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❑ The City's asset records were used to determine the repurposed existing potable infrastructure assets. ❑ The City developed the planning criteria. D The outstanding principal portion of all outstanding debt was deducted (i.e. a debt service credit) from the connection fee total to avoid double counting. D The City provided the CIP for future improvements. D The City determined the portion of future improvements that were growth related. 4.6 Implementation of the Recycled Water Connection Fees The methodology used to calculate the recycled water connection fees takes into account the cost of money or interest charges and inflation. HDR recommends that these charges be adjusted each year by an escalation factor to reflect the cost of interest and inflation. The most frequently used source to escalate a connection fee is the Engineering News Record (ENR) Construction Cost Index which tracks changes in construction costs for municipal utility projects. This method of escalating the City's connection fee should be used for no more than a four to five -year period. After this time period, HDR recommends that the fees be updated based on the actual cost of infrastructure and any new planned facilities that would be contained in an updated master plan, capital improvement plan or rate study. 4.7 Consultant Recommendations Based on our review and analysis of the City's recycled water connection fees, HDR makes the following recommendations: ❑ The City adopt the recycled water connection fees for new connections to the recycled water system that are no greater than the net allowable connection fees as set forth in this report. ❑ The City should update the actual calculations for the connection fee at such time when a new capital improvement plan, facilities plan, comprehensive system plan, or a comparable plan is approved or updated by the City, or every five years, or when a major infrastructure project is completed. ❑ The City should annually adjust the connection fees based on changes in the Engineering News Record Construction Cost Index or other comparable index. 4.8 Summary The recycled water connection fees developed and presented in this report are based on the engineering design criteria of the City's recycled water system, the value of the existing assets, future capital improvements, any current and future debt service on existing assets and "generally accepted" ratemaking principles. Adoption of the proposed fees will provide multiple benefits to the City and create equitable and cost -based fees for new customers connecting to the City's recycled water system. Determination of the City's Recycled Water Connection Fee 18 City of Pleasanton - Recycled Water Connection Fee