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8M Consent 2011 0906
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8M Consent 2011 0906
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Last modified
9/9/2011 11:56:24 AM
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8/30/2011 3:26:19 PM
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CM City Clerk-City Council
CM City Clerk-City Council - Document Type
Staff Report
Document Date (6)
9/6/2011
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PERM
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_CC Agenda 2011 0906
(Reference)
Path:
\City Clerk\City Council\Agenda Packets\2011\Packet 2011 0906
Reso 2011-159
(Reference)
Path:
\City Clerk\City Council\Resolutions\2011
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CHAPTER 1 <br />INTRODUCTION <br />This report documents the development of a schedule of wastewater system capacity charges to <br />recover, in part, the cost of capacity in the City of San Leandro's wastewater system from new <br />applicants for service. <br />Project Authorization and Objectives <br />Municipal Financial Services (MFS) entered into an agreement with the City to develop a <br />schedule of capacity charges for its wastewater utility. This study documents the development of <br />wastewater system capacity charges that would be effective during 2010. The wastewater system <br />capacity charge development process used in this study is in accordance with standard industry <br />practices. <br />Conceptual Approach <br />In developing wastewater system capacity charges for the City, we have endeavored to satisfy the <br />rational nexus criteria generally applied to these types of charges. A rational nexus -based capacity <br />charge must: <br />• Be rationally based on public policy that demonstrates a nexus between new <br />development and the need to replace, expand or build facilities to accommodate it. <br />• Not exceed the new development's proportional share of the cost of facilities needed to <br />serve that development, after crediting it for other contributions that it has already made <br />or will make toward that cost. <br />• Not be arbitrary or discriminatory in its application to individuals or customer classes. <br />To the extent that this study addresses laws, regulations or court decisions of any jurisdiction, it <br />is not intended as a precise, detailed or thorough summary of the pertinent legal authorities. <br />Alternative Capacity Charge System Valuation Methodologies <br />There is no single, established method for the determination of capacity charges that is either <br />appropriate for all utilities or eminently fair to all new applicants for service. The task of system <br />valuation is perhaps the area of greatest variation in the development of capacity charges. There <br />are two general methods currently employed by utilities to develop the valuation of the system. <br />These methods can be categorized as follows: <br />Average Cost Method Capacity charges are designed to derive the average investment per <br />connection. This method is employed using either the historical (acquisition) value or replacement <br />value of the existing utility system. If historical value is used, this method suffers from the fact that it <br />is based on the original cost of the utility assets and is thus not a measure of the current cost <br />(original cost adjusted for inflation) associated with serving a new connection. However, if the <br />replacement value of the existing facility is used, and it includes near -term capital improvements to <br />the utility system, then this average cost method is appropriate because it recovers the current <br />average cost of the capacity in the utility system (including near -term capital improvements) <br />necessary to serve a new customer. This method is most appropriate for those utilities with <br />available capacity'in the existing system. This is the method used in this report. <br />1 -1 <br />
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