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DUBLIN SAN RAMON SERVICE DISTRICT REGIONAL CONNECTION FEES System Development Charges Many wastewater utilities assess system development charges to help offset costs for increased system capacity. Generally levied at the time building permits are required, the system development charges are assessed for increased wastewater flows which result from either (1) changes in use of a structure served by an existing connection to the system, or (2) a new connection to the system. For the purposes of this report, both sources of additional wastewater flow are included in the term "new" customer. System development charges are based on the premise that new customers or developers should pay for required wastewater system capacity, to the extent that water and wastewater service charges do not support the investment for thc required capacity. Similar charges are often termed by other utilities as capital recovery fees, development charges, system capacity charges, impact fees, system equity charges, or other names. These charges represent the current demand requirement of each property and are not transferable to any other property located within thc service area. The cost of providing such capacity in wastewater system facilities for new customers can contribute significantly to the need for capital financing and service rates and /or taxes to support the financing. Collection of system development charges to partially or wholly finance new customer capacity requirements can, over time, significantly reduce the amount of financing and the magnitude of rate increases that otherwise might be needed. Ideally, system development charges should generate sufficient revenues to meet future expansion requirements so that existing users are not burdened by the costs of expansion caused by growth in system use by new users. Basic Methodologies System development charges are traditionally assessed to new development to recover the value of system capacity constructed for ncw customer service. There is no single established method for the determination of system development charges that is both appropriate for all situations and perfectly equitable to all ncw customers. There are, however, various approaches which are currently recognized and utilized, some to a greater extent than others, by wastewater utilities. These methods can be categorized as follows: I. System Buy -In. System development charges are designed to derive from the new customer an amount per connection equal to the "equity" in the system attributable to similar existing customers. (Note: The word "equity" refers to that portion of system value for which there is no offsetting debt. It does not imply ownership of, or title to, utility facilities.) 2. Incremental Cost Pricing. System development charges are designed to derive from the new customer the marginal, or incremental cost of system expansion associated with new customer growth. This method is based on the premise that new connections to the wastewater system should be responsible for those costs which they cause to be incurred for the most recent or next increment of required system capacity, except as such costs are recovered from user fees or other utility charges. BLACK VEATCH 3 MAY 2010