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difficult to project growth and required facilities with precision accurately. Figure 1 shows the framework for calculating a Buy-In connection fee. Figure 1: Formula for Buy-In Approach Value of Existing System Existing Capacity Remalnm0 Utilization NMI E3 - Debi Principal (EDUs) 111.1 INCREMENTAL COST METHOD The Incremental Cost Method is forward-looking and states that new development(new users)should pay for the additional capacity and expansions necessary to accommodate them. This method is typically used when specific capital improvements are needed to facilitate growth for new development. Under the Incremental-Cost Method, growth-related capital improvements are allocated to new development based on their estimated usage or capacity requirements,irrespective of the value of past investments made by existing customers. For instance, if it costs X dollars($X)to provide water for 100 3/4" meter equivalent connection and a new connector uses one of those equivalent units,then the new user would pay$X/100 to connect to the system. In other words,new customers pay the incremental cost of capacity based on the estimated cost of the new facilities. This method is generally used when detailed future facilities have been identified to meet the capacity required to serve new customers and limited existing system capacity is available for development.While California Code 66013(b)(3)does not define a specific period to include future projects,these periods can be as long as a master planning period. Figure 2 shows the framework for calculating an incremental cost connection fee. Figure 2: Formula for Incremental-Cost Approach Total Capital Improvements ($) Increased Capacity(EDUs) HYBRID METHOD The hybrid method is typically used where some capacity is available to serve new growth,but additional expansion is necessary to accommodate new development. Under the hybrid method, the connection fee is based on the existing capacity value and the costs of necessary expansions(i.e.,the Buy-In component and the Incremental-cost component). Capital improvements that expand system capacity to serve future customers may be included proportionally to the percentage of the cost specifically required for expansion of the system versus the percentage of cost incurred in repair and replacement of existing capacity(and therefore benefitting existing users). Figure 3: Formula for Hybrid Approach summarizes the framework for calculating the Hybrid connection fee. WATER CAPACITY AND MISCELLANEOUS FEE STUDY 10