Platte County R-3 School District has requested a waiver of all water and sewer connection fees from the City of Platte City for the high school project under construction at the school complex in the city.
It doesn’t look like the city is willing to waive those fees, which city officials are estimating to be in the neighborhood of $610,000. But the city’s economic development committee is guiding staff to draft an agreement between the city and school district in which the fees can be paid over a five year period.
“The basic guidance is to develop a five year payment agreement, with four equal annual payments equal to the estimated net increase of 110,000 square feet combination of the current phase one work and the future phase two work,” said DJ Gehrt, city administrator, this week.
Gehrt said the fifth year payment will be flexible to address the various alternatives that are possible depending on the outcome of the phase two work over the next four to five years.
Gehrt said the calculation of $610,000 is about two thirds for sewer connection charges and one third for water connection fees.
The city administrator explained that the connection fees are calculated based on a long-standing American Water Works Association (AWWA) structure which assigns capacity dedication to different types of water/sewer users.
A city building permit for the school construction was issued without payment of the connection fees because of the long relationship with the district, Gehrt said.
He said the city’s water and sewer systems are financially independent enterprise funds whose operations, maintenance and capital improvements are funded by revenues from volume-based user fees rather than property tax or other general revenue.
A second major source of funding for future capital water/wastewater improvement projects is collection of capital connection fees from new development and new construction.
Gehrt said the connection fees “are calculated and charged to ensure that newly constructed or expanded facilities pay the capacity of the water/wastewater system that must be reserved in order to meet the peak demand imposed on the system by that new user.”
The city establishes a formula for calculating the fees based on the size and use of new construction. The fees are calculated on a scale comparing each new user to the average single family residential customer.
The city’s position is that not collecting the fees from the school district would have the impact of transferring the financial cost directly to Platte City water and sewer customers.
“Any fees not paid by new users must be made up in higher monthly operating fees for all customers,” Gehrt wrote recently in a staff report.
In this case, Gehrt wrote, the total connection fees for water and wastewater is nearly equal to one year of all wastewater revenue for the city.
Looking to the future, Platte City’s sewer rates are already planned to increase to pay for expansion of the sewer treatment plant in 2024-25. Waiving the school district’s connection fees would require an equivalent amount in additional rate increases for all its sewer customers, Gehrt reports, and this would have a significant impact on overall sewer rates. For instance, a five percent rate increase approved in the city’s 2021-22 budget generates only an increase of $45,000 in annual revenue, he said.
Gehrt said city staff is completing the memorandum of understanding this week and will forward it to the school district for review and comment. He said there is not a board of aldermen discussion scheduled on this until after the city and district officials have completed all reviews and revisions to the drafted memorandum of understanding.