Collectively, these documents will be referred to as the Expert Reports

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1 RESPONSE TO EXPERT WITNESS REPORTS Edge Homes, LLC et al. v. Timpanogos Special Service District Prepared by Keith J. Larson, P.E. Bowen Collins & Associates, Inc. December 12, 2016 This report is prepared in response to portions of a series of expert witness reports submitted in regards to case Edge Homes, LLC et al. v. Timpanogos Special Service District. These reports include the following: Amended Expert Report of Arthur C. Nelson, dated November 1, 2016 (Nelson Report) Amended Expert Report of Charles E. Ulrich, CPA, dated October 31, 2016 (Ulrich Expert Report prepared by Christine Richman, AICP, MBA dated October 17, 2016 (Richman Report) TSSD Impact Fee Opinion and Analysis prepared by Darrel J. Dixon, P.E., dated October 17, 2016 (Dixon Report). Collectively, these documents will be referred to as the Expert Reports General Comments There are several errors contained in the Expert Reports that result in flawed final conclusions. Errors in rationale and calculations include the following: Inaccurate calculation of the flow contributions of new development resulting from a failure to consider flows associated with I/M Flash. Fundamental misunderstanding or misrepresentation of infiltration in a sewer collection system. Misrepresentation of how 10-year treatment capacity has been calculated in the 2014 IFFP (Nelson Report). Claims of Gallons per ERU in the Ulrich Report are unsubstantiated (Ulrich Report). Misrepresentation of Other Growth Projects (Richman Report). Misrepresentation of how impact fees are calculated for development other than single family residential (Richman Report) Evaluation of infiltration is incomplete and contains errors (Dixon Report) Calculations of Impact Fee Per ERU Had it Been Calculated Correctly or Total Amount that Should Be Refunded are flawed. 1. INACCURATE CALCULATION OF THE FLOW CONTRIBUTIONS OF NEW DEVELOPMENT RESULTING FROM A FAILURE TO CONSIDER FLOWS ASSOCIATED WITH I/M FLASH. Table 2 of the Nelson Report concludes that the contribution of new development to Average Day, Maximum Month Flow is gallons per day (gpd) per Equivalent Residential Unit (ERU). This same value is repeated in the Ulrich Report and Richman Report and appears to be 1 P a g e

2 the basis of most subsequent calculations in these reports. This value includes a relatively simple error in calculation that should be identified before other, more substantive issues are discussed. This error exists because the Nelson Report based its calculation on an incomplete understanding of the values contained in Timpanogos Special Service District s 2014 Impact Fee Facilities Plan (IFFP). Specifically, the Nelson Report fails to consider the impact of flows associated with I/M Flash. I/M Flash Average Day, Maximum Month flows in 2013 were calculated to be approximately 1.5 million gallons per day. By 2023, these flows are projected to increase to I/M Flash s full contract amount of 3.2 mgd. This increase in flow is associated with increased process water at I/M Flash s plant and does not include additional infrastructure that would add to expected infiltration. As a result, increases in flow associated with I/M flash (and its corresponding domestic flow based ERUs) must be removed from the calculation of flow associated with future growth. Based on the definition of an ERU contained in the 2014 IFFP based on domestic flow without infiltration (224 gpd/eru), the impact of I/M Flash on flow projections can be separated out as summarized in Table 1. Table 1 Impact of I/M Flash on Growth in ERUs and Flow Total Flow I/M Flash Flow Flow Other Than I/M Flash Total ERUs I/M Flash ERUs ERUs Other Than I/M Flash ,175 6,695 45, ,143 14,283 62, Difference 24,968 7,588 17, Based on this table, the contribution of additional flow associated with new development can correctly be calculated as 4.48 mgd divided by 17,381 ERUs. This equates to gpd/eru as opposed to gpd/eru as erroneously calculated in the Nelson Report. This error propagates into nearly all subsequent calculations contained in the Expert Reports. 2. FUNDAMENTAL MISUNDERSTANDING OR MISREPRESENTATION OF INFILTRATION IN A SEWER COLLECTION SYSTEM. One of the largest single differences between the 2014 IFFP and the Expert Reports is their treatment of infiltration in the calculation of Average Day, Maximum Month flow per ERU. Essentially, there are two different approaches that are being used: In the Expert Reports, it is suggested that new development should only be responsible for the marginal increase in flow associated with development. This value has been calculated in the Expert Reports as gpd/eru (but is actually or gpd/eru when the effect of I/M Flash is correctly accounted for). 2 P a g e

3 Conversely, the 2014 IFFP and IFA calculate the flow for new development as the proportional share of total system flow or gpd/eru at the end of the 10-year planning window. In the case of TSSD, the first approach is unacceptable because it does not achieve rough proportionality between existing and future users and results in a free ride for future development relative to system infiltration. System Infiltration To understand why this is the case, it is useful to discuss how infiltration is distributed in a sewer system. When a new development is constructed, it is responsible to build its own project level improvements. Project level improvements are those facilities that are used primarily by the individual development and not for the benefit of the system. In the case of a sewer collection system, this includes the lateral from each house and a limited amount of generally small diameter piping within the development until it can connect to a larger system level improvement. Downstream of the project level improvements are system level improvements. These are the larger diameter sewer pipelines that collect flow from individual developments and form the backbone of the system. During the initial construction of the system, the District had a decision to make regarding the sizing of system level improvements. One option would be to construct the system level improvements for only those demands that existed at the time. This would minimize the initial investment required by the existing users at the time. It would also significantly reduce the amount of infiltration experienced in the system since infiltration is a function of both the length and diameter of collection pipelines (see page 4 of the Dixon Report). By installing smaller pipelines, infiltration would be limited to only that which was associated with the existing development. Unfortunately, this approach would also have one unacceptable disadvantage. Because there would be no extra capacity, the pipelines would need to be replaced every time a new development came on line. Constantly tearing up the streets to add capacity would not only be unacceptable to District customers, but would also effectively kill new development because replacing all the system level pipelines each time a new development came on line would be cost prohibitive. To overcome these challenges, the District opted for the second approach to sizing system level improvements. Under this approach, the District prepared a master plan and then built system improvements at a size that would accommodate projected growth for a reasonable planning window. This required some additional investment on the part of existing District customers but was deemed the prudent and responsible thing to do for the benefit of everyone involved. It was expected that future users would pay their fair share of the system costs and that this approach would ultimately result in the lowest costs for everyone involved. One of the consequences of this decision was that, with the oversizing of the system level improvements, the District would begin to see system level infiltration equivalent to the amount 3 P a g e

4 that would be expected for all future growth, not just that of existing development. Although not desirable for existing users, this was again deemed to be a reasonable tradeoff for the benefits received as long as future users eventually paid for their fair share of infiltration. Calculation of Average Day, Maximum Month Flow With these concepts in mind, it is now useful to return to the two methods of calculating Average Day, Maximum Month flow per ERU as identified previously. The value proposed in the Nelson, Ulrich, and Richman Reports is based on future growth paying only for its additional contribution to the system. In essence, this means future growth would only pay for its project level infiltration. System level infiltration, including that infiltration incurred from oversizing the system to accommodate future growth, would therefore have to be paid for by existing users. This does not achieve rough proportionality between the users and results in a free ride for future growth relative to system infiltration. A better approach is the one used in the 2014 IFFP. Under this approach, total flows for the planning window are divided among all users (existing and future) equally. By definition, this results in the system infiltration also being divided proportionally between all users and both existing and future users pay their fair share. Reductions in Infiltration Relative to Improvements in Construction Techniques As has been correctly noted in several of the expert reports, infiltration for pipelines constructed today and in the future is expected to be less than infiltration for pipelines constructed many years ago. Indeed, this same concept has been noted in the 2014 IFFP. As a result, project level infiltration rates for future development have been reduced and are expected to gradually lower the overall infiltration rate per ERU overtime. However, it is not reasonable to expect that future growth will only participate in system infiltration at a level equivalent to new construction. To maintain proportionality, future growth should pay for its portion of actual infiltration in the system. It is important to emphasize that system infiltration is not an existing deficiency as has been suggested in some of the Expert Reports (most specifically in the Dixon Report, page 5). It is a fundamental component of the existing infrastructure new development is buying into. Expecting to pay into this infrastructure based on infiltration rates for brand new infrastructure would be analogous to buying a used car (at used car prices) and then complaining that it did not have the same features and gas mileage as newer cars. If new growth wants to buy into existing infrastructure (at a significantly lower cost than building new infrastructure), it is only fair and reasonable that new growth would participate in its fair share of infiltration in the existing infrastructure. If new growth wishes to achieve a lower infiltration rate, it could always construct its own new infrastructure. 4 P a g e

5 Infiltration Conclusion Because the Expert Reports misunderstand or misrepresent several critical concepts regarding infiltration, much of the remaining conclusions and analysis contained in these reports are skewed or entirely flawed. 3. MISREPRESENTATION OF HOW 10-YEAR TREATMENT CAPACITY HAS BEEN CALCULATED IN THE 2014 IFFP (NELSON REPORT). Page 6 of the Nelson Report claims that The IFA 2014 calculates impact fees only over a 10- year period and later on page 7 notes that new development over the next 10 years subsidizes treatment costs for all development beyond 10 years. These statements appear to indicate that Mr. Nelson believes all costs associated with future treatment have been assessed entirely to 10 year growth. If this is the inference of the author, it is patently untrue. As described in detail on page 7-5 of the 2014 IFFP (and as modified on page 2 of the July2, 2014 Amendment), only those treatment costs associated with 10-year growth have been included in the calculation of the impact fee for project development in the 10-year window. This is reflected in the 29.73% factor contained in the IFFP, IFA, and Table 6 of the Nelson report. Therefore, there is no subsidy for development beyond 10 years. 4. CLAIMS OF GALLONS PER ERU IN THE ULRICH REPORT ARE UNSUBSTANTIATED. Page 10 of the Ulrich Report indicate the average ERU contributed 212 gpd of increased flow at the treatment plant from 2002 to However, no data or any calculations are provided to substantiate this number. Thus, there is no way to verify the legitimacy of this number. 5. MISREPRESENTATION OF OTHER GROWTH PROJECTS (RICHMAN REPORT). The Richman Report asserts that the Other Growth Projects contained in the 2014 IFFP and IFA are without an indication of the type, purpose, or extent of the projects and fails to meet the statutory requirements relating to the basis of costs included in the fee calculation. However, page 6-3 of the 2014 IFFP includes a description of type and purpose of this project category as growth related system improvements the District constructs each year related to municipal street improvements projects and other unforeseen development-driven needs. By definition, these projects are unforeseen and, as a result, cannot include a specific description of extent. However, they still do in fact exist and the projected cost of these types of projects in the future have been based on historic expenditures reported by the District. Projects of this type complete in the past several years include: 5 P a g e

6 UDOT Pioneer Crossing Alpine/Highland Outfall Segment 3: Relocation and Upsize of 24 Main to 42 main and new I-15 Crossing (UDOT covered relocation costs on AF Main Street. TSSD Covered cost to upsize pipe and new crossing at I-15) UDOT SR-92/Timpanogos Highway: Upsize of several segments of sewer main to avoid future road cuts in newly reconstructed SR-92. (UDOT Covered relocation costs at Highland Blvd. TSSD covered betterment costs at 6400 West and 6000 West) UDOT I-15 CORE Pleasant Grove Outfall: New Crossing at Proctor Lane. This project cost was covered by I-15 CORE, but TSSD did incur engineering and construction management costs. Utah County North County BLVD New Pleasant Grove Interceptor: New Sewer main construction in County Roadway. (TSSD covered full costs of the project) Developer Meadows Commercial Development Expansion in American Fork Alpine/Highland Outfall Segment 3: Existing Line was relocated and upsized due to commercial development. (Shared costs Developer covered relocation, TSSD covered upsize) Central Utah Water Conservancy District Vineyard Connector Pipeline Alpine/Highland Outfall Segment 2: Upsize existing pipeline in conjunction with a parallel installation of a CUWCD pipeline project. (Costs mostly covered by TSSD) 6. MISREPRESENTATION OF HOW IMPACT FEES ARE CALCULATED FOR DEVELOPMENT OTHER THAN SINGLE FAMILY RESIDENTIAL (RICHMAN REPORT). The Richman Report makes a number of claims regarding how impact fee are calculated for development other than single family residential. However, none of the claims contained in the Report are relevant to or substantiated by anything contained in the 2014 IFA. The Richman Report appears to acknowledge this by correctly quoting the IFA as follows: Cities are responsible for developing their own individual schedules of residential and non-residential ERU equivalencies. We are not aware of any problems with ERU calculations being conducted by the cities. However, if there are mistakes that are occurring in the calculation of ERUs by the cities, this discussion of the 2014 IFFP and IFA is not the appropriate location to address it. It should also be noted that the Richman Report incorrectly identifies the calculation methodology for ERUs other than single family as being the total potential gallons per day divided by gpd. In the impact fee ordinance adopted by TSSD, the actual calculation methodology is defined as follows: An equivalent residential unit shall be equal to gallons per day of total wastewater delivered to the District s treatment facility during the peak month. This includes both the domestic wastewater and infiltration associated with each connection. Because total wastewater is not generally measured for individual connections, the number of equivalent residential units for each building permit issued shall be calculated based on indoor water use. The equivalent indoor water use resulting in total wastewater of gallons per day is gallons per day. Thus, the number of equivalent residential units for each building permit 6 P a g e

7 issued shall be calculated based on gallons per day of indoor water use per ERU or according to Section 8. As described in the ordinance, equivalency is based on gpd, not gpd as indicated in the Richman Report. With this correction, the conclusions contained in the Richman Report regarding this issue are not valid. 7. EVALUATION OF INFILTRATION IS INCOMPLETE AND CONTAINS ERRORS (DIXON REPORT). The Dixon Report contains an assertion that the I&I factor should be somewhere between 4% to 10% and probably closer to 4%, since this lower number is supported by the IFP. This conclusion is based on an evaluation of infiltration that is incomplete and contains errors. For discussion purposes, it is useful to break the conclusion into two separate assertions: 1. The range should be between 4% and 10%. 2. The lower number is better because it is supported by the IFP. While not explicitly explained, the first assertion appears to be based on the combination of two design guidelines referenced previously in the Dixon Report. The first guideline referenced indicates that design infiltration should be between 200 gallons per day per inch diameter per mile of pipe (gpd/in dia-mile) and 500 gpd/in dia-mile. The second guideline referenced is that design infiltration should be approximately 10 percent of average daily flow. It appears that Mr. Dixon then decided to assume that the 10 percent can be connected to the 500 gpd/in dia-mile and that the lower end of the range then becomes 4 percent (10 percent x 200/500). Based on our reading of the referenced design guidelines, however, these are completely separate guidelines regarding infiltration. There is no explicit (or even implicit) connection between the 500 gpd/in dia-mile and the 10 percent. It appears that Mr. Dixon made this connection because it wasn t possible to determine the actual allowable flows for the TSSD system from these values since we do not have all the collection system piping parameters. While BC&A does not have all the piping parameters for TSSD, we do have complete pipeline data for a number of individual cities both within the District and in the immediate vicinity based on several sewer master plans we have prepared in the area. Pipeline densities for some select cities in the area allows us to calculate expected infiltration for the allowance identified in the Dixon Report as summarized in Table 2. 7 P a g e

8 Table 2 Expected New Construction Infiltration Rates for Select Cities in the Vicinity of TSSD Installed Pipe (in diamile) Infiltration at 200 gpd/in diamile Infiltration at 500 gpd/in diamile Domestic Flow % Infiltration at 200 gpd/in diamile % Infiltration at 500 gpd/in diamile City Saratoga Springs % 15.3% Lehi 2, % 22.4% Orem 2, % 14.9% Provo 2, % 15.1% As can be seen in the table, for pipeline densities typical of development in TSSD, the allowance for infiltration (as given by the design guidelines contained in the Dixon Report) are 6 to 15 percent in most cases. Even higher values are observed in Lehi. Thus, using the same numbers recommended in the Dixon Report, it can be concluded that it is not inappropriate or unreasonable to use 15 percent as a planning value for future infiltration. As for the second assertion that the lower number is better because it is supported by the IFP, this conclusion appears to be based on a reported value of an increase of about 4.5% in I&I is expected during this period (10 years of growth). Despite my best efforts, I have not been able to guess how this number was calculated. The increase in infiltration for the period is 0.58 mgd ( ). If this is divided by the growth in domestic flow of 5.59 mgd ( ), this equates to 10.4 percent infiltration for new growth. It seems like this is the number the Dixon Report should have reported if it based its calculations on Table ES-1 in the 2014 IFFP. However, if the growth in domestic flow is then corrected to remove growth associated with I/M Flash it will be reduced to 3.89 mgd (see Section 1 of this document for further discussion) and the infiltration rate is 15 percent for new growth. Thus, the infiltration number supported by the IFP is not 4 percent, but 15 percent, exactly as described in the IFFP document. 8. CALCULATIONS OF IMPACT FEE PER ERU HAD IT BEEN CALCULATED CORRECTLY OR TOTAL AMOUNT THAT SHOULD BE REFUNDED ARE FLAWED. Because of the numerous and substantial errors made in the Expert Reports (as outlined here and by Matt Millis and Ken Spiers), none of the final calculations of Impact Fees or amounts that should be refunded contained the Reports are anywhere close to accurate. Any conclusions made based on the values reported in the Expert Report are therefore of little value. Keith J. Larson, P.E. 8 P a g e