PREVIOUS Deciding on the Type and Amount of Charges to Impose

Front Foot/Benefit Assessments

Authorities may also finance the cost of water and sewer mains by assessing a portion of their cost against the owners of the property that abuts them or benefits from their construction. Most assessments are computed using the front foot rule; which calculates a cost per front foot and requires property owners to pay an assessment based upon the number of front feet of main abutting their property. When this method does not produce a fair and equitable assessment, benefit assessments are used instead. These assessments are established either by agreement with the property owner or by a board of view appointed by the court.

Only specific costs relating to the water and sewer mains can be included in the assessment, and a number of calculations need to be performed for the final report, which is generally completed by the authority's engineer. The governing body of the municipality in which the property to be assessed is located must approve the authority's plan of assessment. However, because of its complexity and the unpopularity of assessments in general, this method of financing has become less and less popular. It is, however, being used as a means to lower quarterly utility rates over the long term or to equalize per-customer investment between new and existing users. Many authorities are imposing assessments and allowing property owners five or even ten years to pay them off, generally charging a low rate of interest.

Each of the above charges will have a different effect on different users or beneficiaries of the system. For example, the connection fee can only recover the cost of the lateral or water service line. Obviously, for a single family household, this may be a smaller amount than the cost to install similar facilities to accommodate a multi-family apartment building, a large commercial structure, or an industrial facility. However, the charge cannot exceed the cost of providing those facilities. Therefore, a charge for a 10-unit apartment building is not likely to be 10 times as great as the cost for a single family home; indeed, it may be the same.

Tapping fees, on the other hand, do reflect the new connection's capacity requirements and impact on the system. It is reasonable to expect a 10-unit apartment building, for example, to pay 10 times the tapping fee as the single family home because 10 families will be placing approximately 10 times the burden on the system as a single family. There are some who argue that this is not the case since multi-family residential units use less water than single family homes. But then, not all single family homes use the exact same amount of water. These are individual fairness items that each authority must decide.

It is likely that the authority will not impose the maximum fees allowed under the law. When there is discretion as to how much of a particular fee should actually be adopted, the authority may wish to consider how this impacts different types of customers. For example, if it is determined that a $1,000 tapping fee per EDU (equivalent dwelling unit) is to be collected, then each home, each apartment, and each EDU would be billed $1,000 and the 10-unit apartment building would pay $10,000. If the charge was divided between a $500 connection fee and a $500 tapping fee, the single family home would still pay a total of $1,000. But, a 10-unit apartment would pay a total of only $5,500 ($500 x 10 units = $5,000 + $500 connection fee = $5,500).

Assessments, too, help to distribute the burden of the system cost differently than either connection or tapping fees. Assessments affect the owners of property whether its improved or unimproved, while connection and tapping fees are collected from only those who are actually connecting to the system. In order to reduce the cost to users for systems that accommodate a substantial number of vacant lots, assessments can be very useful since they will provide funds from property owners who would otherwise not make any payments until they develop their property and begin using the system. During this interval, the users of the system would be paying quarterly charges that include debt service on unused capacity. These are always difficult decisions, and the unpopularity of assessments must be weighed against the promised benefit of reduced user fees. But, like any other financing alternative, they need to be carefully evaluated.

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