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CHAPTER 6 <br />CONNECTION FEES <br />The current City of San Leandro (City) connection fee of <br />$950 per equivalent single - family dwelling unit, was implemented <br />on July 1, 1994. The purpose of this chapter is to develop <br />connection fees that are applicable over the defined study <br />period, fiscal years 1997/98 and 1998/99. As a minimum, <br />connection fees should be adequate to fund annual expansion - <br />related costs over the defined study period. Ideally, connection <br />fees should generate revenues that are adequate to meet future <br />expansion requirements so that existing system users are not <br />burdened by costs of expansion caused by growth in system use. <br />Connection Fees - A General Overview <br />Connection fees are traditionally assessed new system users <br />to recover the cost of excess system capacity constructed for <br />their eventual use. There is no single, established method for <br />the determination of a connection fee that is either appropriate <br />for all situations or eminently fair to all new applicants for <br />service. There are, however, several methods currently employed, <br />some to a greater or lesser extent than others, by wastewater <br />utilities. These methods can be categorized as follows: <br />1. System Buy -In: Connection fees are designed to derive <br />the average investment per connection. This method is <br />employed using either historical (actual) costs or <br />replacement cost. It suffers from the fact that it is <br />based on the net cost of utility assets (assets already <br />paid for) and not the incremental costs associated with <br />serving new service connections. <br />2. Marginal Cost - Pricing: Connection fees are designed to <br />derive the incremental cost of system expansion. This <br />method is based on the sound economic principal that <br />new applicants for service should be responsible for <br />only those incremental costs which they cause to be <br />incurred. <br />3. Value -of- Service: Connection fees are based on the <br />practices of other wastewater utilities tempered by the <br />ability of new users to pay. This method is probably <br />the most frequently employed method of developing <br />connection fees for wastewater utilities. <br />Revenues derived from connection fees can be used to <br />accomplish any of the following objectives: <br />1. To pay the annual capital costs of future capacity. <br />2. To provide rate relief to existing system users by <br />79 <br />