Water and Wastewater System Development Fee Study for Fiscal Year 2026

10 May 1 0 , 20 2 5 Ms Chandra Farmer , Utility Director Johnston County Government PO Box 1049 Smithfield , NC 27577 Subject Water and Wastewater System Development Fee Study for Fiscal Year 202 6 Dear M s Farmer , W ILLDAN F INANCIAL S ERVICES “ Willdan ” is pleased to submit to Johnston County , Nor th Carolina hereinafter the County the Water and Wastewater System Development Fee Study report the Report for your consideration We have completed the analyses for the review and development of water and wastewater system development fees for fiscal year 202 6 and have summarized the results herein GENERAL System development fees “ SDF ” or “ SDFs ” and other comparable charges are often referred to by a number of different terms including impact fees , capacity fees , system expansion fees , availability fees , connection fees , capacity reservation charges , facility fees , capital connection charges or other such terminology In general , a n SDF is a one - time charge implemented to recover in whole or part the costs associated with capital investments made by a utility system to make service available to future users of the system Such capital costs generally include the construction of facilities as well as engineering , surveys , land , financing , legal and administrative costs It has become common practice for water and wastewater utility systems to implement SDF or other similar charges in order to establish a supplemental source of fundin g for future growth - related capital projects This practice helps to mitigate the need for existing customers to pay for system expansions entirely through increased user rates CRITERIA FOR SYSTEM DEVELOPMENT FEES CAPACITY FEE S The purpose of a SDF is to assign , to the extent practical , growth - related capital costs to those customers responsible for such additional costs To the extent that new population growth imposes identifiable additional capital costs to municipal services , equity and prudent financial practice necessitate the assignment of such costs to those customers or system users responsible for thePageadditional costs rather than the existing user base Generally , this practice has been labeled as “ growth pay ing for growth ” without placing the full cost burden on existing users It is important to note that a n SDF is different than an assessment or tax A special assessment is predicated upon an estimated increment in value to the property assessed by virtue of the improvement being constructed in the vicinity of the property Further , the assessment must be dire ctly and reasonably related to the benefit which the property receives Although the Statute includes the term ‘ assessments ’ in the definition of ‘ system development fees ’ , it makes clear that the assessment must be to f und the cost of capital improvements , not for an increase in property values SDFs are not directly related to the value of the improvement to the property but rather to the usage of the facilit ies required by the property Until the property is put to use ie , developed , there is no burden placed upon the servicing facilities and the land use may be entirely unrelated to the value of the assessment basis of the underlying land With respect to a comparison to taxes , SDFs are distinguishable primarily in the direct relationship between the amount charged and the measurable quantity of public facilities required In the case of taxation , there is no requirement that the payment be in proportion to the quantity of public se rvices consumed , and funds received by a municipality from taxes can be expended for an y legitimate public purpose LEGAL CONSIDERATIONS Court Proceedings - General Generally , courts throughout the United States have found that capacity - related fees associated with new customer connections to utility systems are legal as long as they meet a Rational Nexus Test In accordance with common court rulings , the rational nexus test requires that certain conditions be met in order to have a valid capacity - related fee Typically , the court decisions have found that such fees are valid if the following standards are met 1 The required payment should primarily benefit those who must pay it because they receive a special benefit or service as a result of improvements made with the proceeds ; 2 Proceeds from the required SDF payments are dedicated solely to the capital improvement projects ie , proceeds are not placed in a general fund to be spent on ongoing expenses and maintenance , which characterizes a tax , but are set aside in a restricted reserve fund ; 3 The revenue generated by the required payment should not exceed the cost of capital improvements to the system ; and 4 The required payments are imposed uniformly and equitably on all new customers based on their anticipated usage ie , a relationship between the fees paid and the benefits received In general , most courts have found that it is reasonable for utility systems to take steps to ensure that there are adequate funds for capital projects , and to set aside collected fees in a special accountPagefor that purpose Additionally , new customers are treated alike in that all must pay a fee based on anticipated usage and or potential demand Finally , courts have reasoned that it is rational for a utility system to prepare to pay for future capital pro jects and , while imposing a capacity - related fee may not be the only way to raise such funds , it is a reasonable and legitimate method of accruing funds Court Proceedings – North Carolina In 1990 , a precedent was set in the State of North Carolina in a decision by the United States Court of Appeals , Fourth District for the case of Shell Island Investment v Town of Wrightsville Beach North Carolina 900 F 2d 255 , regarding the right of the Town of Wrightsville Beach to impose utility system impact fees to fund the expansion of the water and sewer facilities The Court of Appeals upheld the decision of the United States District Court for the Eastern District of North Carolina that the Town of Wrightsville Beach had “ authority to impose impact and tap fees under the Public Enterprise statute and that no specific enabling legislation is necessary ” Pursuant to the ruling of the District Court and the Court of Appeals , it was concluded that “ despite the absence of any express authorization in the Public Enterprise Statute for municipalities to establish or increase utility fees in order to offset futu re capital improvements to their sewer and water infrastructures , general authority to do so is implicit in relevant state law , limited only by the requirement that any discrimination among users be not based on arbitrary or unreasonable classifications ” Court Proceedings – Town of Carthage Case On April 8 , 2016 , in the case of Quality Built Homes , Inc v Town of Carthage , 766 SE 2d 897 the North Carolina Court of Appeals held that the Town of Carthage possessed authority to charge “ impact fees ” for water and sewer services However , On August 16 , 2016 , the North Carolina Supreme Court reversed the North Carolina Court of Appeals ’ decision and held that the Town did not possess authority to charge impact fees for water and sewer services Although there were many different factors influencing this decision , the result generated a significant amount of confusion and concern for governmental utility systems within the State House Bill 436 The General Assembly of North Carolina recently enacted House Bill 436 , which included a general statute under Section 1 , Chapter 162A , Article 8 for the development of “ System Development Fees ” herein referred to as “ Chapter 162A ” that impact s all governmental entities in North Carolina who currently assess fees for the recovery of capital costs associated with new development and system growth As defined in Chapter 162A , a system development fee is a charge or assessment for service imposed with respe ct to new development to fund costs of capital improvements necessitated by and attributable to such new development , to recoup costs of existing facilities which serve such new development , or a combination of those costs Based on requirements of Chapter 162A , the calculation of the SDFs , must employ generally accepted accounting , engineering , and planning methodologies Defined methodologies include the buy - in method , incremental or marginal cost method , and combined cost method A brief description o fPageo Buy - in Method Based on the value of the existing system’s capacity Under this method , new development “ buys ” a proportionate share of capacity at the cost value of the existing facilities o Incremental Marginal Cost Method Based on the value or cost to expand the existing system’s capacity This method assigns to new development the incremental cost of future system expansion needed to serve new development o Combined Cost Method Based on blended value of both the existing and expanded system capacity This method uses a combination of the buy - in and incremental marginal cost methods each of these methods as defined in American Water Works Association Manual M1 is provided below Chapter 162A allows a governmental unit to utilize any of the three methods described above depending on the availability of information from the governmental unit , ie , a detailed listing of asset data buy - in method or a five to twenty - year capital improvement plan incremental method The combined method include s both existing assets and future capital projects required to serve growth Chapter 162A states that an SDF shall be calculated based on a written analysis , which may constitute or be included in a capital plan , that 1 Is prepared by a financial professional or a licensed professional engineer qualified by experience and training or education to employ generally accepted accounting , engineering , and planning methodologies to calculate system development fees for public w ater and sewer systems 2 Documents in reasonable detail the facts and data used in the analysis and their sufficiency and reliability 3 Employs generally accepted accounting , engineering , and planning methodologies , including the buy - in , incremental cost or marginal cost , and combined cost methods for each service , setting forth appropriate analysis as to the consideration and selection of a method appropriate to the circumstances and adapted as necessary to satisfy all requirements of this Article 4 Documents and demonstrates the reliable application of the methodologies to the facts and data , including all reasoning , analysis , and interim calculations underlying each identifiable component of the system development fee and the aggregate thereof 5 Identifies all assumptions and limiting conditions affecting the analysis and demonstrates that they do not materially undermine the reliability of conclusions reached 6 Calculates a final system development fee per service unit of new development and includes an equivalency or conversion table for use in determining the fees applicable for various categories of demand 7 Covers a planning horizon of not less than 5 years nor more than 20 years 8 Is adopted by resolution or ordinance of the local governmental unit in accordance with GS 162A - 209 PagePage pageNumber5Further , Chapter 162A includes certain other minimum requirements as follows 1 A system development fee shall not exceed that calculated based on the system development fee analysis 2 C redits must be included no matter which methodology is used A more detailed discussion on the applicable credits will be included in later sections of this report 3 A construction or contribution credit shall be given with respect to new development such that the governmental unit will credit the value of costs in excess of a development’s proportionate share of connecting facilities required to be oversized for the u se of others outside the development As such , this report is intended to address the legal requirements set forth above to develop fees in accordance with Chapter 162A ADOPTION AND PERIODIC REVIEW OF SDF ANALYSIS Upon completion of the SDF analysis , Chapter 162A sets forth certain criteria regarding the adoption and periodic review of SDFs T hese include the following 1 For not less than 45 days prior to consideration for adoption of the SDF analysis , the governmental unit shall post the analysis on its website and solicit and furnish a means to submit written comments which shall be conside red by the preparer for possible modification s or revision s to the analysis 2 Following expiration of the 45 - day posting period , the governing body shall conduct a public hearing prior to considering adopting the analysis with any modifications 3 The governmental unit shall publish the SDFs in its annual budget , rate plan or ordinance Further , the SDF analysis shall be updated at least every five years EXISTING CAP ITAL - RELATED FEES The County currently imposes system development fee charge s to new retail customers requiring water and or wastewater utility service The charges imposed by the County to wholesale or bulk water and sewer customers are identified as Capacity Fees and are shown as a unit cost per gallon per day of average capacity as set forth in the County’s Water and Sewer Policies To be consistent with the definitions provided in Chapter 162A , the Capacity Fee terminology utilized in this report is “ System Development Fee s ” PagePage pageNumber6EXISTING TAP FEES T he County currently imposes tap fee s to new customers connecting to the water and wastewater systems However , it is important to note that such tap - related fees are different than the SDFs developed and proposed herein The distinguishing characteristic is that the tap fees are established for the purpose of recovering the operating costs associated with performing the customer service act of physically making a new system tap connection ie , labor and benefits , equipment , vehicles , materials and supplies , etc SDFs , on the other hand , are established for the purpose of recovering the major capital costs incurred in making water and wastewater utility service s available to the general public The proposed fee s designed herein are intended to be in addition to the existing tap fees As such , it is proposed that the existing tap fees continue to be imposed It should be noted that , for the purpose of the Report , the existing tap fees are assumed to recover the costs associated with these items A review of these fees in relation to actual costs incurred is beyond the scope of this Report EXISTING & PROJECTED CAPITAL FACILITIES Existing Facilities – Buy - In Method I n considering the recovery of existing asset cost s under the buy - in method , the general concept is that new customers “ buy ” a proportionate share of system capacity at the value of the existing facilities It is important to note that while this methodology is labeled as buy - in , payment of an SDF does not transfer any ownership of the assets to the customer Rather , such payment provides access to capacity at a status equal to that of existing customers of the system While there are different methods that can be used to establish a value to the existing facilities , a common approach is to value the existing assets at a replacement cost amount According to the replacement cost method , the existing system components are valued at the estimated current cost of replacing the facilities The analysis developed herein uses an approach referred to as Replacement Cost New Less Depreciation RCNLD Applying the RCNLD method , the original costs are escalated to current dollars through the use of construction cost ind ices , and then the result is adjusted down for the accumulate d depreciation , which is also adjusted by the construction cost indices This approach results in a replacement cost valuation that reflects the remaining depreciable life of the facilities In performing the RCNLD analysis , the County provided a detailed listing of the current water and wastewater system facilities the “ Asset Listing ” The Asset Listing contained the original cost , the date placed in service and the accumulated depreciation for each asset The replacement cost of each asset is estimated by using construction cost indices information contained in the Handy - Whitman Index of Public Utility Construction Costs for the South Atlantic Region The Handy - Whitman Index calculates t he cost trends for different types of utility construction , including water systems The published indices are used by regulatory bodies , operating entities , utilit y systems ,PagePage pageNumber7service companies , valuation experts and insurance companies The Handy - Whitman Index values are widely used to trend earlier valuations and original cost records to estimate reproduction cost at prices prevailing at a certain date or to the present While m any general construction cost indexes are published , the Handy - Whitman Index is used in this analysis because it is specifically tailored to the utility industry After the replacement cost is calculated for each individual asset item , the adjusted ac cumulated depreciation is deducted for each asset item The result is the RC N LD For the purpose of this SDF analysis , the existing assets are categorized based on the major components of Treatment and Transmission The treatment category includes the treatment plant facilities water and wastewater and accompanying supply and storage facilities water only , as well as wastewater effluent disposal facilities The transmission collection category consists of major water mains , water pumping facilities , sewer lift stations and collection lines Since the localized distribution and collection facilities are generally co ntributed by developers or funded from other sources ie , assessments , direct customer payments , etc , these facilities are not included for recovery through the SDF s Additionally , a cost limit or threshold has been set at 100,000 as a condition of inclusion of the asset items in the SDF calculation The cost limit is based on the assumption that any asset item that costs less than the limit amount is not a major facility that provides a system - wide benefit The asset data and applicable recoverabl e cost allocations are provided in Exhibit 1 at the end of this Report The total existing water and wastewater capital asset cost allocations i ncluded in the analysis are summarized in Table 1 , which also includes those assets below the 100,000 cost limit that are excluded as assets recoverable in the SDFs PagePage pageNumber8Capital Improvements Program – Incremental Cost Method I n considering the recovery of future asset costs under the incremental cost method , the general concept is to assign to new development the incremental cost of future system expansion needed to serve the new development When using this method , Chapter 162A requires a minimum 5 - year capital improvement s program “ CIP ” that identifies the costs associated with new capacity and the timing of the expenditures It is also important to consider the planned funding sources for the projects identified in the CIP For example , projects that are funded from grants or developer contributions are excluded from the SDF calculation since these are costs that are not incurred by the utility The SDFs developed herein utilize the incremental cost method and therefore includes future capital improvement projects and their applicable additions to system capacity The County has prepared a CIP that provides a listing of individual projects and anticipated construction costs for the current fiscal year 20 2 6 and for those projects anticipated for the future fiscal years 20 2 7 through 20 4 5 ie , a 20 - year CIP The detailed CIP is shown in Exhibit 2 Similar to the rationale for excluding certain e xisting assets from recovery through SDFs , the CIP project costs included for recovery in SDFs consist of only those projects associated with system - wide upgrades or expansions As such , projects related to general maintenance ie , renewal and replacement of existing facilities or localized facilities that benefit only certain customers are excluded from recovery through the SDFs The CIP and resulting identification of assumed growth - related projects ie , project costs recoverable from SDFs are provided in Exhibit 3 which also provides a summary of the recoverable costs allocated between T reatment , T ransmission and Other Those capital costs identified as “ Other ” are not included as recoverable capital costs The projected growth - related projects and associated capital costs included in the analysis are summarized in Table 2 on the following page PagePage pageNumber9Construction Work - in - Progress Included in this analysis and for recovery through SDFs is the addition of Construction Work - in - Progress costs These reflect capital projects that are no longer in the County’s “ active ” CIP and have not been recorded as depreciable assets since the projects have not been completed The County provided Project Income Statements containing the estimated costs of these on - going CWIP projects , the summary of which are summarized in Exhibit 4 and included as part of Table 3 Total Facilities – Combined Method T he analysis developed herein for calculation of the SDFs proposes the combined method As the name implies , the combined method includes the cost value of both the existing facilities currently providing service , as well as the planned facilities required to perpetuate or expand service This method assumes that the utility capacity within the existing system is sufficient t o serve near - term growth but will require additional capacity to serve future growth needs Using this method , new customers will pa y an SDF that reflects the value of both existing and planned capacity The combined system costs included for recovery are summarized in Table 3 Page0DEBT SERVICE & CIP CREDIT S It is common practice for utilities to fund major capital improvements and expansion projects with debt ie , bond issues , SRF loans Generally , debt service payments associated with debt issu ances are recovered through the monthly user rates and charges applied to all system customers , as well as from other available revenue sources including SDFs In order to reduce the potential for new customers to pay twice for capital facilities ie , paying an SDF and then paying for debt service on expansion projects in their monthly user rates , the SDF analysis developed herein includes a debt service credit This credit is equal to the outstanding principal remaining on all outstanding utility related debt as of the date of this Report The debt credit amount is allocated between water and wastewater based on information provided by staff and is related to the capital projects that were funded from t he proceeds of each individual debt component The debt service credit is consistent with the credit methodology set forth in the American Water Works Association M1 Manual HB 436 , section 162A - 207 b also states that “ In no case shall the credit be less than twenty - five percent 25 of the aggregate cost of capital improvements ” Thus , t his Report also includes an additional credit represent ing 25 of the capital costs that are determined by the County to be growth - related This thereby meets thePage1requirements of Chapter 162A and is utilized in the development of the proposed SDFs as discussed in the following section T he combined recoverable capital facilities , as adjusted for the combined debt principal and CIP credit , are summarized in Table 4 SYSTEM CAPACITIES As previously addressed , the purpose of the SDF is to have new customers pay for their proportionate share of system capacity This concept implies that the fee is based on a unit cost of capacity In order to apply a fee based on the unit cost of capacity , it is necessary to identify the capacities of the facilities for which cost recovery is assigned As such , the methodology applied herein relies upon identifying the water and wastewater treatment capacities as well as estimating the capacities of the major transmission facilitie s Due to the regulatory and design requirements for water and wastewater treatment plants , the capacity of treatment facilities is generally well documented However , the volumetric capacity of the major transmission facilities is often more difficult to determine For this reason , in performing an analysis of this nature , the assumed capacity of the transmission facilities is common ly based on a factor of the associated treatment capacities In developing the estimated amount of capacity for each resp ective category , thePage2analysis relies on information provided by the County , as well as assumptions based on common industry standards Water Treatment The Cou n ty currently owns and operates a water treatment facility As part of a capital program , t he County has an expansion under construction at the existing treatment facility and plans to build a new water treatment facility in order to meet future growth requirements In addition , the County h as existing capacity with other water suppliers and has agreements for additional capacity purchases during the Projection Period The combined existing and planned capacity additions total 48 45 million gallons per day MGD While the permitted flow capacity is provided in terms of the maximum daily flow MDF amount , the development and application of SDFs are based on average flow requirements As such , it is necessary to convert the MDF capacity to an estimated average daily flow ADF capacity Pursuant to general industry standards and discussions with staff , it is assumed herein that th e rated MDF is approximately 1 42 times the available capacity on an ADF basis Applying this factor to the rated capacity for the water treatment plant and other water supply sources results in an average daily flow capacity of 3412 MGD An additional adjustment is made based on the assumed amount of non - revenue or unaccounted - for water ie , system flushing and backwashing , testing , line loss , etc The non - revenue w ater reduces the amount of capacity available to existing and future customers The analysis performed herein assumes an average non - revenue factor of 1 3 0 , as provided by County staff This final adjustment results in an assumed average daily treatment plant capacity of 2 968 M GD Water Transmission Unlike the treatment facilities , the capacity information for major transmission facilities is very difficult to determine and quantify Such transmission capacity estimates are typically not even developed in engineering documents such as master plans or Consulting Engineer’s Reports Based on discussions with staff , it is assumed that the transmission facilities are capable of providing average water flow at least equal to 2 0 times the adjusted available average daily treatment capacity , resulting in 5 936 MGD Wastewater Treatment Due to the regulatory and design requirements for wastewater treatment plants , the capacity of treatment facilities is generally well documented The wastewater treatment facilities are designed and permitted in accordance with published hydraulic standar ds adopted by Section 15A NCAC 02T 0114 of the North Carolina Administrative Code regulations The County owns and operates two wastewater treatment facilities , the Central Johnston County Regional Wastewater Treatment Facility CJCRWWTF and the newly constructed 210 Wastewater Treatment Facility An expansion is under construction at the 210 WWTF Upon construction completion , the County will have a total permitted discharge of 160 MGD The County plans additional future expansions in the 20 - year planning horizon to meet future growth requirements , resulting in a total treatment capacity of 2 0 00 MGD Page3Unlike the application for water , the wastewater treatment capacity is permitted at ADF levels As such , it is not necessary to adjust the rated capacity for sewer However , as with the line loss in the water system , the wastewater system is impacted by inflow and infiltration I & I into the wastewater collection facilities In essence , the impact of I & I reduces the level of capacity that is available for use by existing and future system customers Pursuant to discussions with staff , the ADF for wastew ater treatment is adjusted for an assumed I & I impact of 20 00 , resulting in an adjusted average daily capacity of 1 600 MGD Wastewater Transmission Similar to the discussion provided above for the determination of water transmission capacity , it is difficult to identify the capacity of the wastewater transmission facilities Although an exact capacity number is problematic to determine , for the purpose of this analysis it is assumed that the wastewater trunk lines and pumping facilities are designed to provide capacity at least equal to 2 5 times the available treatment plant flow as adjusted for I & I , or 40 00 MGD DEVELOPMENT OF SDFs The methodology utilized herein for developing the water and wastewater SDFs relies upon the cost of major system facilities as well as the existing and expanded system capacities to calculate an estimated cost per unit gallon of capacity Based on this methodology , it is estimated that the water facility costs are 37 73 per gallon of water capacity combined treatment and transmission Additionally , it is estimated that the wastewater facility costs are 1 4 92 per gallon of wastewater capacity These unit costs are proposed to be applicable to new water and wastewater connections system wide In developing the SDFs , the unit costs per gallon of capacity are applied to a common Level of Service LOS standard in order to establish the applicable fee per Equivalent Residential Unit ERU For purposes of applying the LOS , an ERU is representative of a single - family r esidential dwelling unit receiving water service from a 3 4 ” metered connection and discharging normal domestic - strength wastewater through a comparably sized sewer connection Based on common industry standards for the development and application of capacity - related charges , a typical residential water connection is generally assumed to require average service availability in the range of 3 5 0 to 4 5 0 gallons per day gpd of system capacity However , the analysis provided herein utilizes the Countys implied level of service standard The County utilized historic al data and predictive modeling based on their long - term water supply plan For 2022 , the west system where most of the County’s customers are and where most of the growth will occur was predicted to use 151 gpd per customer on average during an average climate year The peaking factor used in their modeling base d on historical data was 15 2 Therefore , 151 gpd times 152 equals 22 8 gpd of capacity needed per customer and was rounded to 230 gpd which was utilized in this Report Similar to the water system , the SDFs for wastewater are to be applied on an equivalent residential unit ERU basis such that 1 ERU is equal to the estimated capacity requirements for a typical single family residential connection with a 3 4 water meter North Carolina Session Law 2023 -Page4137 HB 600 mandates a wastewater design flow rate of 75 gpd bedroom for systems serving two or more dwelling units The County stated that approximately 50 of new homes being built served by the Countys retail sewer system currently have 4 bedrooms Therefore , it is assumed that the average household has 35 bedrooms , resulting in a level of service LOS of 2 63 gpd This better reflects the mix of residential construction currently being seen by the County and they expect the building of larger homes to continue in the future Applying the average day LOS amounts as discussed previously to the estimated unit costs per gallon of capacity , adjusting for the applicable debt service and CIP credits , results in the system - wide proposed water and wastewater SDFs of 8 , 760 and 3 , 910 , respectively , for a typical single - family residential connection ie , one ER U The development of the proposed system - wide water and wastewater SDFs is detailed in Exhibits 5 and 6 , respectively A summary of the existing and proposed SDFs for a residential customer with a 3 4 through 2 ” water meter i s provided in Table 5 APPLICATION OF SDFs For the purpose of developing SDFs , the average daily flow number is established as one equivalent residential unit ERU An ERU provides a standard unit of measure such that f ee s for connections with larger than average demand requirements can be calculated on an equivalency basis One ERU is equal to the average anticipated flow for a single - family residential dwelling unit with a standard 3 4 water meter However , the County has implemented a policy whereby a residential connection with a 3 4 through 2 ” meter will be charged the 3 4 fee New non - residential connections with water meters larger than 3 4 have the potential of placing more demand on the system ie , require more capacity and are assessed ERU factors accordingly The County ’ s existing methodology for incrementing the fee s for larger connection sizes is based on standardized demand criteria established by the American Water Works Association AWWA pursuant to the size of the water meter Utilizing the AWWA demand criteria , the applicable ERU factors for larger water meters are based on the incremental increase in potential demand as compared to the standard meter size As such , the proposed fees developed herein utilize the meter equivalency methodology currently applied by the County for its existing fees Since wastewater flow is generally a direct function of water flow , applying the water and wastewater SDFs basedPage5upon the size of the water meter is equitable , administratively efficient , and consistent with industry standards The existing and proposed water and wastewater SDFs for the various meter sizes , as well as the unit cost per gpd used in calculating SDFs for the County’s bulk and wholesale customers , are developed in Exhibit 7 Table 6 below summarizes the proposed water and wastewater SDFs for residential and non - residential customers In situations where the application of the meter - based fee s will result in the collection of fees significantly different than the potential demand requirement of a new residential or non - residential customer requesting service , a separate calculation methodology may be applied at the discretion of the County ’ s Utilities Director For such situations , it is important for the utility to have the flexibility to utilize an alternative methodology to apply the calculated unit costs per gallon of capacity as provided in Exhibit 7 times the capacity requirement This situation may be applicable in some situations for large industrial users and or institutional users As another example of utilizing a flexible methodology , the County sometimes has new master - metered multi - family connections whereby multiple residential dwelling units receive service through a single , common connection Such connections generally consist of apartment complexes , patio homes , condominiums , duplexes , tri plexes , townhouses , etc Since the usage characteristics for individual dwelling units within multi - family structures are generally consistent with those of individually metered single - fami ly households , it is common industry practice for such connections to be represented on a per - unit basis regardless of the size of the master - metered connection As such , the SDFs for new multi - family connections can be applied based on the number of permitted dwelling units or a lesser equivalency factor thereof For example , if it is determined that a new master - metered multi - family development requires less capacity per dwelling unit than a typical residential home , the utility can apply a factor of le ss than 1 ERU perPage6unit eg , 08 0 ERUs per dwelling unit The resulting number of equivalent units is then multiplied times the SDF cost per ERU to calculate the total fees to be collected COMPARISON WITH NEIGHBORING UTILITIES In order to provide the County with additional insight regarding the development and application of the SDFs , a comparison showing fees imposed by other utility systems in North Carolina was developed and summarized in Exhibit 8 The comparison show s the capacity - related fees for a new residential water and wastewater connection that receives service from the subject utility or other local provider through a standard residential - sized water meter representative of 1 ERU calculated under the existi ng and proposed fees of the County , and those of the other utility systems GENERAL ASSUMPTIONS AND CONSIDERATIONS In the preparation of this Report , certain information has been used and relied upon that was provided to Willdan by other entities Such information includes , but is not limited to , audited financial statements , annual operating budgets , capital information , asset listings , cost data , system capacities , fee schedules for other utilities , and other information provi ded during the study While the sources and applicable information are believed to be reliable , no independent verification of the information has been made , and no assurances are offered with respect to the accuracy of the applicable information To the extent that information used to develop the assum ptions applied in the Report differs from actual results , the analyses developed herein could be impacted accordingly CONCLUSIONS This study has found a need for the County to adopt a mechanism for recovering the capital costs associated with system growth and expansion Based on the reviews , analyses and assumptions provided herein , it is concluded that 1 The application of SDFs for new system connections is becoming more common for public utility systems in North Carolina As growth continues to impact the region , and as state and federal funding programs are reduced or eliminated , it is prudent management practice to adopt mechanisms to recover capital costs incurred by the utility for making service available to future cus tomers 2 Through Chapter 162A , t he North Carolina legislature has found that it is prudent to require new customers to bear a portion of the costs of current capacity and future expansions their presence will demand It should be noted that Willdan is not attempting to issue a legal opinion regarding Chapter 162A or any c ourt proceedingsPage7leading to the enactment of Chapter 162A The summary discussion of the bill and any prior c ourt ruling s is intended for informational purposes only Any questions regarding the legal consideration provided herein should be directed to the County ’ s legal counsel 3 The SDFs developed herein are equitable and provide for reasonable recovery of the existing facilities and capital costs associated with providing service to new customers 4 The SDFs proposed herein are developed in accordance with the requirements of Chapter 162A and utilize methodologies that are consistent with industry standards 5 The proposed SDFs are based on a listing of existing system assets , a listing of construction work - in - progress , as well as the 2 0 - year capital improvement plan prepared by the County 6 The water and wastewater LOS standards proposed herein for establishing an ERU were provided by County staff 7 The County currently imposes tap fees and other related ancillary charges for new customer connections Since these other charges are intended to recover operating costs for providing incident - specific services , t he SDFs developed herein will have no effect on the level or application methodology for the se other connection - related fees 8 The discussions developed herein utilize the terminology of “ System Development Fees ” to be consistent with the terminology as defined in Chapter 162A The County currently uses the term “ Capacity Fees ” when referring to its bulk and wholesale customers for the same such charges To be consistent with the definitions provided in Chapter 162A , the term “ System Development Fee ” is used in this Report RECOMMENDATIONS Based on the reviews , analyses and assumptions discussed herein , as well as the resulting conclusions provided above , it is respectfully recommended that the County 1 Adopt the proposed SDFs or such fees as otherwise determined acceptable to the County’s elected officials and application methodology as developed in th is Report ; 2 Enact the proposed SDFs to become effective on July 1 , 20 2 5 , or other such date as determined appropriate by the County ’ s elected officials ; and 3 Readdress the SDF study within the next 5 years , or at such time s as future capital budgets are developed reflecting changes in future capital cost s that may result in material adjustments to the SDF s as adopted Page8We appreciate the opportunity to be of service to the County in this matter In addition , we would like to thank you and the other members of the County staff for the valuable assistance and cooperation provided during the preparation of the Report We look forward to working with you on future projects and continuing a successful professional relationship Respectfully Yours , W ILLDAN F INANCIAL S ERVICES Richard K McClung , Jr PrincipalPage