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s. TO: Mayor and City Council FROM: Ron Moorse, City Administrator DATE: January 27, 2000 SUBJECT: Connection Charges Related to the 1989 Highway 12 Water and Sewer Improvement Project When the 1989 Highway 12 water and sewer improvement project was constructed,the funding was to come from two sources. 1. Special assessments on the properties that were ready to develop. 2. Connection charges for the properties that would develop later. The assessment amount was set at approximately$5,500 per unit for the combined water and sewer costs. The connection charge amount was set at the same level. Each year, the connection charge has been increased by a cost-of-living factor. For the year 2000, the combined water and sewer connection charge is$9650 per unit. The Council may want to review the connection charge for two reasons. 1. The connection charge amount is substantially higher than similar connection charges in other cities. This is due to the high cost of the improvement project being spread over a relatively small area. The high connection charge amount could make it difficult for the City to obtain the type of development it wants, particularly on the 40-acre medium density residential parcel,but also on the 17-acre commercial parcel. For example, if the 40-acre residential parcel was to be developed at 3 units per acre on the approximately 30 acres of dry buildable land, the development would be 90 units. The connection charge for 90 units @ $9,650 per unit would be $868,500. This is a very large cost for water and sewer service,and it does not include the cost of installing water and sewer lines throughout the development. 2. If the City were to collect the$9,650 per unit connection charge on all development, the City would collect approximately $700,000 of revenues beyond the amount required to pay all expenses related to the 1989 water and sewer project. Based on the above two factors,staff has developed a proposed revised connection charge schedule. The proposed schedule changes the connection charge for the school property,the ice arena property, the medium density residential property, and the commercial property from a per-unit charge to a per-acre charge. The advantage of the per-acre charge is that the per-acre charge can be set at an amount sufficient to cover project expenses,and the City will receive the planned amount regardless of the number of units developed. The attached spreadsheet shows the total expenses and the total estimated revenues using the revised connection charge amount.