Local water officials waded into uncharted territory Tuesday when they reviewed and discussed a plan recommended by an independent ratepayer advocate on what to charge developers each time they hook up one of their homes to the water system.
The fees are called facility capacity fees — paid by developers to cover the cost of connecting new homes to the existing water system in the Santa Clarita Valley.
Historically, staffers at the SCV Water agency crunched numbers — usually with the help of consultants — to figure out how much to charge developers in a one-time fee.
On Tuesday, however, in keeping with the conditions of the Senate bill that created the agency two years ago, board members — for the first time — had facility capacity fees analyzed internally and separately by someone else.
Ichiko Kido appeared before the board Tuesday night as the agency’s first-ever independent ratepayer advocate.
“Our analysis was done using the urban water management plan,” Kido told board members, referring to a plan that cities are required to release every five years.
Kido paid particular attention, she said, to population projections made for the SCV.
“When we saw those numbers, we decided to use those numbers,” she said.
In-house
Although she and agency staffers reviewed fees separately, agency staffers ended up tweaking their own plan after comparing notes with her.
“It’s a pretty interesting time here,” Eric Campbell, the agency’s chief financial and administrative officer, told the board. “Because what we’re doing here today, and over the last eight months, is work which traditionally has been farmed out to expert consultants.”
“This year, we did it in-house, which is great because one of the things that we’re trying to do is build a strong batch of analysts,” Campbell said.
“This is the type of work that should be done in-house for a large water agency,” he said. “And, this is our first year of doing this, and that was a good turning point.”
For the first time, an independent ratepayer advocate took a serious look at the amount of housing expected in the SCV over the next 30 years, what it would cost to service those homes and what sort of fee should be set for developers accordingly.
Infrastructure costs
The amount of money needed to install pipelines for all the new homes and businesses, between now and 2050, amounts to $475.7 million, according to agency staffers, and amounts to $472.8 million, according to Kido.
Both looked at the pipeline infrastructure required in four “water service areas,” including at least $183 million needed for 22,144 connections in the Newhall Ranch housing project, according to staffers.
The development formerly known as Newhall Ranch, with grading underway, calls for more than 21,000 homes between Interstate 5 and the Ventura County line, and between Highway 126 and the Santa Susana Mountains.
According to Kido, Newhall Ranch would need 22,078 connections, costing at least $182.23 million.
Each hookup was defined as an attachment made to a 1-inch pipe.
The fee structures recommended by Kido and those recommended by staffers differed only slightly for each of the water service areas analyzed.
Land development
The other water service areas examined included developments in the West Valley, East Valley and on the Whittaker-Bermite site.
Cleanup after two decades of 996 contaminated acres at Whittaker-Bermite is expected to be completed this year, according to Jose Diaz, senior project manager for the California Department of Toxic Substances Control.
After eight months of discussion and interaction with the ratepayer advocate, Campbell recommended board members adopt the fee schedule recommended by the agency’s Finance and Administrative Committee a version tweaked with input from the advocate.
“The ratepayer advocate has reviewed staff’s work and the ratepayer advocate has shared her thoughts with the (agency’s) Finance and Administrative Committee,” Campbell said in his presentation explaining the fee-setting process.
“We ended up with a model that doesn’t move the needle very much,” Campbell said.
The difference between the ratepayer advocate’s model and the final blended staff model is less than 5%.
Fairness
Having such an advocate on hand to assess, among other considerations, the fairness of proposed water rates, was one of the cornerstones of SB 634, which created the SCV Water Agency in January 2018.
The job of hammering out a fair and equitable rate for facility capacity fees happens every two or three years. The last study of fees was done in 2017.
Last year, new faces were seen at the fee-structure discussion table with the inclusion of major SCV stakeholders such as the Building Industry Association, Santa Clarita Valley Economic Development Corp., Santa Clarita Valley Chamber of Commerce, FivePoint Holdings and JSB Development.
Agency staffers met with the group seven times over 11 months in an effort to
inform, educate, and share ideas about how to update the facility capacity fee structure.
The board is expected to formally select a facility capacity fee structure in the next couple of months.
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