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DUBLIN SAN RAMON SERVICE DISTRICT REGIONAL CONNECTION FEES necessary to revise system development charges periodically to account for construction cost escalation and depreciation. The system buy -in method typically tends to be best suited for application when there is adequate capacity available in existing facilities to serve new customers. Incremental Cost Pricing Method This method is based on the premise that new system users should be responsible for the value of the latest or next increment of capacity which they cause to be incurred. Accordingly, system development charges would be designed to derive the marginal or incremental cost of system expansion as may be determined by recent construction cost experience or planned future improvements. In order to determine the true incremental cost of system expansion, it is necessary to conduct a detailed engineering analysis to establish the facilities required to increase the design capacity to a specific level to accommodate additional new customers. Depending upon circumstances, the capacities of existing facilities which are available for new customers and their associated current value (RCLD) may also need to be recognized. The incremental cost of these specific facilities is then divided by the associated capacity provided to determine the incremental unit cost of additional capacity. In deriving system development charges using the incremental cost pricing method, appropriate reductions in rates should be made to credit any obligation or debt, which will eventually be recovered from future users through the payment of ongoing user fees or other utility charges. Use of this method is generally considered to be most appropriate when a significant portion of the capacity required to serve new customers must he provided by the construction of new facilities. Value -of- Service Method The value -of- service method is sometimes employed to develop system development charges for utilities. Though often simpler to employ than the system buy -in or incremental cost pricing methods, it does not typically recognize the direct cost or value of utility facilities required to provide service for the particular utility facilities involved. Rather, under this method, system development charges are based on considerations such as the rates charged by other communities, the cost of service from available alternative facilities, or other similar measures. Because value of service measures are not typically based on the direct costs or value of facilities of the utility actually providing service, this method is not as readily supportable in adversary proceedings. Legal Requirements in California Many states have established specific laws regarding the establishment, calculation, and implementation of system development charges. For most states, the primary objective of these laws is to assure that the charges are established in such a manner that they are fair, equitable, and cost based. Assembly Bill 1600 Through Assembly Bill (AB) 1600, the District has broad authority to impose system development charges on its users for capital facilities. The main limitation of that authority is that fees on new developments must have a rationale nexus to the needs created by, and the benefits accruing to that development. In 1988, the California Legislature added sections to the Government Code that codified BLACK VEATCH 6 MAY 2010