of those lines are in bad shape now and so future growth shouldn't have to replace what is already there it is only going to be asked the replace the portion of that water main that it needs. The first 5 projects on this list are current projects so they are what we are currently working on and will over lap. The projects 1 -13 are new projects and those will be initiated upon the adoption of the new plan. We have similar situation on the waste water side just a lot less projects. Currently there is only one project which is the lift station. There are 8 new projects that are being proposed. Service units would be classified as the same thing as meter unit equivalents. The unit equivalent for the water is % inch meter. Everything above that is based on how much larger it is than a % inch meter. You can get 67 % more water through a 1 inch meter. The % inch meter is the most common meter and is what most residences will have. Based on our existing meter unit equivalents on the water side is 25464 and on the waste water side it is 21645. The difference is that on the water side businesses pull irrigation meters strictly for water. All the water that is used for irrigation doesn't go into the sanitary sewer system so it isn't counted against the sanitary sewer side. In order to calculate the impact fees we know the size mains that we need from the engineering standpoint. We figure out the construction and engineering costs for Page 2 01/21/10 Capital Improvement Advisory Committee true cost from start to finish to put a new main in the ground. It could mean that the existing main has 60% to cover existing growth and 40% to carry the future growth. On the surface you would assume that the new growth would pay their 40 % value but because of state law you cannot charge the full 40 %. The maximum that you can charge is 20 % so essentially new growth is only paying half of the amount of the infrastructure that is actually needed and that is if the maximum amount is adopted. On the water side we need just under 7 million dollars worth of improvements and on the waste water side we need 1.6 million dollars worth of improvements. In order to come up with a formula besides recovering all of our construction and engineering costs there are also the financing costs and we can only re -coop 50 % of those costs. Other associated costs are study costs and Mr. Reeds services. He monitors our finance department to make sure that they are collecting the appropriate amount of money and that it is being put into the appropriate accounts. Based upon what we have our total eligible cost is just under 9.5 million on the water side and just under 2.4 million on the waste water side. We go back and look at what our meter unit equivalents were for both water and sewer and divide that into it and you have a flat easy rate on what the impact is on meter unit equivalent. On the water side that comes out to $3,542 and on the waste water side it is $948. Due to state law we can only charge 50% of that total then you would just divide those two numbers in half. The maximum that we could charge on the water side would be $1,771 and on the waste water side $474. If those fees are adopted here is where North Richland Hills would relate to other cities in the immediate area. Our existing fees would put us at the very bottom and with the new proposed fees it would put us just below the middle. I don't believe that the proposed rates are unreasonable. There is a fine balance on the fees that you charge. The more expensive you make the fees there is a very good argument that it discourages homebuilding. We don't want that in the current economy but at the same time you have to look at it and realize that the fees you are recovering are only half of what you need to put in the infrastructure. There is a fine balance that you need to maintain and looking at our competitors in terms of attracting new development. Looking at where Hurst and Keller are give you a good idea where we are competitively. I wouldn't sayHaltom City has the same kind of housing stock or trying to attract the same kind of housing stock that we are. Therefore they wouldn't be a good comparative. Those are the kinds of things that we need to consider. With that in mind I don't think that it is unreasonable where North Richland Hills is on this chart. I would be happy to answer any questions that you might have. Steven Cooper asked why you are asking us to approve a maximum fee and not a recommended fee? Greg Van Neiuwenhuize said that the recommended fee is probably the better way to word it. To recommend to the city council that they charge up to the maximum. Page 3 01/21/10 Capital Improvement Advisory Committee Steven Cooper said that the city council is asking us for a recommendation and you are asking for a maximum and to me that would be a better way of stating it. Mike Benton said that maybe we could do both. Approve a max and recommend the max. Steven Cooper said that if it is 50% of what we could charge. Greg Van Neiuwenhuize said that up until that law was changed in 2000 or 2005. Steven Cooper said that he assumes that the body agrees with that. Bill Schopper said that he remembers when we first did it that the 50% was a big deal that we could have done all of it. Mr. Reed said that originally when the law was written that 50% reduction was not part of the law. The homebuilders association of Texas got that changed after about 3 or 4 sessions of the legislature after it was just put into affect. Some cities were really hit with calculations of big dollars and they would come up and the citizens would eat the council alive if they didn't approve all of that for the new citizens that come into the city. The homebuilders didn't like it either because they were getting high fees in cities that were in a tremendous growth areas. The homebuilders association had proposals before the state legislature stating they could do one of two things. You can calculate what the rate is according to the law now and cut that in half or calculate what it is now and go through a long winded audit process to see how much extra money is generated by this new development and take that as a credit rather than the 50 %. 1 don't think there has been more than 3 or 4 cities in the state that has gone through all of that process. That became subject to judgement calls on how much money a new home would generate. Therefore most cities have done the 50 %. Bill Schopper asked if we are recommending or just rubber stamping the calcualations? Mr. Reed said that right now you are telling the council that they can approve rates up to $1771 for water and $474 for waste water. If you would like to make a recommendation on your own that is your prerogative. Whatever recommendations you would like to make to the council since they are looking to you for that. Greg Van Neiuwenhuize said that you should understand that what the council is going to see. They aren't going to have the benefit of going through this process. This is the 4 th or 5 th meeting that we have discussed this subject. The public hearing to look at adopting these rates is tentatively scheduled for the March 8th city council meeting. They could adopt this rate that night. The way that the Page 4 01/21/10 Capital Improvement Advisory Committee state law is set up is that CIAC does all of this leg work so that city council doesn't have to. They can just take your recommendation and go with that since the study has been done at your level. The reason the public hearing is scheduled for March 8 th , lets just say that the council would like to have more time to consider it. This will be a public hearing and they may have some developers or homeowners that address the council. Perhaps they bring up something that we neglected to study or something that we have studied but that council would like to look at closer. Maybe council would like to look at staggering the rates. They can still do that and then vote on the rates at the last meeting in March. Our current impact fee program doesn't end until the end of March. It gives council a little bit of flexibility. They aren't going to see all of this information you have they are basically going to see the land use assumptions and that we are proposing X% growth rate what the CIP plans are and what that total dollar amount equates to. Bill Schopper said that he misunderstood and thought that you were doing the same thing for them again. Greg Van Neiuwenhuize said that if they would adopt the rates on March 8 th that would be fine. I wasn't here last time impact fees were adopted. From talking with Mr. Curtis the likelihood of that happening is probably not very favorable. They will probably want to think about it and adopt it at their second meeting in March. They won't have the benefit of seeing and going through this whole process. This is the way that the state law is set up with cities that have adopted the Capital Improvements Advisement Committee process. This is your responsibility. Mike Benton asked about what percent of increase is this from the current rate? Mr. Reed said that is was about a 70% increase. You are going from $1087 up to $1700. Mike Benton asked if it was 5 years ago that we had adopted the current rate? Greg Van Neiuwenhuize said yes. I have the old rates here. The old rates for sewer were $306 and it is going to $474. However on water we are recommending going from $1087 to $1771. Mike Benton said that he agrees with Steven that we might want to reword that a little. It sounds a little more severe if you say that you recommend the calculated amount instead of a maximum amount. Mr. Reed said that the maximum is a two edged sword. If you get up in public and say that we are going to recommend the maximum rate that we can charge. What you are doing by that is telling the existing rate payers that the new people coming in are going to pay what they are supposed to pay and we aren't going to Page 5 01/21/10 Capital Improvement Advisory Committee have to pick up the tab for the new rate payers. The developers don't want the maximum to be charged. Sometimes people on the council will say that we don't want to use the word maximum. Steven Cooper said that if he was city council and was looking to this body to make a recommendation and we agreed with the maximum. I would say then what do you recommend. Is that you agree with the maximum? Bill Schopper said that he is in the frame of mind that he doesn't know that any increase is appropriate because you are going to have this increase on a very few number of units. Builders are not building because it isn't financially feasible and then we go ahead and add another expense then it really becomes not financially feasible. It seems counterproductive at this juncture to have a 70% increase. Steven Cooper asked if they thought someone wouldn't build a house because of the $800 difference? Greg Van Neiuwenhuize said that ultimately it is not the homebuilder that is going to pay this fee. It will be the home purchaser. Bill Schopper said that ultimately somebody has to sell the soap in the meantime. That home buyer is looking at homes in North Richland Hills and Hurst. That is the competition and our lot prices got so expensive and all the expenses got so high that for a builder to come out they have to build these big expensive houses. just see it as another component and don't know if it is appropriate to raise it right now. I liked the way before where 100% was the maximum and we were saying that we are only going to charge 50% of that. Now the state has made that 50% mandatory. Mike Benton asked how much of an impact does it affect the City of North Richland Hills if the fee is lower? Greg Van Neiuwenhuize said lets say we keep the fees the same. Is that going to attract more people to build? I don't believe it will make a difference. I think it is a function of the current economy. I see what Mr. Schopper is saying and he has a good point. Maybe there is some merit to going ahead to recommending a phase in approach. Bill Schopper said that he is just thinking about the article in the Star Telegram about no building going on and North Richland Hills deciding to increase rates by 70 %. That doesn't make sense and seems to be disconnected from what is going on in the economy. Greg Van Neiuwenhuize said that maybe the thing would be to have the ability during this 5 year program to be able to charge the maximum but with the current Page 6 01/21/10 Capital Improvement Advisory Committee economic climate keep the rates the same. I don't know if you can look at it again in 6 months. Do you not have to at the time adopt the fees say in 6 months they will be X and then in 12 months Y? Mr. Reed said that if you set it at a certain rate and say that you want to check it again in a stated amount of time. I think that this committee would have to be comfortable with making the decision that the land use assumption has not changed since we approved it last. The Capital Improvements plan has not changed since we approved it last. Consequently the rates allow under those two has not changed the allowable rate and so we would recommend to the council then that they change their rates. Bill Schopper said that he is just looking at the fact that there are a whole lot of home builders that aren't in business anymore that or ones that used to have offices that are now working out of their homes. Greg Van Neiuwenhuize said that he understands what he is saying but even if we keep the rates the same is that condition going to change. I think that condition is more of a function of the current economy. Bill Schopper said why rub salt in the wound. I would be on your side for raising the fees if we would have a whole bunch of them happening. In college when you studied the elasticity of demand. There is a certain point where they just say that is it. Mike Benton asked if there was a way that each year that the fees could raise by a certain percentage? Greg Van Neiuwenhuize said that he has done that in other cities. You give the council the ability to charge up to the maximum but allow them to consider phasing it in. Whether they decide to phase that in over 1 year, 2 years or 3 years. Maybe that would be the best approach. That would give them the flexibility to determine. Bill Schopper said that I'm not comfortable with the maximum in the current environment. Dianna Madar said that we could say up to the maximum with a phasing approach. Greg Van Neiuwenhuize said that they could give council the ability to charge it at the appropriate time without going through this whole process again. Mark Haynes said that we are within the range of the competition so to me it seems fair. We are only recovering 50% of our capital expenditures. Page 7 01/21/10 Capital Improvement Advisory Committee Steven Cooper said that he doesn't have a problem with it. Is it around $1300? Greg Van Neiuwenhuize said that it is just under $1400. Steven Cooper said that it is going to $2250. It is only a $800 difference and I can't see why somebody would not build in North Richland Hills because of $800. We are still well within the range of everyone else and only a couple places have lower fees. Mike Benton said that the ones that are going to be affected are the big home builders. The ones that are coming in and building 50 -100 lots and that is when it is going to add up. Although they will pass it on to the homeowner. Steven Cooper asked what our actual cost now for the sewer and water? Do we have those numbers? Mr. Reed said that what they are recommending is the maximum. Steven Cooper asked if that is what the actual cost is today? This is a projection and this is based on what we recover in 10 years. Greg Van Neiuwenhuize asked if he is asking about what the cost of construction would be? I don't understand the question. Steven Cooper said that the $1393 which is what we charge now which is theoretically 50% of what was calculated last time. If that is what we are charging do we assume that double that is what the actual cost is now? Mr. Reed said that basically the only difference you would have would be construction costs because there has not been that many major projects change. You can track the last program through and here is project A, if you didn't need it last time it will be in there again like before and the only difference you will have is the construction costs because of inflation. Basically you can say that the $1393 is just about the cost that you have had in the last 5 years. Steven Cooper said that he is comfortable with this. We aren't here to make money we are trying to recover the costs or at least half of the costs. I have no problem with it if that is what we are doing. Based on your studies and projections that is what it is. This is only covering half of what it is going to cost. I don't have a problem if we can think of a phased in approach of a year or two and raising it gradually. I don't think that we should just ignore the numbers here. Mr. Reed said that he believes that council the time before last when they changed fees they had to do this study every 3 years instead of every 5. When that study was done back then they came up with a pretty sizeable number and said to council this is what we can charge. Then the council looked at other Page 8 01/21/10 Capital Improvement Advisory Committee comparable cities in the area and said that we would stay in the same area as where these other cities are but they could have gone dramatically above those other cities. That 50% wasn't even in play then. Greg Van Neiuwenhuize asked if they wanted to consider approving the maximum rate or calculated rate and ask the council to consider in a phased in approach. I understand what Mr. Schopper is saying that he doesn't want to rub salt in the wound. Then we can let council take that into consideration when they eventually adopt the fees. That expresses if there is a concern on this being detrimental on future homebuilding. Mr. Reed this is exactly why we scheduled this where we have an extra meeting before the current program expires. Bill Schopper asked if anyone felt comfortable making a motion? Steven Cooper asked if they wanted to recommend a number of years phased in approach or just a phased in approach? Bill Schopper said that we could recommend a maximum rate or calculated rate. We can report the maximum rate with the suggestion that the council temperate with the current economic environment. If they want to go with it that is fine. Mike Benton said that we will recommend the numbers that you are requesting now but will be in smaller increments within the next few years. Greg Van Neiuwenhuize said that he is asking the committee to consider letting council make the decision on the timing for raising the rates. Maybe they will want an economic trigger for raising the rates rather than just saying in 6 months from now to raise the rate. Mark Haynes asked if this fee would be good for the next 5 years? Greg Van Neiuwenhuize said yes Mr. Reed said that this can be done sooner than 5 years but has to be done before 5 years has passed. Bill Schopper said that a fee is no different than a tax. If the council is not trying to raise property taxes now in this environment it doesn't make sense. Maybe we should try to keep the fees in line with our current economic environment. Steven Cooper said that he doesn't disagree but if you don't pay for it here then it will be paid for somewhere else. The cost is the cost. So whether it is the homebuilder or the buyer that it is going to do it on these fees. If it is not paid from there it is going to come out of the city money somewhere else. Page 9 01/21/10 Capital Improvement Advisory Committee Mr.Reed said that the 50% that is not paid for that you get credit for up front. That money comes from the water and sewer revenue bonds to build those projects. Most of the time the money in those projects is large enough that you cant fund it out of day to day or year to year operations with rate collections. You have to fund it with bond proceeds and pay principal interest on those bonds. That is where that would come from. Jessica Brown said that the calculated rates to give you an idea of what percentage of maximum if you stayed where you are right now. The sewer would be 32% versus 15% and water would be just under 31 % versus the 15 %. I know that Fort Worth at one point the impact fees they were charging 35% and they implemented a phase plan to increase from the 35% to 50% over a 3 year time period. Grand Prairie and Frisco also when they were looking at a pretty substantial increase they also did a phased approach so it is not uncommon for them to do that. APPROVED Mike Benton motioned that we recommend that the fees that staff has proposed but allow council to make the decision on how the fees should be phased in. Dianna Madar seconded with a recommendation to council of a calculated rate up to the maximum fee utilizing a phased in approach to be determined by city council. The motion was approved (6 -0). 7. ADJOURNMENT The meeting was adjourned at 7:04 p.m. Randy Shiflett, Chairman Dt& � l Don owen. Secretary Page 10 01/21/10 Capital Improvement Advisory Committee