6. INFRASTRUCTURE CHARGES
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1 6.1 Overview 6. INFRASTRUCTURE CHARGES Aquatera currently uses infrastructure charges to recover the capital cost of construction related to Water and Wastewater services. The Infrastructure Charge is applied for new or newly serviced developments and put towards the Water and Wastewater infrastructure needed to accommodate growth. Aquatera currently charges a fee for each service connection and is based on the nominal size of the service pipe. The current Aquatera infrastructure charges (April, 04, 2008) are given in the following table: Table 6.1 Infrastructure Charge for Water* Water Service Size Water Charge ($) ¾" 3,180 1" 5,653 1-½" 12,720 2" 22,613 4" 90,453 6" 203,520 Water Service Size Table 6.2 Infrastructure Charge for Wastewater* Grande Prairie System Wastewater Charge ($) Clairmont System Wastewater Charge ($) ¾" 2,450 4,810 1" 4,355 8,551 1-½" 9,800 19,240 2" 17,422 34,204 4" 69, ,818 6" 156, ,840 * Rates will be adjusted for 3% increase effective January 1, 2009 A wastewater charge for Sexsmith is currently $1,500 per connection. Morrison Hershfield carried out a review of Infrastructure Charges enforced by various municipalities in Alberta to provide a broad perspective for validating the Aquatera Infrastructure Charge costs. Municipalities in Alberta use a wide range of Infrastructure Charge system to recover the cost of capital investment related to water and sewage 62
2 services. Across municipalities in Alberta, Infrastructure Charge is charged in different ways as follows: Infrastructure Charges per lot. The fee could be either a flat rate based on Single Family Residential or charged depending on the type of development (i.e., single family, multi family, commercial etc). In the former case, Multi family, commercial and industrial developments are converted to the equivalent number of Single Family residential based on municipality defined rule of conversion. Infrastructure Charges per Gross area of development. Infrastructure Charges per Net area of development. Infrastructure Charges per service connection (based on size of service pipe). There are also a number of variations in the Infrastructure Charge collection polices and bylaws. For example some municipalities do not include the municipal infrastructure areas (roads, ROW etc) in calculating the Infrastructure Charges while other municipalities will include them as long as they are viewed as a part of the development. There is also a degree of variation on exempting properties from infrastructure charges. For example some municipalities do not charge Non-profit commercial properties and institutions such as churches and schools. The charges are either collected at the time of connection or spread over a period of time (10 year) with an agreed interest on Infrastructure Charges. Aquatera s current system of Infrastructure Charge reflects the amount of water used. It appears to be a fair system for users comparing the other type of offsite infrastructure charges that do not reflect usage or consumption. However this system is most suited for cities or densely developed towns and may not be sustainable in small towns/rural hamlets where developments are spread over a larger area. In those areas Infrastructure charges based on gross area would be most appropriate. 6.2 Infrastructure Charge Calculations Assumptions and Methodology The Infrastructure Charge is a key contractual obligation between the developers, Town of Sexsmith and Aquatera and as such should be determined based on an accurate capital investment cost and an agreed Area Structure Plan. Currently there are no Area Structure Plans available for the proposed growth areas and the capital cost calculations are conceptual. Therefore validating the Infrastructure Charge charges accurately for the future growth areas is not possible. The report will analyse Infrastructure Charges from a strategic perspective. It is advised that Aquatera review the infrastructure charges as Area Structure Plans and detailed development proposals become available. The current town s land use is varied from Single Family accommodation to Industrial areas. MH reviewed the current Land Use bylaw (Bylaw no. 755) of Town of Sexsmith and identified the minimum lot size stipulated in the bylaw for various land use. A summary is provided in the following table: 63
3 Table 6.3 Minimum Lot Size Land use Classification Minimum Lot Size (m2) Single Family Residential R1 418 General Residential R2 743 Multi Family R Manufactured Home MHP 437 Central Commercial C1 139 Highway Commercial C2 1,152 Secondary Commercial C3 743 Commercial Light CL 2,286 General Industrial M1 604 Un serviced Industrial M3 6,000 Institutional I 992 Urban Reserve UR 80,000 Land use classification for future growth areas is not available and therefore the size of individual lots cannot be determined in present time. In this report it is assumed that each service lot will require a service connection and for the purpose of infrastructure calculations two type of land use is assumed: a) Residential and b) Non-Residential (this includes Commercial, Industrial and Institutional). It assumed that all properties would be charged regardless of whether they are Profit or Non-Profit dwellings. As service sizes are currently unknown, Residential lots are considered as Single Family Residential and all other land use are considered as commercial. The service charges therefore will be applied as per Aquatera infrastructure policy as follows: 64
4 Table 6.4: 2008 Water & Wastewater Service Charge Rates for Clairmont Land Use Minimum Water Service size Water Service Charge Wastewater Service Charge Residential ¾ $3,180 Non Residential 1 $5,653 $4,810 $8,551 Wastewater charge for Sexsmith is currently not available and therefore the Clairmont System Wastewater service charge is used for the purpose of validating the service charges. The minimum lot size for the current developed areas of the Town ranges from 292 m2 to 2,500m2. For calculating Water and Wastewater infrastructure charges, the following lot size is assumed: Residential Lots: Non-Residential Lots: 1,250 m2 5,000 m2 This translates to 8 lots /ha for residential areas and 2 lots/ha for Non-residential areas. It is recognised that the actual size of residential and commercial lots in future growth areas would vary depending on development type and the service connection pipe size will vary accordingly. At master plan level, it is not possible to estimate the cost of service pipes required from the strategic mains to the property/development limit. It is assumed that the service main will be the responsibility of the developer and the cost is deemed to be incurred by the developer and is not included. An inflation rate of 6% per annum is assumed for calculating future capital cost and a general increase of 3% per annum is assumed for the infrastructure charges inline with current Aquatera policy. The Infrastructure Charges, i.e. the recoverable cost, is calculated in the following sections and is an approximate value at concept level to provide a broad overview of the infrastructure charges. It cannot be used as a basis for entering an agreement with a developer. The actual mechanism by which infrastructure charges will be recovered should be worked out between Aquatera, the Town and the Developer. For example, there is an option to receive upfront contribution from the developer to construct major infrastructure such as the sewer trunk mains and adjust the infrastructure fees accordingly. The recovery mechanism that will suit best for Aquatera in managing cash flow needs to be determined at the detailed design phase when accurate capital costs and actual development profile are available. For the purpose of Infrastructure Charge analysis the total capital cost for each phase is considered irrespective of whether it is Aquatera s cost or Town of Sexsmith s cost. 65
5 6.3 Funding Opportunities Funding Opportunities are available through the following programs: Alberta Municipal Water/Wastewater partnership ( AMWWP) Alberta Municipal Infrastructure Program (AMIP) New Deal for Cities and Communities (NDCC) The above funding programs typically cover the following: Water Storage Systems and Pumping Facilities Pipeline from storage reservoir to the first connection point Pipeline for Raw Water conveyance Water Treatment Systems Main Lift Station and Forcemain Trunk Sewers from Treatment Plant to the first branch or service Sewage Treatment Systems Sewage Treatment System enhancement Water distribution system and Wastewater collection system are generally excluded in the above funding programs and the municipality will be expected to recoup the investment through other means. Funding for Water distribution System and Wastewater collection System may be available through NDCC program. It is not clear what funding the Town has already applied for and what level of funding is currently available. Funding is applicable for the sewage treatment system, main lift station, force main, water pump house and reservoir and transmission lines (AMWWP). 6.4 Water Services Infrastructure Charge The infrastructure charges discussed here are for the Aquatera portion only. Costs attributed to the developer of future lands are not included in this discussion. Refer to Appendix G. As noted earlier, the areas identified for 5, 10 and 20 year growth have a holding capacity that exceeds the projected population growth. In this study we have used Option 3 with investment to handle the projected 20 year population and presented the case where contributing lots are based on population growth. Aquatera s water system is a single utility that benefits all users. The water charge is uniform for all users and supports upgrades that provide overall benefit to the system as well as projects that are specific to the Town of Sexsmith. The water charge is therefore uniform for all users. Effective January , the minimum water infrastructure charge is $3, for single family residential and $5, for all other land uses. 66
6 6.5 Wastewater Services Infrastructure Charge As with the water infrastructure charges, the infrastructure charges discussed here are for the Aquatera portion only. Costs attributed to the developer of future lands are not included in this discussion. Refer to Appendix G. In calculating the Infrastructure Charge for Wastewater infrastructure, provincial funding has not been applied as it is never guaranteed. For the purpose of costing the sewage treatment, the Aerated Lagoon conversion to handle the projected 20 year population, is recommended. In this case funding from the Alberta Municipal Water/Wastewater Partnership program is used. Under this program, funding is available for new or upgrading of sewage treatment works and the amount of funding is calculated through the formula based on the total population of the Town. A total investment of $2,735, is needed when inflated to the time the work is needed. It appears that infrastructure charges of $4, per residential lot and $8, per nonresidential lot are needed to cover the capital cost of wastewater infrastructure over the 20 years. The proposed infrastructure charges in this scenario anticipate that Aquatera will be out of debt in approximately 15 years (2022) and begin to accumulate capital to cover initial planning and engineering preparation for the next expansion of the wastewater system beyond the end of the 20-year period. 67
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