02-17-1993 CC MIN - SPECIAL-JOINT
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CITY OF ELK RIVER
ELK RIVER MUNICIPAL UTILITIES
Joint meeting of City Council & Utilities Commission
February 17, 1993
The main purpose of this meeting will be to discuss the financing methods for water system
improvements required by developments. It is important to consider that the only sources of
revenue for these improvements can come from either the customers through the rates, the
builder ( or homeowner) when the home is built, the developer when the lot is platted, or the
taxpayer if the improvements are assessed. Let us consider the positive and negative aspects of
each of these options.
1. The Ratepayer
This person already feels that his rates are too high. The ratepayer feels that he/she has
already paid his share of the costs supporting the water system and the improvements are of no
immediate benefit to them. This person has already paid a water access charge and does not feel
that additional dollars should be added to the rates to benefit another area of town or to make
money for some developer. The positive of this method is that is it the least painless of all with
the money coming in much smaller lumps over a long period of time.
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2. The Homebuilder
The builder, or homeowner, is presently being charged $700 for a "Water Access Charge"
which they consider too high. This fee was recently raised from the $300 fee which had existed
for years. We have considered that this fee was for replacement of mains when that becomes
necessary in the future. As a matter of fact, the Water Mains have been replaced on Main
Street, Jackson A venue, and Proctor without the necessity of bonding or borrowing any money.
The Utilities feels that the well and associated treatment facilities in the new City Hall area can
be paid for with available cash and cash expected to be generated before the project is completed
next fall. This cash has all come from the old WAC fees and existing ratepayer revenues.
3. The Developer
The developer could pay by one of two methods, directly pay for a portion of the tower and
associated facilities or pay a "water impact fee" for each developed lot when the plat is approved.
If the developer is charged a portion up front, he/she may feel that he/she is paying for
something from which a future developer may benefit. A properly calculated "impact fee" may
be the best way to go, since the developer will pay only for the lots which are being developed
at the time. The disadvantage of this is that the lots may not be competitively sold when
competing against neighboring communities which do not have this charge built in to the cost
of the lot.
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4. The Taxpayer
In this method, the benefitting area would be defined and a taxing district would be set up
and all acreage would be assessed. This appears to be the least attractive method because of the
political ramifications.
It is important to note that in all cases, the eventual payer is the ultimate user. All we have
to decide is how do we extract that money with the least possible pain.
If a "Water Impact Fee" were added to each development at the time of platting, it is
estimated that this charge would be in the area of $500 per residential lot and $625 for
Commercial Development for each Residential Equivalent. This fee would be have to be refined
with further calculations if it were approved.
Another consideration that we have considered in the calculation of "Water Impact Fees" was
the amount the Utilities contributed to the payment of the existing water tower built at the time
of the Mall development. The TIP district will have collected in excess of $350,000 over the
payments required. The .Utilities would request that the amount of their payment ($120,000)
would be applied toward the construction of the next water tower.
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