Memorandum

City of Lawrence

City Manager’s Office

TO:	Mayor and City Commission
FROM:	City Manager David L. Corliss
DATE:	May 1, 2014
RE:	Request for waiver from System Development Charges from Douglas County Request for waiver from building permit fees from USD #497

The City has received the attached waiver requests from Douglas County and USD #497.  Mayor Amyx, Vice Mayor Farmer, and city staff met with representatives from Douglas County and USD #497 regarding their requests on April 24, 2014.   The County has further requested that this matter be placed on a City Commission agenda as soon as possible.

Background- System Development Charge (County request):

Since 1996 the City has charged system development charges (a/k/a impact fees) on new connections to the City water and wastewater system.  These fees generate approximately $1 million per year from new construction within the community.  These fees reduce the amount of water and wastewater utility rate increases which are sought for improvements to our water and wastewater system.   The rationale behind these fees is that new connections (new developments) to the City’s water and wastewater system impact the capacity of the system requiring capital expenditures to address these capacity needs (e.g. new water storage tanks,  new transmission or force mains, new wastewater treatment plant, etc).  Rather than placing the entire financial burden for capital expenditures on water/wastewater ratepayers, the City has followed a policy of requiring a fee from new connectors to the system thereby reducing – but not eliminating – the rate burden on existing ratepayers.

City staff does not agree with the rationale in the County’s letter concerning system development charges.   The County’s new facility does create a new impact on the City’s water and wastewater system – the existing County facilities will eventually be resold and/or repurposed and still use the utility system.  The new County facility doesn’t remove the existing water/wastewater use or impact – it adds to it.

The City has rebated funds back to certain economic development related projects.  The County’s facility will be used by Douglas County Public Works for work in the unincorporated County without substantial direct economic benefit to the City of Lawrence.

In our April 24 meeting, there was discussion about possible County assistance on the wastewater treatment plant project as a means of accommodating the impact fee waiver.    The County Engineer suggested possible dirt hauling to the site of the new wastewater treatment plant, City staff suggested possible County road work on County and/or Township roads necessitated by the new wastewater treatment plant.  City Staff has continued discussions with County staff on this since the meeting.    If the City Commission considers this issue further, staff recommends that there be like assistance from the County in order to ensure appropriate equity in the continuation of the system development charge program.

Background -  Building Permit Fee Waiver (School District Request):

USD # 497 has requested a building permit fee waiver for their construction projects.  As the Commission knows, the City charges building permit fees for plan review and construction inspection.   The City closely tracks building permit fee revenues to ensure that they do not substantially exceed our cost for providing building inspection services.   Similar to the concern of waiving system development charges, there is an argument that a waiver of building permit fees may endanger our legal ability to collect future fees, however, this is unknown and untested.  The School District points to State law and court opinions for an exemption, however, the City’s legal review indicates that this does not point to an exemption.  To-date, there is no clear exemption authority for School Districts.  The City has rebated building permit fees for certain economic development projects.   At our meeting on April 24 there was discussion about the waiver and the belief from the School District that these funds would be better used on the school buildings and that the fees were in excess of the City’s actual costs to perform the inspection.    We discussed possible compromises and next steps, however, we have not reached a consensus on a recommendation.  We recommend further discussion on this item. 

Staff Recommendation

As the City Commission knows, the City has a substantial history of intergovernmental cooperation with both the County and School District.  School Resource Officers and Crossing Guards funded by the City.   City rental of School District facilities.  City parks adjacent to certain elementary schools.   City/County cooperation on dispatch services, planning services, fire/medical department, sustainability coordinator and economic development.   This relationship is built on a desire to provide excellent services to shared constituencies.   It is also built on an understanding of different roles and responsibilities and established procedures for cost allocations.   Staff recommends that if the City Commission desires to waive or reduce these established fees that it seek an appropriate level of consideration or compromise and direct staff accordingly.  Staff also recommends that a joint policy among the various governing bodies be established to avoid last minute surprises and requests.