1. System Development Fees
Next Steps
Fee Calculation & Administration
Fee Adoption Process
House Bill 436
Definition

2. System Development Fees
Definition:
One-time charge assessed against “new development” as a way to pay for “facilities” needed to support growth or to recoup costs for existing facilities.

3. System Development Fees
10/19/2017
System Development Fees
Applicability
Subdivision of land
“New Development”
Construction, redevelopment,
conversion, etc.
System Development Fees are assessed on ‘new development’ which would include Subdivision of Land, Construction, Redevelopment, Conversion, or use or extension of use of land that increases need for service.
Use of land that increases
service units
“Facilities”
This Photo by Unknown Author is licensed under CC BY-SA

4. System Development Fees
Ratification of NC House Bill 436
“An Act to provide for uniform authority to implement system development fees for public water and sewer systems in North Carolina and to clarify the applicable statute of limitations.”
● Signed into law on July 20, 2017
● Amended Chapter 162A, Article 8 of the General Statutes “System Development Fees”
● Authorizes local governmental units to adopt a SDF for water or sewer service
● Sets forth process for establishing system development fees
● Requires preparation by a “financial professional or licensed professional engineer…”
● Requires compliance by July 1, 2018

5. System Development Fees
Fee Adoption Process
Calculate system development fees based on written analysis
45 days prior to consideration of adoption, post written analysis on Web site and solicit written comments - Post no later than April 2, 2018
Preparer to consider written comments
Conduct public hearing to adopt system development fees – scheduled for May 17, 2018
Adopt and publish system development fees in annual budget, rate plan, or ordinance (replaces Sewer Acreage Fees and Water/Sewer Capacity Fees)
Update written analysis at least every 5 years

6. System Development Fees
10/19/2017
System Development Fees
Fee Calculation Methodologies
Incremental/ Marginal Cost Approach
- Focuses on additional facilities required to meet anticipated growth
- Analysis based on capital improvement plan
Buy-in Approach
- Focuses on existing facilities with available capacity to serve new customers
- Analysis based on fixed asset records
Combined Approach
- Blend of Buy-In and Incremental Methods
- Focuses on existing and future facilities

7. System Development Fees
Fee Calculation Process
Determine methodology to be used
Identify cost of facilities
Consider/make adjustments as necessary
Derive System Development Fee per service unit
Establish equivalency or conversion table for various categories of demand

8. System Development Fees
10/19/2017
System Development Fees
Revenue Use & Accounting
Incremental/ Marginal Cost Approach
- Revenues may be used to pay for costs of constructing capital improvements, professional fees for SDF analysis, or, if no capital improvements are planned for construction within 5 yrs, principal and interest on existing capital improvement debt .
Buy-in Approach
- Revenues may be used to pay for costs of previously completed capital improvements for which capacity exists and for capital rehabilitation projects
Revenue Administration
- Revenues shall be accounted for by means of a capital reserve fund established pursuant to NC General Statutes, Chapter Part 2, Article 3.

9. System Development Fees
Proposed Fees – Combined Approach
Water
Sewer
Meter Size
Meter Capacity Conversion Factor
System Development Fee by Meter Size
3/4"
1.00
$ 724
1"
1.67
$1,209
1.5"
3.33
$2,411
2"
5.33
$3,859
2.5"
7.30
$5,285
3"
10.67
$7,725
4"
16.67
$12,069
6"
33.33
$24,131
8"
53.33
$38,611
10"
80.00
$57,920
12"
144.58
$104,676
16"
225.00
$162,900
Meter Size
Meter Capacity Conversion Factor
System Development Fee by Meter Size
3/4"
1.00
$881
1"
1.67
$1,471
1.5"
3.33
$2,934
2"
5.33
$4,696
2.5"
7.30
$6,431
3"
10.67
$9,400
4"
16.67
$14,686
6"
33.33
$29,364
8"
53.33
$46,984
10"
80.00
$70,480
12"
144.58
$127,375
16"
225.00
$198,225
Note: Fees based on 166 gallons of water and 159 gallons of wastewater per day per equivalent dwelling unit

10. System Development Fees
Next Steps
Post written analysis on Web site and solicit written comments by April 2, 2018
Preparer to consider written comments
Conduct public hearing to adopt system development fees – scheduled for May 17, 2018
Adopt and publish system development fees in annual budget, rate plan, or ordinance (replaces Sewer Acreage Fees and Water/Sewer Capacity Fees)
Update written analysis at least every 5 years