SENATE BILL REPORT

SSB 6013

BYSenate Committee on Governmental Operations (originally sponsored by Senators Bluechel, Talmadge, Fleming, Conner and McDonald)

Regulating capacity charges imposed by a metropolitan municipal corporation.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 23, 1989; March 1, 1989

Majority Report:  That Substitute Senate Bill No. 6013 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McCaslin, Chairman; Thorsness, Vice Chairman; Conner, Sutherland.

Senate Staff:Sam Thompson (786-7754); Eugene Green (786-7405)

                  April 17, 1989

House Committe on Local Government

AS PASSED SENATE, MARCH 13, 1989

BACKGROUND:

Metropolitan municipal corporations have the authority to operate sewage collection and treatment facilities.  They do not have the authority to impose connection charges upon new users of these facilities in addition to the uniform rates that all customers pay.  Other entities of local government--cities, counties, sewer districts and water districts--have such authority with respect to sewage and water facilities. Connection charges are imposed to ensure that new customers pay a proportionate share of the capital costs of facilities to match the sum already paid by existing customers through regularly imposed rates.  The charges are usually used to retire debt incurred to finance construction.

Sewer districts have the authority to impose liens against real property to enforce collection of delinquent connection and sewage disposal charges.  If the charges are delinquent for more than 60 days, the lien may be foreclosed.

Sewer and water district connection charges may include actual costs of connection and an equitable share of the cost of the entire system.  This latter charge is required to be "reasonable."  It is suggested that standards for the determination of reasonable sewer and water district connection charges be specified.

Sewer and water districts have the option to establish reimbursement contracts with property owners who finance the construction of sewer and water facilities.  The contracts provide for reimbursement of property owners who financed the system by other owners who later connect to the system. Reimbursement payments consist of a pro rata share of the cost of construction.  It is suggested that reimbursement contracts be made mandatory in certain circumstances, and that property owners who paid for the original construction costs be relieved of any further charges if they connect other property to the facilities.

SUMMARY:

A metropolitan municipal corporation engaged in the transmission, treatment, and disposal of sewage may impose a capacity charge when a user connects, reconnects or establishes a new service.  The capacity charge will be based upon excess capacity built into capital projects identified in the metropolitan municipal corporation's comprehensive water pollution abatement plan from January 1, 1982 to the effective date of the bill.  The capacity charge cannot exceed $7.00 per month collected over 15 years for connections and reconnections occurring prior to January 1, 1996.  For connections and reconnections occurring after January 1, 1996 and prior to January 1, 2001, the monthly capacity charge cannot exceed $10.50 per month collected over 15 years.  For connections and reconnections occurring after January 1, 2001, the capacity charge collected over 15 years cannot exceed 50 percent of the basic sewer rate established by the metropolitan municipal corporation at the time of the connection or reconnection.

The charge for a building other than a single-family residence will be based on the projected number of residential customer equivalents represented by the building, considering its intended use.

The capacity charge can be paid off at any time prior to the final monthly payment at a discount determined by the metropolitan municipal corporation.  This option on the part of users of the system cannot give rise to a lien.

Collection of the charge will be enforced in the same manner provided for enforcement of sewer district charges.  The metropolitan municipal corporation must notify a mortgage or deed of trust holder prior to foreclosing a lien for delinquent charge payments.

When a sewer or water district board of commissioners establishes a connection charge, factors relating to differences in cost of construction of sewer or water system facilities and differences in cost of service delivery must be considered.  The charge may include interest related to the cost of construction of a water or sewer system, but interest cannot exceed 10 percent per year.  The connection charge can be applied only after a certificate of occupancy is granted by the appropriate building department.  Revenue from the charges can be expended for capital debt retirement but not for maintenance and operation.

In some circumstances, sewer and water districts must prepare a long-term capital improvement plan.

Sewer and water districts must provide reimbursement contracts for property owners when the owners finance construction of projects required for property development.  The contracts will provide for reimbursement of an owner's pro rata share of the costs of the project by other property owners who later connect to the system.  Property owners who paid for the original construction costs are relieved of any further charges if they connect other property to the facilities.  Districts may finance a project and be reimbursed in the same manner.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Chuck Henderson, Seattle Master Builders; Ron Posthuma, METRO (pro); Tim Douglas, Mayor of Bellingham (pro)

HOUSE AMENDMENTS:

The capacity charge imposed on users of a metropolitan municipal corporation's sewage facilities must be reviewed and reapproved annually.  A provision is deleted that enabled the capacity charge to be paid off by a user at any time prior to the final monthly payment at a discount determined by the metropolitan municipal corporation.

The criteria for setting sewer and water district connection charges are altered.  The charges must be based on a pro rata share of the cost of existing facilities, the cost of facilities planned for construction within the next ten years according to a district's adopted comprehensive plan, and other costs borne by the district which are directly attributable to the improvements required by property owners seeking to connect to the sewer or water system. 

Standards are altered for computing the accrued interest that is a component of connection charges.  Interest can be applied from the date of the construction of the sewer or water system until the connection or ten years, whichever is shorter.  The accrued interest will be based upon the rate applicable to the district at the time of the construction or major rehabilitation of the sewer or water system, or at the time of installation of the sewer or water lines to which the property owner is seeking to connect. 

Revenue from connection charges (excluding permit fees) are to be considered payments in aid of construction as defined by Department of Revenue administrative rule.

Latecomer contracts providing for the reimbursement of property owners who finance an extension to a sewer or water system are not required to be provided to the property owners unless a district approves an extension to a system. Construction of an owner-financed extension is contingent upon comprehensive plan approval.  Connection of the owner-financed extension is conditioned upon construction according to plans approved by the district and adherence to other district requirements.