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Act 57 Clarifies Several Confusion-Causing Calculations from Act 203

Because several calculations included in Act 203 of 1990 caused confusion for authorities and builders alike, Act 57 attempts to clarify these issues. One of the most significant areas of confusion concerned the need to subtract outstanding debt for new systems. Act 203 had exempted authorities from subtracting debt related to facilities that exclusively served new users, but it was silent on the treatment of debt for subsequent calculations. The original intent of the law was to limit authorities to a “single bite at the apple,” but this intent was not incorporated into law. Act 57 corrects this omission. It also prevents authorities from reaching back to pre-1990 facilities in order to claim the exemption from subtracting debt on the basis of exclusively serving new users. While some authorities that are entitled to an exemption which allows them to index their tapping fee based on interest cost will see relief, they are not entitled to update the historical cost of facilities.

Act 57 also clarified the order of calculation when subtracting grants. Previous legislation did not indicate clearly whether an authority should trend its historical costs first and then subtract grants or subtract the grants first and then trend the net amount. Act 57 requires authorities to subtract grants before trending, and the result will be lower tapping fees.

Other clarifications:

• Certain costs related to improving existing facilities can now be incorporated into the basis of the tapping fee. These costs were previously intended for exclusion when they solely benefited existing users of the system.
• Minor changes have been made to the procedures for adopting connection fees, customer facilities fees, and tapping fees. Essentially, the new language describes the mechanism by which these fees are adopted and establishes the need to incorporate the calculations supporting the fees into the resolution as well as the manner in which each part of the fee was calculated and the maximum fee allowable for each part.

The discussion above has focused on the tapping fee, but this is just one of three fees that are permitted under Act 203 and Act 57. Knowing what fees you are paying is important because each fee is to be based on the cost of specific types of facilities, as illustrated in this figure.

NEXT Summary of Differences Between Act 57 and Act 203

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