HomeMy WebLinkAboutagenda.council.worksession.20121030 MEMORANDUM
TO: Mayor and Council
FROM: Tom McCabe, APCHA Executive Director
THRU: Barry Crook, Assistant City Manager
DATE: October 30, 2012
RE: THE MARKET GAP APPROACH FOR FEE-IN-LIEU HOUSING
MITIGATION
SUIVEVIARY: APCHA is requesting that council review the attached housing fee-in-lieu
mitigation methodology developed by consultants RRC Associates, in cooperation with senior
city and county staff. If council agrees that the methodology satisfies community objectives,
staff and consultants will take the next step and generate ordinance and housing guideline
language needed to implement this standard for later adoption by council. The consultants will
then also finalize the computer programming and training plan needed to implement same.
This information will be presented to the county commissioners on December 18.
PREVIOUS COUNCIL ACTION: The City Council and County commissioners directed
APCHA to conduct research and provide a methodology to calculate fee-in-lieu values as one
of several options to offset the affordable housing impacts to the community that result from
development or re-development of commercial or residential property.
BACKGROUND: The RFP issued by APCHA requested that respondents offer a
methodology that is logical, legally defensible, compatible with both the City and County
affordable housing programs and land use codes, transparent and easily updated by local staff.
The scope of work includes creating an excel-based model that staff can use to generate annual
fee-in-lieu updates and to draft language to amend the several documents needed to enact the
new methodology.
DISCUSSION: Today's consultant presentation and attached report will explain the details of
the proposed methodology including:
• Preferred terminology
• Preferred approach; Market Affordability Gap methodology - its basis, compatibility,
variables, advantages, defensibility, and conversion factors
• Other resort area communities using this approach
• Other communities that have stopped using this methodology and reasons
• Possible alternative approaches
• Satisfaction of City, County and APCHA issues/concerns
FINANCIAL IMPLICATIONS: The increased revenue generated through accurate fee-in-
lieu regulations will reflect the true cost of providing the affordable housing necessitated by
development, and will better support the goal of housing adequate numbers of employees
within the urban growth boundary.
ENVIRONMENTAL IMPLICATIONS: There are no increased environmental implications.
RECOMMENDATION: To confirm the choice of method and to direct the completion of the
Market Gap fee-in lieu approach.
ALTERNATIVES: The alternative is to continue to utilize the existing payment-in-lieu
methodology which is not thought to reflect the true costs of mitigating development impacts;
or to contract with the consultants to study a different approach.
PROPOSED MOTION: No motion is needed to move forward with this approach.
CITY MANAGER COMMENTS:
Notes:
Memo provided by RRC Associates
Affordable Housing Fee-in-Lieu Methodology
City ofAspen/Pitkin County/APCHA
October 24, 2012 Draft
Prepared for:
City of Aspen, Pitkin County, and APCHA
Prepared by:
RRCAssociates, Inc.
4940 Pearl East Circle, Ste. 103
Boulder, CO 80301
303/449-6558 � www.rrcassoc.com
Rees Consulting, Inc.
PO Box 3845
Crested Butte, CO 81224
RRC
ASSOCIATES
970/349-9845 � www.reesconsultinBinc.com
An STI
Affordable Housing Fee-in-Lieu Methodology October 24, 2012 Draft
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TABLE OF CONTENTS
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Introduction..................................................................................................................................................1
Purposeof This Report..............................................................................................................................1
Organizationof the Document.................................................................................................................1
� Terminology..............................................................................................................................................2
TheRecommended Approach......................................................................................................................3
Advantages Over Other Approaches...........................................................................................................4
Defensibility..................................................................................................................................................5
The Gunnison County Decision.................................................................................................................5
ColoradoRevised Statutes........................................................................................................................7
Calculatingthe Gap......................................................................................................................................7
TheAffordable Price.................................................................................................................................9
TheMarket Price.....................................................................................................................................10
The Per-Unit Gap and Conversion Factors..............................................................................................12
Fee Calculations in Comparable Communities..........................................................................................13
Examples of Fee Based on Market-Affordability Gap.............................................................................13
Communities No Longer Using Market-Affordability Gap for Fee Calculation.......................................17
Communities Using Alternative Approaches for Calculating Fees-in-Lieu .............................................17
In-Lieu Fees Not Allowed........................................................................................................................18
Fee-in-Lieu Model for Aspen and Pitkin County ..................................................18
IncomeTargets ......:................................................................................................................................20
AffordablePrice......................................................................................................................................20
Market Sales Price per Square Foot........................................................................................................21
ConversionFactors..................................................................................................................................22
Appendix A: Excerpts from Aspen Land Use Code.....................................................................................23
Appendix B: Local Government Land Use Control Enabling Act................................................................27
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Introduction
Purpose of This Report
The purpose of this report is to provide a methodology for calculating fees that could be assessed by the
City of Aspen in lieu of the provision of required affordable housing and by Pitkin County though its
affordable housing impact fee program. The methodology for calculating the fee must be sound, easily
understood and readily updated. It must be compatible with existing codes and enacted through the
Guidelines of the Aspen Pitkin County Housing Authority (APCHA).
This report recommends an approach based on the difference between the market price of housing and
the price that is affordable for households for which the housing is intended. It is referred to herein as
the Market-Affordability Gap approach.
Organization of the Document
This report consists of six major sections as follows:
• The Recommended Approach,which describes the Market-Affordability Gap methodology and
its benefits.
• Advantages Over Other Approaches, which contrasts the Market-Affordability Gap with the
methodology used historically by APCHA and in place in three comparable communities.
• Defensibility,which examines case law and statutes in Colorado related to housing fees.
• Calculating the Gap, which presents the formula and the variables within each of the two main
components—the market price and the affordable price. Factors for converting the fee from
per-unit to per-employee and per-square-foot amounts are also presented.
• Fee Calculations in Comparable Communities,which examines four groups: 1)towns and
counties with fees based on the recommended Market-Affordability Gap methodology; 2) places
where similar fees were in place but have since been eliminated;3)jurisdictions with other
approaches for calculating housing fees; and 4) communities where fees in lieu are not allowed.
• Fee in Lieu Model for Aspen and Pitkin County,which provides 2012 fee amounts for APCHA's
income categories 1 through 4 and Pitkin County's 100%AMI target with justification for each
variable used in the formula.
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Additional supporting documents are provided as appendices to this report.
Terminology
Multiple terms are used by the City, County and APCHA when referring to payments by developers to
satisfy affordable housing requirements. Consistency is recommended in ordinances, codes and
guidelines used by all three entities. The terms "fee" and "fees in lieu" seem to be the most appropriate
for the following reasons:
• While there are also inconsistencies in other communities, "fee"seems to be the term most
often used.
• Pitkin County's affordable housing requirements are structured as an impact fee.
• Technically, developers do not pay with cash but rather with checks or some form of bank draft;
the term "cash" is not accurate.
In this report, the term "fee" or"fee in lieu"will be used. Each of the terms now used by APCHA,the
City of Aspen and Pitkin County is summarized below.
APCHA Guidelines
Section 12 of APCHA's Guidelines is titled Affordable Housing Dedication Fee (aka Payment-in-Lieu or
Cash-in-Lieu Fee). Within this section (Paragraph 4),the term Affordable Housing Impact Fee is also
used.
City of Aspen
Chapter 26.470, Growth Management Quota System (GMQS), of the City's Land Use Code contains 14
references to:
• Affordable housing impact fee, used when referring to the fees paid for single family and duplex
units;
• Affordable housing mitigation fees, used when indicating that affordable housing requirements
are waived for temporary food vending;
• Cash-in-lieu payment,which is the term most often used in the Code; and,
• Cash in lieu, which is used with and without hyphenation interchangeably with cash-in-lieu
payment.
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Excerpts from the code containing these references are in the appendix to this report with the
references highlighted and the page numbers provided. The terms employee housing, affordable
housing and workforce housing are all used in the Code. Distinctions among these terms are not clear.
Pitkin County
Pitkin County differs from the City of Aspen in that its requirement is structured as an impact fee, not a
fee in lieu. In the unincorporated county, building units, buying and deed restricting existing units or
providing land for the construction of employee housing are allowed as an in-lieu compliance options.
Pitkin County Ordinance 023-2005 adopted the employee housing impact fee and repealed all existing
provisions within the Land Use Code related to affordable or employee housing mitigation or impact
fees. Article 11 of the Pitkin County Land Use Code implements the adopted employee housing impact
fee. The Ordinance uses two terms: "affordable housing impact fee" and "employee housing impact
fee." The Code consistently uses the terms "employee housing impact fee" or"impact fee;"the term
"affordable" is used to describe units but is not used in tandem with the term "fee."
The Recommended Approach
The Market-Affordability Gap methodology is recommended for calculating fees/fees in lieu
applicable to both the City of Aspen's and Pitkin County's affordable housing requirements. It is based
on the difference between the market price of housing and the price that is affordable to households
with incomes that are targeted by the underlying affordable housing requirements. This methodology:
• Is transparent and relatively simple, allowing for regular updating with readily available
information from highly regulated public sources—the County Assessor and U.S. Department of
Housing and Urban Development (HUD).
• Can be used with both the City of Aspen's and Pitkin County's programs without requiring that
the programs be modified and would still likely be applicable if revisions are made since it can
be expressed in per-unit, per-employee and per-square-foot amounts.
• Has been tested in a lawsuit in Gunnison County and found by the Gunnison County District
Court to be reasonable and sound.
• Incorporates variables that can be adjusted in response to local conditions and unique
circumstances.
• Can be used to calculate fees for existing income categories as well as other categories that may
be targeted in the future.
• Reflects changes in land and construction costs since they adjust to market conditions.
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• Is applicable to both ownership and rental housing since sales of both types of units are included
in market price calculations'and since the affordable housing payment is assumed to be the
same regardless of whether the targeted households owns or rents.
• Represents the actual cost of housing available to employees without public-sector subsidies
and responsibilities; neither the City's nor the County's housing programs intend for the public
sector to subsidize compliance with affordable housing requirements.
• Provides sufficient revenue to purchase and deed restrict existing units since opportunities for
development of new units is limited.
• Is based on a widely-used method for examining the affordability of housing;the gap between
market and affordable prices is a key indicator/metric of need.
• Is the methodology most used by other mountain towns and counties in the Rocky Mountain
region for calculating housing fees.
Advantages Over Other Approaches
Aside from the recommended approach,the only other approach for calculating affordable housing
fees/fees in lieu identified through research of towns and counties in the Rocky Mountain Region is
based on the gap between the historical cost of building affordable units and their affordable price, or
the income received from sales and rental income. This is the methodology originally used by APCHA in
calculation of the fees now in their Guidelines. The market-affordability gap approach is recommended
over the historical cost-affordability gap approach for multiple reasons:
• It is easily calculated through up-to-date, reliable data on the market price of housing from a
public source (County Assessor)whereas documenting the total actual planning and
construction costs of affordable housing can be very complicated and staff intensive, especially
when land might be acquired by means other than market-rate purchases. Keeping pace when
land and construction costs increase requires regular updating of information from multiple
sources. The complexity of the documentation is not only time consuming but also involves
many figures and assumptions that are subject to challenge.
• Does not require adjustment factors to make the fees relevant to current conditions. Past costs
do not represent current costs. Affordable housing projects are not built every year. Historical
'Note: "Housing authority' (deed-restricted) units are excluded from the analysis. Free-market sales include both
owner-and renter-occupied units,and vacant units.
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costs must be updated using multiple assumptions on changes in land, design and construction
costs in order to be kept up to date.
• Likely involves less fluctuation in the amount of the fee. The cost to build affordable housing
has varied widely in the past. The market price of housing has gone up and down in recent
years but the changes have been less than the differences in the price of affordable housing
construction. Averaging of the market price over a two- or three-year period could be used to
further reduce variability in the fee amount.
• Revenues should be sufficient to build, buy or partner with private developers to produce
housing when based on market prices; calculating fees on the cost of public-sector construction
of affordable units might under-represent the real cost to produce units given future options.
Defensibility
The right to impose affordable housing requirements on new development is well established and
founded in the authority of municipal and county governments to:
• provide for the health, safety and welfare of residents;
• control land use; and
• require development to mitigate impacts it creates.
The ordinances and land use codes enacting affordable housing requirements in both Aspen and Pitkin
County address authority,justification for and purpose of the requirements. Additional justification for
the requirements that could potentially result in fees being paid does not appear to be needed. The
methodology used to calculate the fee amounts is not documented but should be for defensibility; it
should be sound and easily understood.
There is little guidance in statutes or case law, however, concerning how impact fees or fees in lieu
associated with affordable housing programs should be calculated. Only one lawsuit has been brought
against an affordable housing fee in Colorado,and Colorado statutes offer limited direction. Both are
examined as they relate to the calculation of affordable housing fees.
The Gunnison County Decision
As mentioned previously, one significant advantage of the market-affordability gap approach as a basis
for calculating fees is that it has withstood a legal challenge. In 2008,the Gunnison County Contractors
Association,Alpine Construction and Nicholas and Sara Mirolli, a couple who had applied for a permit to
build a new home, filed a complaint against the Gunnison County Board of County Commissioners and
the Gunnison County Housing Authority(the defendants). The plaintiffs filed the action in an attempt to
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invalidate a 2006 resolution creating a workforce housing fee applied to all residential construction in
the county.
A summary judgment was issued by Gunnison County District Court Judge J. Steven Patrick on March 10,
2009 finding on behalf of Gunnison County and dismissing the complaint. The judgment ruled on many
issues including the authority of the County to impose an impact fee and the multiple reasons why the
fee was not a tax.
Of particular relevance to this report is that Gunnison County's workforce housing fee is based on a
market - affordability gap as proposed in this report. The gap was calculated in a study entitled
Nexus/Proportionality Analysis for Commercial and Residential Linkage Program (referred to as "the
Analysis" in the decision) prepared by Rees Consulting, Inc. and RRC Associates, Inc. using the same
methodology presented in this report.
Citing case law from multiple states, key findings from this judgment included:
• TABOR (taxpayer bill of rights) is not applicable since "An impact fee is a type of special fee that
is not designed to rain revenue to defray the cost of a particular government service." Judge
Patrick indicated the language of the enabling statute or ordinance is the primary determinant,
not how the collected revenue is actually spent. At that time, Gunnison County had spent very
little of the revenue received from the newly created workforce housing fee.
• Plaintiffs must bear the burden of proving that the workforce housing fee is invalid beyond a
reasonable doubt. This is an important point. It is not up to the City or County to prove it is
valid and sound but for parties objecting to the fee to prove it is not. The burden of proof is on
the plaintiffs.
• The Analysis demonstrated that "The Resolution was reasonably designed to meet the overall
cost incurred by the County in alleviating the impact of residential and commercial development
on the availability of workforce housing."
• In concluding that the workforce housing fee was legitimate,the ruling found that the data in
our analysis on job generation and the fee schedule "seems reasonable." Specifically, "The
Court finds nothing inherently unsound in the methodology used by the County in imposing the
fee."
• When addressing the plaintiff's claim that the County had not shown that the lack of low cost
housing is caused by new development, the Judge found that "The recommended fee
calculation is designed to close the gap between prevailing market prices and what low-income
households can afford to pay for housing."
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The District Court's decision was not appealed.
Colorado Revised Statutes
C.R.S. 29-20-104.5 expressly authorizes local governments to impose impact fees as a condition of
approval of development permits. In accordance with this statute, Pitkin County imposes an impact fee
on residential units greater than 5,750 square feet in size and on non-residential development. While
Aspen allows a fee in lieu at the Council's discretion for requirements that are structured as inclusionary
policies or impact mitigation, the fee could potentially be considered an impact fee by the courts.
The focus of this examination is on language in the statute that pertains to how impact fees can be
calculated. The entire statute is provided in an appendix to this report. Among other less relevant
stipulations,the statute specifies that impact fees are allowed when:
• Fees are assessed according to a schedule that is legislatively adopted and generally applicable
to a broad class of property. Fees should not be established on a case by case basis.
o Note: Since City and County approval is required of substantive changes to APCHA's
Guidelines where the fee schedule is located, adoption of the fee formula by both the
City and County is recommended. It appears that annual updating of the fee could be
handled administratively if the enacting ordinances sufficiently describe the
methodology and the update process.
• Local governments establish the fee at a level no greater than necessary to defray impacts
related to proposed development. Impact fees cannot be charged to remedy existing
deficiencies.
o Note: The statute does not give guidance as to how the level of the fee should be
established. Using the gap between market and affordable prices to establish the fee,
and applying this fee only when impacts and mitigation requirements have been
determined based on job generation or public policy, appears to be sound.
The statute specifically allows impact fees on the development of low-or moderate-income housing or
affordable employee housing to be waived.
Calculating the Gap
Simply stated,the market-affordable price gap is the difference between the market price of a housing
unit and the price that is affordable for employees. The basic formula'Involves a three-step process:
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1. Calculating the amount that households in each targeted income category can afford to pay for '
housing.
2. Determining the market price for housing using records for previous home sales.
3. Comparing market prices to affordable amounts to determine the per-unit gap that exists for
each income category. This amount is then translated into per employee and per square foot
amounts based on conversion factors including the number of employees per unit and the
number of square feet of housing per employee.
Crested Butte's fee-in-lieu calculation from 2009, illustrated in the table below, serves as an example of
this formula. The per-employee and per-square-foot conversions were not part of the Town's
calculation since its code is based only on per-unit requirements.
Town of Crested Butte Fee-in-Lieu Formulas (For Illustration)
Category 1 2 3 4
AMI Range 580%AMI 81%-120% 121%-160% 161%-200%
Max. Income: 2-person HH's $42,300 $63,480 $79,350 $105,800
Targeted Income Point (middle of range) 40%AMI 100% AMI 140%AMI 180%AMI
Average Income to be Served $21,160 $52,900 $74,060 $95,220
Gross Monthly Income $1,763 $4,408 $6,172 $7,935
Affordable Monthly payment $529 $1,323 $1,852 $2,381
Prop.Taxes/Ins./HOA= 20% of pmt $106 $265 $370 $476
Mortgage Payment $423 $1,058 $1,481 $1,904
Max. Mortgage Amount (6% int, 30 yrs) $79,160 $197,899 $277,058 $356,218
5% Down $4,166 $10,416 $14,582 $18,748
Affordable Purchase Price $83,326 $208,315 $291,640 $374,966
Average Sq. Ft of Units 800 1,000 1,200 1,400
Median $ per Sq Ft. - 2009 sales $382 $382 $382 $382
Market Cost per Unit $305,600 $382,382 $458,400 $534,800
Affordability Gap: Market Cost-Affordable Price $222,274 $174,067 $166,760 $159,834
Plus 15%Administrative Fee $39,225 $30,718 $29,428 $28,206
Payment in Lieu per Unit $261,498 $204,785 $196,188 $188,040
Per Employee Payment in Lieu (1.8 employees/unit) $145,277 $113,769 $108,993 $104,467
Per SF Payment in Lieu (SF from avg size above) $327 $205 $163 $134
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There are many variables in this equation that impact the bottom line. These variables are described for
each of the main components of the formula—1)the market price; 2)the affordable price;and 3)the
gap per unit and the translation of the per-unit gap into per-employee and per-square foot amounts.
The Affordable Price
Calculating the affordable price involves six variables for which there are options.
• Incomes—To calculate affordable price,the income of households the housing requirement is
intended to benefit is first established. There are often multiple incomes categories as is the
case in Aspen, and distinct fee-in-lieu amounts for each category. Since households with higher
incomes can afford higher priced homes,the gap/fee is lower for moderate income categories
than low income categories. Most of the City of Aspen's affordable housing requirements
target Category 4 with lower income targets allowed,while the requirement on single-family
and duplex units allowed through administrative approval is based on an average of Category 2
and 3. Pitkin County's impact fee is based on 100%AMI. In Aspen, eligible incomes by
Category are not tied to the AMI and,with the number of dependents considered for ownership
units, is not easily converted to AMI,which is based on household size irrespective of the
number of adults and the number of dependents within the household.
• Average Household Size—AMI's and APCHA's income guidelines vary by household size. Most
affordable housing requirements, however, including the City of Aspen's and Pitkin County's, do
not specify the size of households that must be housed or the number of bedrooms that must
be provided. Therefore,for each income category, only one gap/fee amount is needed. To get
to this single number,the income for the size of household closest to the average household
size is used,typically either two or three persons per household. According to the 2010 Census,
the average household size was 1. 88 in Aspen and 2.09 in Pitkin County as a whole.
Communities occasionally combine income categories to derive at a single figure, as in the case
of Glenwood Springs which calculates the income for a 2.S person household. This slightly
complicates the initial calculation and annual updating process, and seems not necessary given
that the average household size in both Aspen and Pitkin County is very close to two.
• Percentage of Income Spent on Housing Payment—The standard is 30% among the other resort
communities studied. The percentage stems from mortgage criteria and Federal housing
programs though these vary somewhat,with mortgage underwriters usually using 28%to 32%
and Federal programs, like Section 8 rent subsidies, including utilities. For purposes of
calculating cash-in-lieu amounts, communities usually assume that housing is affordable if 30%
of gross household income covers the monthly mortgage (PITT) or rent payment.
• Property Taxes, Insurance and HOA Fees—It is usually assumed that 20%of the affordable
monthly payment will cover taxes, insurance and HOA fees. This percentage has been tested in
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some communities like Vail and found to be appropriate. In others, it has been assumed to be
adequate.
• Mortgage Interest Rate—The interest rate assumed for calculation of the maximum affordable
mortgage amount very much impacts the affordable price and resulting gap/fee. The following
table shows the differences in the amounts that can be borrowed assuming that 30% of income
covers PITI. For example, with a 30 year mortgage at 4%, a buyer could borrow 4.188 times
their gross annual income. At 5%, they could borrow only 3.725 times their income.
Mortgage Calculation Factors
Factor x Income
Interest Rate = Max. Mortgage Amount
4.00% 4.188
4.25% 4.064
4.50% 3.946
4.75% 3.832
5.00% 3.725
5.25% 3.620
5.50% 3.521
Note: Due to rounding, use of these factors could result in a
slightly different amount than an amortizing calculation.
Communities vary regarding the interest rate they use when calculating affordable price. The
current rate ranges from 4%to 7% among the communities examined. Communities with the
higher rates argue that their buyers seldom have a 20% down payment and must pay premium
R interest rates to obtain mortgages.
• Down Payment—Most of the communities examined assume that employees can afford 5%
down. The higher the down payment assumed,the lower the resulting gap/fee.
• Mortgage Term —Every community examined calculates the affordable purchase price based on
a 30-year fixed rate fully amortizing mortgage.
The Market Price
Within the calculation of market price there are seven items for which options exist:
• Per-Square-Foot vs. Per-Unit Price—Most high-cost mountain resort communities calculate
market price based on the market price per square foot. The per-square-foot price is then
multiplied by the size of an affordable unit to determine market price. Since many free market
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homes are often much larger than affordable workforce housing with average prices that exceed
$1 million (or substantially more),the market price per square foot is derived and applied to the
average/typical/desired size of an employee unit. Otherwise, if the market price per unit was
used to figure the gap,the gap would often be a seven-digit figure. In some communities where
market units are smaller and more affordable, like Glenwood Springs,the average per unit price
is used.
• Average vs. Median Price—The market price per square foot can be expressed as a median or
average. Communities are divided on this. The average price per square foot is typically higher
than the median price;the average is more influenced by high-end home sales.
• Type(s)of Units Included—Most communities use all free-market sales other than fractional
ownership and (where applicable) mobile homes. Glenwood Springs uses the average of two-
and three-bedroom units. Jackson and Teton County use only condominium sales. Outliers may
be excluded. Accessory dwellings are included in some communities but not others. A square
footage range is applied in Park City.
• Source of Sales Data—Assessor records are typically used. Assessor records are public,
unbiased, relatively easy to obtain, comprehensive including sales not captured by the MLS,
consistently reported and usually available for the previous year in January or February. In non-
disclosure states like Wyoming, MLS or sales reports produced by real estate offices are used.
• Period Covered —Communities usually base the calculation on sales in the previous calendar
year. Due to recent volatility in prices that caused variation in the cash-in-lieu amount, the
Town of Vail is now averaging for three years. If the number of sales in any given year is low,
use of two or three years of data would increase the sample size and thereby reduce the margin
of error.
• Location—Towns/cities typically use their municipal boundaries. Counties use county wide data
but may divide it into separate regions if there is significant price variation by area, as is the case
in Gunnison County. Incorporated areas are usually included in County calculations since the
preference is for employee housing to be located in communities with water/sewer services,
public transit and proximity to employment.
• Size of Employee Unit—The final step in the calculation of market price is to apply the median or
average price per square foot to the square footage of employee housing units. The size is
typically in the range of 800 to 1,100 square feet. It may be based on the size of existing
employee units, adopted guidelines, or what is desired as a policy. The size may vary if cash-in-
lieu amounts are needed for multiple income categories, as is the case with the City of Aspen.
The size usually increases with income at least in part due to the ability of employees with
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higher incomes to afford larger units. The size requirements in APCHA's Guidelines are smallest
for Category 1 and increase with incomes.
The Per-Unit Gap and Conversion Factors
The simplest step in the fee calculation process is the subtraction of the affordable price from the
market price. The result is a per-unit gap. Because of fluctuations in the amount from year to year
caused by market volatility, the Town of Vail has adopted a process that involves three-year averaging of
the gap.
To translate the per-unit fee into per-employee and per-square-foot amounts,two conversion factors
are used:
• Number of Employees per Household—The average in Aspen is 1.6 employees per unit based on
a 2008 survey sample of 471 resident households living in affordable ownership and rental
housing. With a relatively high percentage of respondents living in studios (16%) and one-
bedroom units (28%),the figure is slightly lower than commonly found in mountain resort
communities (1.7 to 1.8 is more typical).
• Number of Square Feet per Employee—The conversion factor of 400 square feet per employee
is in both the City Code and APCHA Guidelines. The County's Code and ordinance adopting the
affordable housing impact fee does not specify the number of square feet required per
employee. Snowmass requires 448 square feet per employee. Breckenridge uses a standard of
385 square feet per employee. Some communities, like Crested Butte, do not apply a per-
employee standard but rather divide the per-unit gap by the average or required number of
square feet for affordable units to develop a per square foot amount per unit. For purposes of
the Aspen/Pitkin County fee-in-lieu model,two per-square-foot conversion frameworks have
been developed (to suit different regulatory applications), as described later in this report.
Basalt, Eagle County and Vail charge an administrative fee to partially cover the costs associated with
administration of the program. Spending the funds received through fee-in-lieu payments to produce
affordable housing through construction or acquisition and deed restriction of market units can take
considerable staff resources and can involve hiring of expertise in land development, soils analysis,
project design and construction. Crested Butte previously charged an administrative fee but it was
dropped recently when the City Council wanted to retain its mitigation rate but lower the amount of the
fee.
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Fee Calculations in Comparable Communities
Research on the methodologies used in resort and down valley communities in the Rocky Mountain
region with affordable employee housing programs found that there are few differences in general
approach but significant variation with regard to the variables within the formulas. This research did not
attempt to cover all communities within the region but rather focused on ones that have similar
affordable housing programs or are located in the Roaring Fork Valley. Communities generally fall
within four categories:
1. Municipalities and counties that utilize a market—affordability gap approach for calculating
fees.
2. Cities and towns that had affordable housing programs with fees based on the gap between
market and affordable prices but have since eliminated their requirements.
3. Communities that utilize alternative approaches for calculating fees in lieu.
4. Communities that do not allow fees in lieu.
Examples of Fee Based on Market-Affordability Gap
The market-affordability gap methodology is the most commonly used approach for calculating the fee
in lieu as a means for satisfying affordable housing requirements in Rocky Mountain communities. Nine
towns and counties have been identified that base their affordable housing fees in lieu on the gap
between market prices and prices that are affordable to the targeted population.
• Basalt—The Town of Basalt generally allows,with some exceptions, payment in lieu only when a
fraction of an affordable housing unit is required. It is based on a standard market-affordability
gap formula developed in 2009. It is referred to as a "Community Housing Dedication Fee" with
"Payment-in-Lieu Fee" in parentheses in the Town's Guidelines. Separate fee amounts are
calculated for residential inclusionary requirements (average of Categories 2 and 3) and
commercial linkage/job generation requirements (Category 2).
• Crested Butte—The Town of Crested Butte recently adopted fees in lieu for two income
categories (1580%AMI and 81%- 120%AMI). The market price is based on all units within the
Town, lagging one to two years,with current AMI's. The fee does not include an administrative
charge. Until last year,the fee was based on the gap between the cost of developing affordable
housing and the affordable price. Due to the complexity of determining the actual cost for
development with variables like donated land, it was too difficult to regularly update the fee.
• Eagle County—The Eagle County Housing Office is updating their program requirements and
their fee-in-lieu amounts using the same basic formula as recommended herein. The revised
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but not yet adopted figures show the gap between market and affordable prices disappears
above 100%AMI.
• Glenwood Springs—The City of Glenwood Springs bases its market affordability gap on 100%
AMI. The market price is determined by taking an average of the sale prices for two-and three-
bedroom units using Assessor data. All sales within town limits are averaged except for mobile
homes and deed restricted units and the two units with the lowest and highest sale prices. The
total gap was calculated as $129,299 in 2010 but the fee in lieu was reduced to 25% of the total
($32,325) due to market conditions.
• Gunnison County—The County's affordable housing requirement is structured as an impact fee
on new residential and commercial construction rather than an option in lieu of providing units.
With a mitigation rate that increases with house size,the fee ranges from Gunnison County's
requirements withstood challenge in 2009 in a lawsuit filed by an applicant for a building permit,
their general contractor and the Gunnison County Contractors Association.
• Jackson and Teton County,WY—Jackson and Teton County's affordable housing programs are
administered by the Teton County Housing Authority,which has the responsibility for annually
updating fees in lieu for three income categories. The methodology is based on a market
affordability gap yet it is unique in that the per-unit gap is converted into a per-person fee
rather than per employee. The per-person affordability gap for a unit with one, two, or three
bedrooms is calculated by subtracting the maximum resale price of an affordable unit with one-,
two-or three-bedrooms from the average sales price of free-market condominiums in the Town
of Jackson with the corresponding number of bedrooms. Teton County uses a different
approach for calculating the gap for seasonal worker housing using wage data rather than AMI
and construction costs rather than market prices for condominium units.
• Mt. Crested Butte—The Town of Mt. Crested Butte annually updates their fee for two income
categories (S80%AMI and 81%- 120%AMI) near the first of every year using Assessor data for
all sales other than fractional in the previous year. The affordable purchase price is based on a
4% interest rate as published by Community Banks on the date when the fee is updated. The
Town does not include a charge for administration in its fee.
• Park City, UT—Park City has a unique approach for calculating income. The median monthly
wage for the previous year is determined then 6% is added for income from other sources (tips,
interest, etc.)then multiplied by 1.5,the average number of employees per household. The
City's calculation of market price is based on units sold in the previous year between 600 and
1,600 square feet,with sales excluded within areas of the community that are primarily
second/vacation homes.
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• Vail—The Town of Vail annually calculates a single fee for its inclusionary and linkage programs
based on 120%AMI and the median price per square foot of all units sold the previous year
within the town except for fractional ownership. Due to wide variation in the fee from market
price volatility,the Town has implemented a three-year averaging approach. The interest rate is
set higher than the prevailing market rate (5.5% in 2012) since borrowers seldom have 20%
down and must pay premium rates. The assumption that 20%of the affordable housing
payment covers property taxes, insurance and HOA fees was tested when the fee was first
established on older, lower-end condominium properties (since Vail had few deed restricted
ownership units), and found to be appropriate. Vail uses both market prices and incomes from
the previous year. A$3,000 administrative charge is included in the fee.
The table to follow provides details on selected communities with a similar fee calculation.
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Examples of Communities with Fee-in-Lieu Based on Market-Affordability Gap
Glenwood Jackson/ Mt.Crested
Crested Butte Springs Teton Co. Butte Park City Vail
Market Price
per sq ft $380 $219 $395 $460
avg of 2&3 $257,975-
per unit BR $480,679
time period 2010 2011 2011 2011 2011 2011
portions of
geography covered Town limits town limits town of Jackson town limits town town limits
all but MH& all but units 600- all but
type units included all DR condos fractional 1,600 SF fractional
calculation median averse averse averse median median
acreage exclusion N/A N/A N/A N/A N/A N/A
primary
more than 1 unit/lot included N/A N/A N/A residence
total/finished sq ft finished total total livable total
Incomes/Categories
med wage
1 _<80%AMI 100%AMI <_80%AMI 1580%AMI +6%x1.5 120%AMI
2 81 -120%AMI 120%AMI 81 -100%AMI 81 -120%AMI
3 101 -120%AMI
max or mid point mid max max mid N/A max
household size 2 2.5 1,2,3 2 3 2
Affordable Price
%income=affordable pmt 30% 30% 30% 30% 30% 30%
down pmt 5% 5% 5% 5% 5% 5%
interest rate 5% 7% 4% 4% 5.50%
taxes,ins, HOA 20% 20% $460 avg 20% 20%
sq feet of units 800,900 N/A 800, 1100 900 825
Admin fee None None None None $3,000
Market Affordability Gap
Per Unit—by income cat.
1 $222,034 $32,325 $183,066 $43,200 $135,000 $113,286
2 $136,951 $122,033 $10,373
3 $61,266
Fee per Sq Ft of employee
housing required N/A N/A N/A N/A $137.65
Fee per Employee N/A N/A $70,164 avg' N/A N/A $84,298
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Communities No Longer Using Market-Affordability Gap for Fee Calculation
Several communities at one time had affordable housing programs in place that allowed cash-in-lieu to
satisfy requirements based on a market-affordability gap approach but have since eliminated their
requirements.
• Steamboat Springs, CO—The City of Steamboat Springs rescinded its commercial and residential
impact mitigation programs and associated fees in lieu,which had been based on the market-
affordability gap approach. An inclusionary zoning program is still in place but information on
fees in lieu is not currently available due to staff turnover.
• Sun Valley, ID—When challenged,the City of Sun Valley's affordable housing requirements
were found by the court to be a tax since Idaho only allows impact fees for a limited number of
specifically defined uses; impact fees are not allowed for affordable housing.
• City of Longmont,CO—The City of Longmont has repealed all of its affordable housing
requirements. When an inclusionary housing program was in place,the fee in lieu was based on
the gap between market and affordable prices.
No communities have been identified that once used a market-affordability gap approach but have since
replaced it by a different method for calculating cash in lieu.
Communities Using Alternative Approaches for Calculating Fees-in-Lieu
Three communities were identified that have affordable housing fees in lieu based on the gap between
the cost to build affordable housing and the price that targeted households can afford. In Blaine County
and Telluride, updating the fee on an annual basis has not always occurred. Program administrators
citied the complexity of the task as the contributing factor.
• The Blaine County Housing Authority calculates fees in lieu for Ketchum's incentive-based
affordable housing program. It is based on the gap between the cost to develop affordable
housing and the price that is affordable for targeted households.
• Telluride uses a development cost/affordable price gap approach to calculate its payment in
lieu that combines the cost of developing affordable housing with the market price of vacant
land and then compares the sum to the affordable price. There is an adjustment for the average
floor area ratio of affordable projects to determine the actual land costs for affordable housing.
The affordable price is based on their Tier 1 income limits of 120%AMI and income targets of
80% and 90%AMI.
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• Snowmass Village gives strong preference to development of required affordable housing on
site since land is not available on which the Town could develop units if they accepted fee-in-
lieu. Fee in lieu is allowed for minor developments at the Town Council's discretion. While the
Town has not yet accepted fees in lieu,the code indicates that it shall be based on the net cost
that would be incurred by the Town in the construction of the units, or as agreed to by the Town
and developer.
• Summit County,CO is unique among the areas researched in that it has a voter-approved
housing impact fee of$2.00 per square foot on commercial development and a fee on
residential development that increases with unit size as follows:
Size of Unit Fee per Sq Ft.
<1,500 SF -0-
1,500- 2,500 SF $ .50
2,500-3,500 SF $1.00
3,500- 5,000 SF $1.50
5,000+SF $2.00
The municipalities within the county participate in this program through a revenue sharing
approach.
In-Lieu Fees Not Allowed
While it is common for fees in lieu to be allowed not by right but only as an exception, often requiring
the approval of the Council or Commissioners,two nearby jurisdictions were identified that do not allow
fees in lieu under any circumstance:
• Carbondale does not allow fees in lieu.
• Garfield County does not allow fees in lieu for satisfaction of its inclusionary housing
requirement,which is now applicable to only the portion of the county within the Roaring Fork
Valley.
Fee-in-Lieu Model for Aspen and Pitkin County
An Excel spreadsheet model was developed to consider options for the Aspen/Pitkin County fee in lieu
formula. For each significant variable,three options were considered. Through discussion with City,
County and APCHA staff,the options most appropriate for the conditions, constraints, codes and
opportunities within the two jurisdictions were determined. The table to follow shows the
recommended fee calculations for 2012.
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Recommended Fee Calculation Method and Components for Aspen and Pitkin County
City of Aspen Pitkin
Category: 1 2 3 4 County
Income Targets
Area Median Income (AMI) - 2 person household 50% 75% 110% 17S% 100%
Maximum Income $41,600 $62,400 $92,520 $145,600 $83,200
Mid Range/Target Income $20,800 $52,000 $77,460 $119,060 $83,200
Affordable Price
Affordable monthly payment (30%) $520 $1,300 $1,937 $2,977 $2,080
Affordable principal and interest(80%of pmt) $416 $1,040 $1,549 $2,381 $1,664
HOA dues, property taxes, insurance (20%) $104 $260 $387 $595 $416
Mortgage interest rate 4.5% 4.5% 4.S% 4.5% 4.5%
Maximum mortgage $82,102 $205,256 $305,752 $469,956 $328,409
Maximum affordable price-5% down $86,423 $216,059 $321,844 $494,691 $345,694
Market Price
Market Price per SF of heated floor area $1,047 $1,047 $1,047 $1,047 $874
Average Affordable Unit Size 900 900 900 900 900
Market Price per Unit $942,300 $942,300 $942,300 $942,300 $786,600
Market-Affordability Gap/Fee
per Affordable Unit $855,877 $726,241 $620,456 $447,609 $440,906
per SF of affordable unit (per unit gap/900 SF) $951 $807 $689 $497 $490
per Employee(per unit gap/1.6 employees per unit) $534,923 $453,901 $387,785 $279,756 $275,566
per SF per employee (per employee gap/400 SF per
employee) $1,337 $1,135 $969 $699 $689
With Optional 10%Administrative Charge
per Affordable Unit $941,464 $798,866 $682,501 $492,370 $484,997
per SF of affordable unit(per unit gap/900 SF) $1,046 $888 $758 $547 $539
per Employee(per unit gap/1.6 employees per unit) $588,415 $499,291 $426,563 $307,731 $303,123
per SF per employee (per employee gap/400 SF per
employee) $1,471 $1,248 $1,066 $769 $758
The components of the model are summarized in detail below to allow for regular updating.
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Income Targets
Income targets are based on the 2012 HUD Area Median Income (AMI) amounts for Pitkin County two-
person households that most closely align with APCHA's limits for ownership with one dependent. The
figures for two-person household are used since household size in Aspen and Pitkin County averages
close to two persons per unit (2010 Census persons per occupied unit:Aspen —1.88; Pitkin County—
2.09; 2008 Resident Survey: 2.1 persons per unit). The decision to switch to AMI-based income limits
was done to conform to the practices of comparable housing authorities and funding agencies like the
Colorado Housing and Finance Authority(CHFA),the US Department of Housing and Urban
Development (HUD) and the Colorado Division of Housing (DOH), and to simplify the updating process.
The income limits are shaded on the following table.
Income Limits—APCHA 2012 Guidelines Compared to AMI Targets
Categories APCHA 2012 Equivalent AMI Max Income,
Limits AMI Rounded 2012
1 $41,500 49.88% 50% $41,600
2 $60,500 72.72% 75% $62,400
3 $92,500 111.18% 110% $91,520
4 $146,500 176.08% 175% $145,600
The incomes used to calculate affordable prices are the midpoint in the range between the maximum
income and the maximum for the next lowest category. In the case of Category 1,the midpoint is
between the maximum income amount and zero. For Pitkin County's 100%AMI category, a mid point is
not used since the County's code does not specify a range or multiple income categories.
Affordable Price
I
Key variables in the fee calculation formula are assumptions about the mortgage interest rate and down
payment used to determine the affordable price. A mortgage interest rate of 4.5% is used for the 2012
calculation,which is one percentage point higher than the best available rates quoted by mortgage
lenders in the Aspen area that have historically provided loans for the purchase of affordable units. One
percentage point was added since not all buyers of affordable units will have ideal credit and
employment history and,therefore,will not be able to obtain the best available rates. A down payment
of 5%was used, which is typical. Increasing the down payment and decreasing the interest rate both
increase the affordable price and would therefore lower the fees.
Several other variables are involved in the calculation of affordable prices including the percentage of
income that is affordable to spend on housing payments,the percentage of the monthly payment that
covers mortgage principal and interest,the percentage of the payment that pays for HOA fees, property
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taxes and property insurance, and the term of the mortgage. The following assumptions, which are
standard among comparable communities, were used:
• affordable housing payment = 30%of income;
• mortgage principal and interest= 80% of affordable payment;
• HOA fees, property taxes and insurance = 20% of affordable payment;
• The mortgage term is 30 years at a fixed rate.
It is assumed that the employee housing units provided through payment of fees will average about 900
square feet in size. With variety in the existing inventory of affordable housing,the construction of
which started in the 1970's,the exact square footage of all existing units is unknown. An average of 900
seems reasonable and flexible. Increasing the size would increase the fee.
Market Sales Price per Square Foot
The most significant variable in the determination of market price per square foot and the resulting gap-
based fees is geography. Based on sales data from the Pitkin County Assessor's Office, sales prices per
square foot are highest within the City of Aspen and lowest when calculated for all of Pitkin County.
Because funds collected from development within the City will be used to provide affordable housing
within municipal boundaries whereas fees collected by Pitkin County may also be used in and near
Basalt and Snowmass Village,two different per-square-foot prices are used. Only sales within the City
are used for calculation of fees for the Categories 1 through 4. Sales throughout the county are used for
Pitkin County's fee calculation. This is the only deviation in the fee-in-lieu calculation for the two
jurisdictions.
To reduce year-to-year fluctuations in the fee amounts caused by market volatility,thereby enabling
developers to better estimate their obligations as the enter the planning and entitlement process, the
median price per square foot for sales in the previous three years is used. Both the 2011 median and
2009-11 three-year median are illustrated in the table below.
Median Sales Price per Square Foot of Heated Floor Area
Pitkin County City of Aspen
2011Median: Improved Residential Sales on<_ 5 acres $838 $1,048
3-Yr Median (2009-11): Improved Residential Sales on <_ 5 acres $874 $1,047
Source: Pitkin County Assessor; RRC calculations.
Note:The above figures are for free-market condo and residential properties; "housing authority,"
commercial/residential, mobile homes, exempt units,fractional ownership units, other Assessor
property classifications, properties with two or more residential buildings, and properties with parcel
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size of more than 5.0 acres are excluded. The median rather than mean/average prices per square foot
are used since they are less influenced by outliers.
Conversion Factors
For applicability to both City and County codes, the per-unit gap/fee amounts are converted into both
per-employee and per-square-foot amounts. The City's code imposes commercial mitigation
requirements that are expressed on a per-employee basis, whereas residential inclusionary
requirements are based on units. In both instances,fees may be accepted on a square-foot basis when
less than one employee must be housed, or less than one affordable housing unit must be provided.
The County's code requires is based on employees generated and employees that must be housed.
To convert from per-unit into per-employee amounts, a factor of 1.6 employees per unit was used. This
figure was generated from a 2008 survey of affordable housing residents.
Two distinct calculations for per-square-foot fee amounts are provided. The first, a fee per square foot
of affordable units required, is based on an average of 900 square feet per affordable unit. This is the
same average used to calculate the affordable price. The per-unit gap/fee is simply divided by 900
square feet to obtain a per-square-foot per affordable unit amount.
The second calculation converts the per-employee fee (per-unit fee divided by 1.6 employees per unit)
into a fee per square foot per employee by assuming 400 square feet per employee. This standard is
contained in both the City's code and APCHA's Guidelines. Assuming employees each need 400 square
feet of housing and there are 1.6 employees on average per unit results in a figure of 640 square feet
per unit on average to house employees. This figure is lower than the average size existing units and
does not take into account the housing needed for children and other household members.
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Appendix A: Excerpts from Aspen Land Use Code
(References to fees or cash in lieu are highlighted.)
Chapter 26.470, GROWTH MANAGEMENT QUOTA SYSTEM (GMQS)
26.470.060 Administrative applications
2. Single-family and duplex dwelling units.
C. Affordable housing requirements for the types of single-family and duplex development
described above shall be as follows:
Single-family. In order to qualify for a single-family approval, the applicant shall have five (5)
options:
1) Providing an above-grade, detached accessory dwelling unit (ADU) or a carriage
house pursuant to Chapter 26.520, Accessory Dwelling Units and Carriage Houses;
2) Providing an accessory dwelling unit, or a carriage house, authorized through special
review to be attached and/or partially or fully subgrade, pursuant to Chapter 26.520;
3) Providing an off-site affordable housing unit within the Aspen Infill Area accepted by
the Aspen/Pitkin County Housing Authority and deed-restricted in accordance with
the Aspen/Pitkin County Housing Authority Guidelines, as amended;
4) Paying the applicable affordable housing impact fee pursuant to the Aspen/Pitkin
County Housing Authority Guidelines, as amended; or
5) Recording a resident-occupancy (RO) deed restriction on the single-family dwelling
unit being constructed.
6) Providing a Certificate of Affordable Housing Credit as mitigation, pursuant to Section
26.540.060 Authority of the Certificate, commensurate with the net increase of
square footage, according to Aspen/Pitkin County Housing Authority Guidelines, as
amended. (Ord. No. 6—2010, §3) (p. 126)
Duplex. In order to qualify for a duplex approval, the applicant shall have six (6) options:
1) Providing one (1) free-market dwelling unit and one (1) deed-restricted resident-
occupied (RO) dwelling unit with a minimum floor area of one thousand five hundred
(1,500) square feet;
2) Providing either two (2) above-grade, detached accessory dwelling units or carriage
houses (or one [1] of each), or one (1) above-grade, detached ADU or carriage house
with a minimum floor area of six hundred (600) net livable square feet, pursuant to
Chapter 26.520;
3) Providing either two (2) accessory dwelling units or carriage houses (or one [1] of
each) or one (1) ADU or carriage house with a minimum of six hundred (600) net
livable square feet authorized through special review to be attached and/or partially
or fully subgrade, pursuant to Chapter 26.520;
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4) Providing an off-site affordable housing unit within the Aspen Infill Area accepted by
the Aspen/Pitkin County Housing Authority and deed-restricted in accordance with
the Aspen/Pitkin County Housing Authority Guidelines, as amended;
5) Providing two (2) deed-restricted resident-occupied (RO) dwelling units; or
6) Paying the applicable affordable housing impact fee pursuant to the Aspen/Pitkin
County Housing Authority Guidelines, as amended.
7) Providing a Certificate of Affordable Housing Credit as mitigation, pursuant to Section
26.540.060 Authority of the Certificate, commensurate with the net increase of
square footage, according to Aspen/Pitkin County Housing Authority Guidelines, as
amended. (Ord. No. 6—2010, §3) (p. 127)
7. Temporary Food Vending
j. Affordable Housing Waiver. The Community Development Director shall waive affordable
housing mitigation fees associated with the temporary new net leasable square footage
being created by outdoor food vending activities. (p. 130)
Sec. 26.470.070. Minor Planning and Zoning Commission applications.
1. Enlargement of an historic landmark for commercial, lodge or mixed-use
development. The enlargement of an historic landmark building for commercial, lodge or
mixed-use development shall be approved, approved with conditions or denied by the Planning
and Zoning Commission based on the following criteria:
a. Up to four (4) employees generated by the additional commercial/lodge development
shall not require the provision of affordable housing. Thirty percent (30%) of the employee
generation above four (4) and up to eight (8) employees shall be mitigated through the
provision of affordable housing or cash in lieu thereof. Sixty percent (60%) of the employee
generation above eight (8) employees shall be mitigated through the provision of affordable
housing or cash in lieu thereof. Page 131
4. Affordable housing. The development of affordable housing deed-restricted in accordance
with the Aspen/Pitkin County Housing Authority Guidelines shall be approved, approved with
conditions or denied by the Planning and Zoning Commission based on the following criteria:
b. Affordable housing required for mitigation purposes shall be in the form of actual newly
built units or buy-down units. Off-site units shall be provided within the City limits. Units
outside the City limits may be accepted as mitigation by the City Council, pursuant to
Paragraph 26.470.090.2. If the mitigation requirement is less than one (1) full unit, a cash-
in-lieu payment may be accepted by the Planning and Zoning Commission upon a
recommendation from the Aspen/Pitkin County Housing Authority. If the mitigation
requirement is one (1) or more units, a cash-in-lieu payment shall require City Council
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approval, pursuant to Paragraph 26.470.090.3. A Certificate of Affordable Housing Credit
may be used to satisfy mitigation requirements by approval of the Community Development
Department Director, pursuant to Section 26.540.080 Extinguishment of the Certificate.
Required affordable housing may be provided through a mix of these methods. (Ord. No. 6
—2010, §4) (p. 132)
5. Demolition or redevelopment of multi-family housing.
3. Fractional unit requirement. When the affordable housing replacement requirement of this
Section involves a fraction of a unit, cash-in-lieu may be provided only upon the review and
approval of the City Council, to meet the fractional requirement only, pursuant to Paragraph
26.470.090.3, Provision of required affordable housing via a cash-in-lieu payment. (p. 135)
Sec. 26.470.090. City Council Applications.
3. Provision of required affordable housing via a cash-in-lieu payment. The provision of
affordable housing equal to or in excess of one (1) residential unit, as required by Chapter
26.470, Growth Management, via a cash-in-lieu payment shall be approved, approved with
conditions or denied by the City Council based on the following criteria:
a. The provision of affordable housing on site (on the same site as the project requiring such
affordable housing) is impractical given the physical or legal parameters of the development
or of the site or would be inconsistent with the character of the neighborhood in which the
project is being developed.
b.The applicant has made a reasonable good-faith effort in pursuit of providing the
required affordable housing off site through construction of new dwelling units or the deed
restriction of existing dwelling units to affordable housing status.
c. The proposal furthers affordable housing goals, and the cash-in-lieu payment will result in
the near-term production of affordable housing units. A recommendation from the
Aspen/Pitkin County Housing Authority shall be considered for this standard.
The City Council may accept any percentage of a project's total affordable housing mitigation to
be provided through a cash-in-lieu payment, including all or none. Unless otherwise required by
this Title, the provision of affordable housing via a cash-in-lieu payment for a fraction of a
dwelling unit shall not require City Council approval. (p. 141)
Sec. 26.470.100. Calculations.
3. Employee housing cash-in-lieu payment. Whenever a project provides employee
housing via a cash-in-lieu payment, in part or in total, the amount of the payment shall be
in accordance with the applicable provisions of the Aspen/Pitkin County Housing Authority
Guidelines, as amended. (p. 144)
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4. Employee/square footage conversion. Whenever an affordable housing mitigation
requirement is required to be converted between a number-of-employees requirement
and a square-footage requirement, regardless of direction, the following conversion factor
shall be used: 1 employee = 400 square feet of net livable area. (p. 144)
Sec. 26.470.120. Community objective scoring criteria.
A. Community Objectives Scoring Criterion #1 —Workforce Housing.
1. Points for the number of employees housed. One (1) point shall be assigned for each
one percent (1%) by which a proposal exceeds the minimum affordable housing
requirements of this Chapter, as applicable to the particular type of development, with
actual housing units on site or off site. Depending upon the type of development,
affordable housing requirements are either expressed as a number of units, number of
employees to be housed or square footage of housing to be provided, and the score
shall be a reflection of the applicable requirement. In circumstances where a project's
affordable housing requirements are a combination of requirements, the average
percent by which a proposal exceeds each requirement shall be used. In no case shall
cash-in-lieu be used to obtain points for this criterion.
2. Points for the size of affordable housing units. One (1) point shall be assigned for each
one percent (1%) by which proposed affordable housing units exceed the minimum
square footage requirements of the Aspen/Pitkin County Housing Authority Guidelines.
In no case shall cash-in-lieu be used to obtain points for this criterion. (p. 150)
RRC Associates, Inc./Rees Consulting, Inc. 26
Affordable Housing Fee-in-Lieu Methodology October 24, 2012 Draft
Appendix B: Local Government Land Use Control Enabling Act
TITLE 29. GOVERNMENT- LOCAL
LAND USE CONTROL AND CONSERVATION
ARTICLE 20.LOCAL GOVERNMENT REGULATIONOF LAND USE
PART 1. LOCAL GOVERNMENT LAND USE CONTROL ENABLING ACT
C.R.S. 29-20-104.5 (2012)
29-20-104.5. Impact fees
(1)Pursuant to the authority granted in section 29-20-104(1)(g) and as a condition of issuance
of a development permit, a local government may impose an impact fee or other similar
development charge to fund expenditures by such local government on capital facilities needed
to serve new development. No impact fee or other similar development charge shall be imposed
except pursuant to a schedule that is:
(a) Legislatively adopted;
(b) Generally applicable to a broad class of property; and
(c) Intended to defray the projected impacts on capital facilities caused by proposed
development.
(2)A local government shall quantify the reasonable impacts of proposed development on
existing capital facilities and establish the impact fee or development charge at a level no greater
than necessary to defray such impacts directly related to proposed development.No impact fee
or other similar development charge shall be imposed to remedy any deficiency in capital
facilities that exists without regard to the proposed development.
(3)Any schedule of impact fees or other similar development charges adopted by a local
government pursuant to this section shall include provisions to ensure that no individual
landowner is required to provide any site specific dedication or improvement to meet the same
need for capital facilities for which the impact fee or other similar development charge is
imposed.
(4)As used in this section,the term "capital facility" means any improvement or facility that:
(a) Is directly related to any service that a local government is authorized to provide;
RRC Associates, Inc./Rees Consulting, Inc. 27
Affordable Housing Fee-in-Lieu Methodology October 24, 2012 Draft
(b)Has an estimated useful life of five years or longer; and
(c) Is required by the charter or general policy of a local government pursuant to a resolution or
ordinance.
i
(5)Any impact fee or other similar development charge shall be collected and accounted for in
accordance with part 8 of article 1 of this title.Notwithstanding the provisions of this section, a
local government may waive an impact fee or other similar development charge on the
development of low- or moderate- income housing or affordable employee housing as defined by
the local government.
(6)No impact fee or other similar development charge shall be imposed on any development
permit for which the applicant submitted a complete application before the adoption of a
schedule of impact fees or other similar development charges by the local government pursuant
to this section.No impact fee or other similar development charge imposed on any development
activity shall be collected before the issuance of the development permit for such development
activity.Nothing in this section shall be construed to prohibit a local government from deferring
collection of an impact fee or other similar development charge until the issuance of a building
permit or certificate of occupancy.
(7)Any person or entity that owns or has an interest in land that is or becomes subject to a
schedule of fees or charges enacted pursuant to this section shall,by filing an application for a
development permit, have standing to file an action for declaratory judgment to determine
whether such schedule complies with the provisions of this section. An applicant for a
development permit who believes that a local government has improperly applied a schedule of
fees or charges adopted pursuant to this section to the development application may pay the fee
or charge imposed and proceed with development without prejudice to the applicant's right to
challenge the fee or charge imposed under rule 106 of the Colorado rules of civil procedure. If
the court determines that a local government has either imposed a fee or charge on a
development that is not subject to the legislatively enacted schedule or improperly calculated the
fee or charge due, it may enter judgment in favor of the applicant for the amount of any fee or
charge wrongly collected with interest thereon from the date collected.
(8) (a)The general assembly hereby finds and declares that the matters addressed in this section
are matters of statewide concern.
(b)This section shall not prohibit any local government from imposing impact fees or other
similar development charges pursuant to a schedule that was legislatively adopted before
October 1, 2001, so long as the local government complies with subsections (3), (5), (6), and(7)
of this section. Any amendment of such schedule adopted after October 1, 2001, shall comply
i
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RRC Associates, Inc./Rees Consulting, Inc. 28
Affordable Housing Fee-in-Lieu Methodology October 24, 2012 Draft
with all of the requirements of this section.
(9) If any provision of this section is held invalid, such invalidity shall invalidate this section in
its entirety, and to this end the provisions of this section are declared to be nonseverable.
RRC Associates, Inc./Rees Consulting, Inc. 29
I
I
MEMORANDUM
TO: Mayor Ireland and Aspen City Council
FROM: Chris Bendon, City of Aspen Community Development Directo
RE: Certificates of Affordable Housing Code Amendment
DATE: October 30, 2012
SUMMARY:
The Certificates of Affordable Housing Program is nearly
three years old. The first project is complete and occupied
and the first Credit Certificates were issued in February this
year. A second project is under construction and is expected W
to be occupied in roughly a year. The program allows a
developer of affordable housing to sell his "credit" to another
developer to use to satisfy housing mitigation requirements.
When a Certificate project is built, the units are of specific
APCHA Categories and the Credits are issued according to
those Categories.
The program needs an update. The original code adopted for
this program didn't anticipate the need for Certificate holders
to exchange Certificates between different Category
designations. This presents a problem between buyer and
sellers of Certificates — "I'd like to buy some Category 2
Certificates,but you're only selling Category 3 Certificates."
City ComDev staff has developed a concept of how to exchange between Categories by using the
APCHA cash-in-lieu figures. The APCHA cash-in-lieu rates reflect actual subsidy costs to
house employees of various Categories. It is more expensive to mitigate for lower Category
employees as the subsidy required to house lower Category employees is greater. The same
condition exists in the Certificates program—it is more expensive for a developer to create lower
category units.
By using these APCHA rates, Certificate holders could exchange their Category designations in
an equivalent manner. Using the current APCHA rate structure (which will be updated soon), a
4.0 FTE Category 2 Certificate would equate to a 3.75 FTE Certificate at Category 3. The
APCHA rates will change from time to time and the code would always refer to the APCHA
rates in effect at the time of exchange.
ComDev has reviewed this concept with Peter Fornell, the developer of the first two projects and
Certificate owner, and representatives of the Boomerang project. Other clean-ups and
clarification of terms would be included in the re-write. Staff is seeking Council support to
proceed with this update to the Certificates program.
s .
� ,�
i
MEMORANDUM
TO: Mayor Ireland and Aspen City Council
FROM: Chris Bendon, City of Aspen Community Development Directo
RE: Accessory Dwelling Unit Code ter
Amendment
DATE: October 30, 2012 g „;Y
SUMMARY:
The City requires the redevelopment ("scrape-and-
replace”) of single-family and duplex properties to
provide housing mitigation. Because these projects are
replacement of existing development, the mitigation
requirements are lower than for new development.
Options for these projects include providing an off-site
unit, payment of a cash-in-lieu, providing an AH Certificate, or building an ADU on the property.
An ADU is an accessory dwelling unit that must be separate from the main house and may only be
rented to a local worker. An ADU does not provide any other benefit to a property and "counts" in
floor area. The ADU and cash-in-lieu options are highly preferred over other options.
There are approximately 150 to 200 ADUs, most of which were built as a result of this mitigation
requirement. Occupancy of these units is estimated to vary between 20 and 30 percent, much lower
than desired by many. However, because the mitigation requirements are based on the net
expansion, the actual occupancy in ADUs may still exceed that which would have been achieved
through the cash or certificate options.
ComDev staff is requesting direction to proceed with eliminating the ADU mitigation option.
Remaining options would be cash-in-lieu or the certificate program. This change would provide a
boost to the certificate program, which has yet to see a certificate used for mitigation. ADUs could
still be built, but would not longer provide a property with a mitigation credit.
If the ADU option is eliminated, staff also requests direction to provide a mechanism to remove
existing ADUs (plus removing the deed restriction) with a reduced mitigation. Currently, the
program does not have a reversion mechanism—an owner can easily create an ADU,but the code is
silent on how to remove an ADU.
The existing ADU inventory does have a considerable (maybe not optimal) role in the overall
housing inventory. While occupancy is low, simply eliminating existing ADUs will have a
detrimental effect on the housing stock. Staff suggests an administrative process with a cash-in-lieu
or certificate option at a rate of 25% that required for scrape-and-replace projects. This would
account for the approximate actual impact on the community. Removing an ADU from a property
would continue to be at the option of the property owner.
r :
•
��
MEMORANDUM
TO: Mayor and City Council
FROM: John D. Krueger,Director of Transportation
THRU: Randy Ready,Assistant City Manager
DATE OF MEMO: October 24,2012
MEETING DATE: October 30,2012
RE: Revised Rubey Park Funding Request of the EOTC
REQUEST OF COUNCIL: Staff is seeking direction and approval to move forward with a
revised funding request submitted to the Elected Officials Transportation Committee(EOTC) at
the meeting on October 12, 2012 in the amount of$200,000 for the planning, scoping and public
involvement/outreach for the Rubey Park Transit Center for the next 20 years. If Council
approves the request for planning funds, it would go forward to each jurisdiction for approval at
their regular meetings as a part of the 2013 EOTC Budget.
PREVIOUS COUNCIL ACTION: At a previous Council work session staff provided a
briefing to Council on the October 18, EOTC meeting. During the briefing staff asked Council
for direction and if they agreed with the proposed EOTC funding request for the planning,
outreach, design and engineering of Rubey Park in the amount of$500,000. Council directed
staff to go ahead with the request. At the October 18, 2012 EOTC meeting, City Council as a
member of the EOTC agreed to "table"any action on this funding request until a work session
between staff and City Council could be held. The 2013 EOTC proposed budget is waiting on
direction from City Council before going forward for approval.
BACKGROUND: Rubey Park has been in operation for over 30 years and has served the transit
system well. It was built to accommodate a much smaller transit system than it accommodates
today. The transit facility is almost at the end of its useful life and is in need of repair,
rehabilitation and redesign in order for it to keep up with current and future bus operations,
including but not limited to BRT. (Please see the attached EOTC memo for more details).
DISCUSSION:
After the October 18, EOTC meeting Transportation staff met with staff from Asset
Management, Engineering, and the Parks Department to discuss Rubey Park. All agreed to team
up and help with the project. Transportation, Engineering and RFTA will contribute funds
towards some basic repairs in 2013 with funds contained within their budgets.
Page 1 of 4
Basic repairs could include fixing the tripping hazards in the sidewalks, curb and gutter
replacement, a new interior paint scheme, floor repair, and some fixture replacement.
Beyond these basic repairs to the building and sidewalks,the staff consensus was that the facility
needs to go through a comprehensive pre-design and planning process with public outreach and
involvement. The project could be divided up into the following phases:
Phase I: Project planning,scoping, public involvement/outreach and conceptual
design
Phase II: 30% Preliminary Design
Phase III: Final Design (Plans & Specifications)
Phase IV: Project Construction
Phase V: 20 year plan
Phase VI: New multi-use Transit Center
Phase I:
The first phase would include planning, scope of work, public outreach and conceptual design.
This phase will require an interdisciplinary project consultant team. A Request for Proposals
(RFP) would be issued.
The funding request to the EOTC in the amount of$200,000 beginning in 2013 would be used
for this phase of the project.
Phase I could have the following planning elements:
• Existing Conditions and Site Assessment $25,000
• Existing usage, problems and issues
• Limitations of current facility
• Engineering Research
• Building, Site, Easement and ROW Survey
• Drainage Plan
• Utility Assessment and research
• Quality of Experience
• Assessment of future demand(BRT and other transit services)
• Needs assessment $50,000
• Project Goals and design issues clarified
• Identify possible improvements needed
• Technical needs and wants for transit facility
• Social needs and wants
• Prioritize needs and wants
• Design Assessment $50,000
• Clarify the needs, wants and desires for the transit facility for design purposes
• Sustainable Goals
Page 2 of 4
• Conceptual design $25,000
Illustrate design concepts based on the needs and priorities established in the
design assessment
• Public Involvement/Outreach $50,000
As with most major projects the public outreach and involvement portion of the design budget
could be significant
This planning process would also address a 20 year plan for the facility and a conceptual plan for
a new multi-use transit center of the future.
ENVIRONMENTAL IMPACTS:
An upgrade to Rubey Park to make it function more efficiently could improve ridership on transit
and reduce bus idling and bus repositioning around town. Both of these impacts would have a
positive effect on the environment.
FINANCIAL/BUDGET IMPACTS:
There would be no immediate impact to the City of Aspen budget. If the project moves forward
there could be budgetary impacts related to design or construction.
Phase I Planning: $200,000-EOTC
The funding request to the EOTC in the amount of$200,000 beginning in 2013 would be used
toward the first phase of the project for planning and public outreach.
After talking to Tom Oken with the County about the impacts of funding this request from the
ETA lockbox or the $3 million capital pool, staff recommends that this funding would come out
of the $3 million capital pool. After funding is provided for the AABC underpass for$1,125,000
there will be a balance of$1,875,000 left in the $3 million capital pool.
The $3 million capital pool is made up of funding from the ETA lock box at 50%and the
Snowmass lock box at 50%. The two lock boxes would eventually be repaid from discretionary
funds for any project funded from the $3 million capital pool. During the creation of the current
EOTC spending policy including the $3 million capital pool for projects Rubey Park was
prioritized as one of the top projects to be funded from the pool and a reason for creating the
pool.
If the project is funded from the ETA lockbox as originally requested there would be no future
repayment to the ETA lockbox and available funding for future projects could be reduced.
Phases II & III Design:
Funding for design phases II and III, of the project would be requested from the EOTC capital
pool.
Page 3 of 4
Phase IV Construction:
It is important to note that funding for construction has been anticipated but not resolved.
Funding sources could include funding from grant opportunities,the City of Aspen, RFTA or the
EOTC.
The Transportation staff(with help from RFTA staff)have applied for a statewide FASTER
grant for construction of improvements to Rubey Park. An important consideration for this grant
is local commitment to the project, local investment in the project and at least a 30%design level
of the project. A 100%final design of the project would be preferred. If local investment can be
demonstrated with the planning funding request to the EOTC approved the project becomes
much more competitive in the eyes of the grant evaluators. If the community views this project
as important it is critical to get it to a fully designed-shovel ready project as soon as possible.
It is important to note that CDOT is strongly considering this project for statewide funding if
funding for planning through final design is provided locally.
RECOMMENDED ACTION: Staff is seeking approval to move forward with a revised EOTC
funding request for 2013 in the amount of$200,000 for the planning, scoping and public
outreach of the Rubey Park Transit Center.
ALTERNATIVES: If Council does not want to approve the staff recommendation for planning
funding, the minor building repairs programmed in 2013 would go forward as planned but the
rest of the facility would remain in its current condition. This will compromise the current and
future bus operations, aesthetics and other issues associated with Rubey Park.
Another alternative would be to replace all of the existing concrete flatwork in the facility(bus
parking and staging areas and sidewalk area) at an estimated cost of$1.2 million. No change ih
design or use would be made. The old failing concrete would be removed and replaced with new
concrete. This would not solve any structural long term problems but would help in the near
term.
CITY MANAGER COMMENTS:
ATTACHMENTS:
Page 4 of 4
MEMORANDUM
TO: Mayor and City Council
FROM: Lee Ledesma,Utilities Operations Manager
THRU: David Hornbacher,Director of Utilities and Environmental Initiatives
Randy Ready,Assistant City Manager
Don Taylor,Finance Director
DATE OF MEMO: October 19,2012
MEETING DATE: October 23,2012
RIE: 2012 Water Utility Business Plan—
Rate Recommendations
REQUEST OF COUNCIL: City Council is asked to review and approve the proposed water
rate adjustments that will transition Water Utility to a cost-of-service model in the next five
years, as shown in Alternative 1 of the Water Utility Business Plan Executive Summary Draft
Report prepared by Red Oak Consulting.
PREVIOUS COUNCIL ACTION: Council approved a five percent monthly bill rate increase
in November 2011 with a January 1, 2012 effective date while staff and consultant reviewed
Water Utility rates and fees. Many of these rates and fees have not been increased since they
were created in the 1980's.
Water Utility charges and dates they were last analyzed and updated (outside of recent short-term
five percent adjustment on monthly bills)are as follows:
Raw Water Rates 1994
Pump Charges 2006
Variable Charges 2006
Demand Charges 1985
Fire Protection Charges 1985
Utility Investment Charges 1985
Hook Up Charges 1995
The last Water Utility Business Plan update was completed in April of 2006 and specifically
addressed water variable and pumping charges and the four-tier usage structure without
analyzing other fees and charges as they relate to the overall health and revenue sources of the
Water Fund.
BACKGROUND:
The seven Water Rates/Charges being evaluated and presented in tonight's worksession are
defined as follows:
1. Raw Water Rates — Charge to recover costs of untreated water supply for irrigation or
snowmaking purposes. Charge will be one of two rates. In pressurized system, charge
Page 1 of 2
will be on a metered raw water account and be billed per 1,000 gallons on an annual
basis. On a ditch system account, customers will be billed per 1,000 sq. ft. annually.
2. Pump Charges—Charge recovers cost associated with booster pump stations and is based
on the number of pump stations needed to deliver water to the customer and the quantity
of water used.
3. Variable Charges — Charge recovers remaining costs and is based on quantity of water
used.
4. Demand Charges — Charge recovers capital costs associated with potential customer
water demands and is based on the number of Equivalent Capacity Units (ECUs) and the
Billing Area Factor(BAF).
5. Fire Charges — Charge recovers fire protection related costs and is based on the quantity
of ECUs and the BAF.
6. Utility Investment Charges — Charge to recover certain debt service costs allocated to
new customers which is based on a new customer's ECU rating and BAF.
7. Hook-Up Charges — Charge based on a new customer's line size to recover certain costs
of making a physical connection to the water system.
DISCUSSION: Staff is seeking guidance from Council on the two rate alternatives being
presented in the Water Utility Business Plan. The two alternatives seek to recover the full cost of
providing treated and untreated water service to Aspen water customers. Alternative 1 is a Cost-
of-Service transition over five years and is the recommended alternative by utilities staff and rate
consultant. Alternative 2 is a Uniform Adjustment also for a five-year period. It has been over
six years since the last Water Utility Business Plan study was conducted and presented to
council.
FINANCIAL/BUDGET IMPACTS: The financial implications of the recommended cost-of-
service rate are detailed in the attached Water Fund Long Range Plan (LRP), as well as in the
Water Utility Business Plan. Projected revenue requirements for budget years 2013 through
2017 are shown in Table 2-1 of the 2012 Water Utility Business Plan.
ENVIRONMENTAL IMPACTS: Water rates continue to encourage conservation with a
projected two percent per year reduction in water use by each of Aspen's water customers being
identified by water rate consultants.
RECOMMENDED ACTION: Staff recommends proceeding with first reading of ordinance to
implement five-year transition to cost-of-service water rates and the associated 2013 adjustment
to the Utility Investment charge at next regular council meeting.
ALTERNATIVES: Council may request additional rate information and/or alternatives to
satisfy Water Fund revenue requirements currently forecasted in the Water LRP.
PROPOSED MOTION: I move to support Alternative 1 and request staff to draft ordinance
for first reading in November 2012 at next regularly scheduled council meeting.
CITY MANAGER COMMENTS:
ATTACHMENTS: Exhibit A—Water Fund LRP; Exhibit B—Water Utility Business Plan
Page 2 of 2
City of Aspen - 2013 Budget
421 Water Utility Fund
Audit Audit Audit Audit Audit Forecast Budget
2007 2008 2009 2010 2011 2012 2013 2014 2015
Beginning Balance $8,623,925 $10,159,342 $9,678,324 $9,990,559 $8,354,389 $6,687,188 $3,498,816 $2,600,486 $2,989,536 $3
Revenues
General Government Revenue
Subtotal,General Government Revenue $12,479 $32,169 $32,761 $20,749 $24,490 $23,100 $23,300 $23,700 $24,100
Water Revenue
Demand Service $1,423,962 $1,461,011 $1,478,889 $1,482,269 $1,496,581 $1,649,000 $1,719,500 $1,841,700 $1,965,300 $2
Variable Service $2,345,504 $1,840,150 $1,961,372 $1,977,664 $1,890,791 $2,532,000 $2,577,300 $2,745,500 $2,925,000 $3
Total of Other Revenue $1,061,988 $899,258 $858,943 $749,763 $793,912 $834,000 $1,021,800 $1,161,00 0 1 205 300 Ll
Subtotal, Water Revenue $4,831,454 $4,200,419 $4,299,205 $4,209,696 $4,181,285 $5,015,000 $5,318,600 $5,748,200 $6,095,600 $6
Other Revenue
Subtotal,Other Revenue $621,135 $798,488 $503,151 $280,923 $221,290 $102,273 $30,100 $85,100 $89,100
Tap Fees and Transfers
Total of Other Revenue $459,270 $528,335 $1,046,190 $395,966 $282,264 $352,000 $329,000 $339,000 $350,000
Transfer-Electric-Drainline Repayment $0 $0 $0 $0 $0 $0 $0 $0 $158,000
Tap Fees $1,385,490 $1,323,273 $499,031 $436,386 $2,364,257 $811,000 $558,000 $1,503,750 $1,178,100 ;
Subtotal, Tap Fees and Transfers $1,844,760 $1,851,608 $1,545,221 $832,352 $2,646,522 $1,163,000 $887,000 $1,842,750 $1,686,100 $1
Total Revenues and Transfers $7,309,828 $6,882,684 $6,380,338 $5,343,720 $7,073,587 $6,303,373 $6,259,000 $7,699,750 $7,894,900 $7
Expenditures
Operating Expenses
Subtotal, Operating Expenses $3,446,668 $3,759,913 $3,733,106 $3,522,492 $3,813,756 $4,231,580 $4,180,130 $4,347,000 $4,471,000 $4
Capital Expenses
Subtotal, Capital Expenses $1,177,742 $1,065,785 $1,130,846 $2,028,210 $841,454 $3,824,466 $1,612,600 $1,589,500 $1,691,900 $1
Transfers
General Fund $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1
City Employee Housing Fund $0 $40,720 $43,440 $65,900 $128,550 $136,000 $139,000 $146,000 $149,000 '
Parks Fund-Debt Service 2005 Bonds $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000
Renewable Energy Fund-Capital Projects $0 $877,800 $0 $126,730 $2,802,030 $26,700 $0 $0 $0
Parking Fund-Galena Plaza Redevelopment $0 $0 $0 $0 $0 $50,000 $0 $0 $0
Parks Raw Water Management/Supplemental $0 $0 $0 $0 $0 $73,000 $75,600 $78,200 $80,900
Total of Other Transfers 469 483 10 710 20 000 5 000 $0 LO LO
Subtotal, Transfers $1,150,000 $2,538,003 $1,204,150 $1,362,630 $4,085,580 $1,435,700 $1,364,600 $1,374,200 $1,379,900 $1
Total Uses $5,774,410 $7,363,701 $6,068,102 $6,913,332 $8,740,789 $9,491,746 $7,157,330 $7,310,700 $7,542,800 $7
Increase(Decrease)to Fund Balance $1,535,417 ($481,019) $312,236 ($1,569,612) ($1,667,202) ($3,188,373) ($898,330) $389,050 $352,100 $
Ending Fund Balance $10,159,342 $9,678,324 $9,990,559 $8,354,389 $6,687,188 $3,498,816 $2,600,486 $2,989,536 $3,341,636 $3,
City of Aspen, Colorado
Water Utility
Business Plan
Executive Summary
Draft Report
October 19, 2012
Report Prepared By:
RED N
O ARCADIS
100 Fillmore Street
Suite 200
Denver, CO 80206
05557006 (303)316-6500
Table of Contents
Contents
1 Executive Summary 1-1
1.1. Introduction ................................................................................................................... 1-1
1.2. Definitions ..................................................................................................................... 1-2
1.3. Assumptions.................................................................................................................. 1-2
1.4. Findings......................................................................................................................... 1-2
2. Cost of Service 2-1
2.1. Cost of Service.............................................................................................................. 2-1
3 Rate Design 3-1
3.1. Equivalent Capacity Unit............................................................................................... 3-1
3.2. Billing Area Factor......................................................................................................... 3-1
3.3. Existing Rates............................................................................................................... 3-1
3.3.1. Potable Water Rates..................................................................................... 3-1
3.3.2. Raw Water Rates.......................................................................................... 3-2
3.4. Revenue from Existing Rates....................................................................................... 3-2
3.5. Proposed Rates............................................................................................................ 3-2
3.5.1. Alternative 1 —Transition to Cost of Service................................................. 3-2
3.5.2. Alternative 2—Uniform Adjustment............................................................... 3-3
3.6. Comparison of Monthly Bills ......................................................................................... 3-4
3.6.1. Alternative 1 —Transition to Cost of Service................................................. 3-4
3.6.2. Alternative 2—Uniform Adjustment............................................................... 3-7
4 Utility Investment Charges 4-1
4.1. Introduction ...................................................................................................................4-1
4.2. Existing Charge............................................................................................................. 4-1
4.3. Proposed Charge..........................................................................................................4-1
List of Tables
Table 1-1. Summary of Revenue Adjustments Produced by Proposed Rate Alternatives.......... 1-3
Table 1-2: Comparison of Monthly Residential Bills Calculated Using Western Region CPI with
ActualBills for 1984-2012........................................................................................................... 1-4
Table 2-1. Projected Net Revenue Requirements........................................................................ 2-1
Table 2-2. Summary of Cost of Service Analysis......................................................................... 2-2
Table 3-1. Projected Revenue from Existing Rates..................................................................... 3-2
Table 3-2. Comparison of Existing and Transition Monthly Water Rates..................................... 3-3
Table 3-3. Comparison of Existing and Uniform Monthly Water Rates........................................ 3-4
Table 3-4. Comparison of Monthly Residential Water Bills under Existing and Transition Rates 3-5
Table 3-5. Comparison of Monthly Commercial Water Bills under Existing and Transition Rates3-6
Table 3-6. Comparison of Monthly Residential Water Bills under Existing and Uniform Rates... 3-8
Table 3-7. Comparison of Monthly Commercial Water Bills under Existing and Uniform Rates.. 3-9
City of Aspen,Colorado
RED Water Utility Business Plan
`'° Draft Report
Table of Contents
Table 4-1. Development of Proposed Utility Investment Charge.................................................4-2
Appendices
A. Replacement Cost Development by Merrick-McLaughlin Water Engineers
B. Billing Area Factors
City of Aspen,Colorado
• RELY Water Utility Business Plan
Draft Report
1 . Executive Summary
1.1. Introduction
The City of Aspen, Colorado provides water utility services to approximately 3,800
customers. The City's water operations are self-supporting with funding for capital and
operating requirements derived primarily from rates and utility investment charges.
Water sales revenue since 2007 has been virtually unchanged due to very modest growth,
reduced usage due to conservation and infrequent rate adjustments. Prior to 2012, the
most recent rate increases were as follows:
Potable Water Rates
Demand Charge 1985
Fire Protection Charge 1985
Pumping Charges 2006
Variable Charges 2006
Raw Water Rates 1994
Utility investment charges are also slowing with most revenue coming from
redevelopment projects. The most recent increase in utility investment charges was in
1985.
Over the past five years, operating expenses increased an average of 4.2%per year and
average annual infrastructure costs increased 7.3% per year. Additionally, the water
utility made nearly $4.8 million in one-time transfers to other City funds during this
period.
These factors have led to declining water fund reserves. Reserves have decreased from
$10.2 million at the beginning of 2008 to an estimated$3.5 million at the beginning of
2013. The reserves still exceed the minimum target reserve of 12.5%of water fund
expenditures ($0.9 million) but the rapid decrease indicates the inability of water fund
revenues under existing rates and charges to meet annual expenditures.
The City authorized Red Oak Consulting to complete a Water Fund business plan study
to address these challenges. This study includes:
■ Determining ability of revenue from existing rates and other sources to meet
revenue requirements during the study period,
• iZEL� City of Aspen,Colorado
u nun rro
Water Utility Business Plan 1-1
Draft Report
Section 1
Executive Summary
• Determining cost of providing water service for each year of the study period,
• Developing water rate alternatives that produce sufficient revenue to meet annual
revenue requirements during the study period, and
• Updating utility investment charges (UICs).
This report summarizes the Water Fund business plan study assumptions, procedures,
findings and recommendations.
1.2. Definitions
The following terms are used throughout the report and are defined in this section.
• Cost of service means the annual expense determined through a detailed analysis
of revenue requirements resulting in the cost allocation to each rate component. -
■ Existing rates mean water rates in effect January 2012.
• Study period means the five-year period, 2013 through 2017.
1.3. Assumptions
This business plan study is based on numerous assumptions. Changes in these
assumptions could have a material effect on study findings. Red Oak incorporated the
following key assumptions into the study:
• The Long Range Plan (LRP)provides annual revenue from non-rate sources and
revenue requirements for the study period.
• Growth in water accounts is 2.0%per year.
• Water usage per account will decrease by 1.0%per year.
1.4. Findings
Principal findings of the water business plan study are as follows:
• Red Oak conducted a comprehensive water utility cost of service analysis in
accordance with industry standard methods.
• Red Oak proposed two rate alternatives to produce sufficient revenue to meet
annual revenue requirements identified in the Long Range Plan:
♦ Alternative 1 (Cost of Service Transition) -Provides initial transition to cost
of service rates over five-year period.
♦ Alternative 2 (Uniform Adjustment) - Increases rates by uniform percentage
amount.
City of Aspen,Colorado
• RED ` water Utility Business Plan 1-2
Draft Report
Section 1
Executive Summary
■ Table 1-1 compares the revenue increases produced by the proposed alternatives
rate adjustments for rate component. Each alternative is designed to generate a
similar annual revenue amount.
Table 1-1.
Summary of Revenue Adjustments Produced
by Proposed Rate Alternatives
Revenue Adjustments Annual
Description 2013 2014 2015 2016 2017 Average
Alternative 1 -Cost of Service
Transition
Demand Charge 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Fire Protection Charge 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Pumping Charge 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Variable Charge 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Raw Water Charge 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Alternative 2- Uniform
Adjustment
Demand Charge 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Fire Protection Charge 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Pumping Charge 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Variable Charge 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Raw Water Charge 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
■ Table 1-2 calculates the monthly bill for a typical residential customer using the
annual increase in the Western Region Consumer Price Index (CPI since 1984).
The bill is calculated to increase from $20.43 in 1984 to $45.45 in 2012, a 122.5%
increase. These Western Region CPI-based bills are compared with the actual
monthly bill during the same period. Actual bills increased from $20.43 in 1984 to
$24.23 in 2012, an 18.6% increase.
City of Aspen,Colorado
• KEI� Water Utility Business Plan 1-3
""` Draft Report
Section 1
Executive Summary
Table 1-2:
Comparison of Monthly Residential Bills
Calculated Using Western Region CPI with Actual Bills
for 1984 - 2012
(6,000 gallons, 2.4 ECU, Billing Area 1, No Pumping)
Western Region CPI
Calculated Actual
Year Index Bills Bills
1984 101.90 $20.43 $20.43
1985 105.50 21.15 20.43
1986 109.60 21.97 20.43
1987 111.20 22.29 20.43
1988 115.70 23.20 20.43
1989 121.10 24.28 20.43
1990 127.40 25.54 20.43
1991 134.60 26.99 20.43
1992 138.10 27.69 20.43
1993 142.60 28.59 20.43
1994 146.20 29.31 20.43
1995 150.30 30.13 20.43
1996 154.40 30.96 20.43
1997 159.10 31.90 20.43
1998 161.60 32.40 20.43
1999 164.30 32.94 20.43
2000 168.80 33.84 20.43
2001 175.10 35.11 20.43
2002 177.10 35.51 20.43
2003 181.70 36.43 20.43
2004 185.20 37.13 20.43
2005 190.70 38.23 20.43
2006 198.30 39.76 23.08
2007 202.40 40.58 23.08
2008 211.10 42.32 23.08
2009 211.40 42.38 23.08
2010 216.70 43.45 23.08
2011 220.20 44.15 23.08
2012 226.70 45.45 24.23
City of Aspen,Colorado
• I:kD ` Water Utility Business Plan 1-4
Draft Report
2. Cost of Service
2.1. Cost of Service
Red Oak determined the cost of service to be recovered from each water rate component
for each year of the study period. The water rate components include demand, fire
protection, pumping, variable and raw water charges. Red Oak determined the cost of
service in accordance with industry standards:
The initial step to determine cost of service for each rate component is identifying net
revenue requirements to be recovered from water sales revenue. Table 2-1 summarizes
the development of annual net revenue requirements and is based on the LRP.
Table 2-1.
Projected Net Revenue Requirements
Line Description 2013 2014 2015 2016 2017
Revenue Requirements
1 Operating $ 4,180,130 $ 4,347,000 $ 4,471,000 $ 4,643,000 $ 4,793,000
2 Capital 1,612,600 1,589,500 1,691,900 1,685,700 1,706,000
3 Transfers 1,364,600 1,374,200 1,379,900 1,388,700 1.397,600
4 Total Revenue Requirements $ 7,157,330 $ 7,310,700 $ 7,542,800 $ 7,717,400 $ 7,896,600
Less Non-Water Sales Revenue
5 General Government ($23,300) ($23,700) ($24,100) ($24,500) ($24,900)
6 Water(Non-Rate) (259,000) (371,000) (383,000) (396,000) (409,000)
7 Other (30,100) (84,100) (87,100) (118,100) (119,100)
8 Transfers (329,000) (339,000) (508,000) (518,000) (529,000)
9 Utility Investment Charges (558,000) (1,503,750) (1,178,100) (856,650) (914,400)
10 Fund Balance(Decrease) Increase (898,365) 331,574 223,106 59,904 244,725
11 Total Non-Water Sales Revenue ($2,097,765) ($1,989,976) ($1,957,194) ($1,853,346) ($1,751,675)
12 Net Revenue Requirements $ 5.059, 65 $ 5,320.724 $ 5,585,606 R 5,864,054 $ 6.144,925
RED City of Aspen,Colorado
Water Utility Business Plan 2-1
Draft Report
Section 2
Cost of Service
The final step is allocating net revenue requirements to water rate components. Potable
water costs include four rate components:
• Demand Charge costs include capital costs associated with potential customer
water demands.
• Fire Protection Charge costs include operating and capital costs associated with
potential fire demands.
• Pumping Charge costs include operating and capital costs associated with booster
pump stations.
• Variable Charge costs include operating and capital costs associated with average
day water demands and the remaining costs not included in the other potable
water related costs.
Raw water costs are operating and capital costs associated with the delivery of raw water
in pressurized mains and ditch conveyance systems.
Table 2-2 summarizes the findings of the cost of service analysis for 2013 by comparing
cost of service (net revenue requirements) with revenue from existing rates for each water
rate component.
Table 2-2.
Summary of Cost of Service Analysis
2013 Revenue Indicated
From Existing 2013 Cost of Percent
Line Description Rates Service Adjustment
1 Demand Charge $1,728,391 $1,275,320 (26.2%)
2 Fire Protection Charge 365,859 879,189 140.3%
3 Pumping Charge 268,361 451,729 68.3%
4 Variable Charge 2,388,958 2,125,562 (11.0%)
5 Raw Water 129,434 327,765 153.2%
6 Total $4,881,003 $5,059,565 3.7%
City of Aspen,Colorado
KED `` Water Utility Business Plan 2-2
^""'"' Draft Report
3. Rate Design
3.1. Equivalent Capacity Unit
Each customer is assigned an equivalent capacity unit(ECU)value that represents their
potential water system capacity requirements. Section 25.08.050 of the City's municipal
code defines the equivalent capacity unit(ECU) as "a unit reflecting that part of the
capacity of the water system necessary to serve a standard water customer, with
multiples or fractions of the unit including a maximum number and type of water fixtures,
a maximum irrigated area, certain cooking facilities or other water demand factors."
Section 25.08.090 shows the schedule of ECUs. The ECU is included in the demand, fire
protection and variable charges.
3.2. Billing Area Factor
The City's water system is divided into nine different billing areas. An individual
weighting factor known as a billing area factor(BAF) is assigned to each area. These
factors assessed the relative difficulty to serve each area of the water system compared to
the Central Aspen area due to location, density, and other factors. The billing area factors
are defined in Section 25.08.070 of the City municipal code and are shown in Appendix
B of this report. The BAF is included in the demand and fire protection charges.
3.3. Existing Rates
3.3.1. Potable Water Rates
Existing potable water rates have been in effect since January 2012. The rates include
demand, fire protection, pumping, and variable charges and have the following structure:
• Demand Charge varies with the number of ECUs and the BAF associated with
the customer's location.
• Fire Protection Charge varies with the number of ECUs and the BAF associated
with the customer's location.
• Pumping Charge varies with the number of pump stations needed to deliver water
to the customer and the quantity of water usage.
• Variable Charge has a four-tier increasing rate structure. The size of each tier is
based on the customer's number of ECUs as follows:
♦ First tier includes 5,000 gallons per month per ECU.
♦ Second tier includes 10,000 gallons per month per ECU.
♦ Third tier includes 5,000 gallons per month per ECU.
RED Water of Aspen,Colorado 3-1
Water utility Business Plan
Draft Report
Section 3
Rate Design
♦ Fourth tier includes all usage greater than 20,000 gallons per month per ECU.
3.3.2. Raw Water Rates
The City provides raw water to approximately 55 irrigation customers and one
snowmaking customer. This service is provided through either a pressurized water main
or ditches. Nearly all raw water customers are currently assessed an annual charge of
$8.90 per 1,000 square feet of irrigable area. The Aspen Ski Company is assessed an
annual capital charge of$55,000 to recover the costs of specific facilities provided by the
City to serve the Highlands ski area and a volume charge of$1.02 per thousand gallons
for annual operating and capital costs.
3.4. Revenue from Existing Rates
Revenue from existing rates includes potable water revenue (from demand, fire
protection, pumping and variable charges)and raw water rate revenue. Table 3-1
summarizes water revenue from existing rates for the study period.
Table 3-1.
Projected Revenue from Existing Rates
Line Description 2013 2014 2015 2016 2017
1 Demand Charge $1,728,391 $1,762,959 $1,789,195 $1,815,957 $1,836,430
2 Fire Protection Charge 365,859 373,176 380,640 388,253 394,077
3 Pumping Charge 268,361 273,728 279,203 284,787 289,059
4 Variable Charge 2,388,958 2,412,370 2,436,011 2,459,884 2,484,298
5 Raw Water Rates 129.434 129,434 129.434 129,434 129,434
7 Total $4,881,003 $4,951,667 $5,014,483 $5,078,315 $5,133,298
3.5. Proposed Rates
Red Oak proposed two rate alternatives to produce sufficient revenue to meet annual
revenue requirements:
• Alternative 1 (Cost of Service Transition) - Provides initial transition to class cost
of service rates over five-year period.
• Alternative 2 (Uniform Adjustment) - Increases rates by uniform percentage
amount.
3.5.1. Alternative 1 —Transition to Cost of Service
It is common practice for utilities to transition to cost of service rates over a multi-year
period to mitigate customer bill impacts. Alternative 1 rates will increase revenues to
meet the City's Long Range Plan revenue requirements for years 2013 through 2017 and
improve the equitability of the rates. For example,the fire protection charge recovers
City of Aspen,Colorado
• REh "' Water Utility Business Plan 3-2
Draft Report
Section 3
Rate Design
41.6%of its cost of service under existing rates in 2013. Its recovery of cost of service
improves to 70.2%under proposed Alternative 1 rates in 2017. Similarly the pumping
charge improves its recovery of cost of service from 59.4% in 2013 to 92.8% in 2017,
and the raw water charge improves its recovery of cost of service from 39.5% in 2013 to
90.8% in 2017.
Table 3-2 compares existing and proposed Alternative 1 monthly water rates. Alternative
1 charges transition to cost of service rates over a 10-year period.
Table 3-2.
Comparison of Existing and Transition Monthly Water Rates
Existing
Transition Rates
Description Rates 2013 2014 2016 2016 2017
Demand Charge, $ per ECU (1) 4.57 4.57 4.57 4.57 4.57 4.57
Fire Protection Charge, $ per ECU (1) 1.30 1.42 1.54 1.68 1.84 2.00
Pumping Charge, $ per 1,000 gallons
Pumped One Time 1.15 1.25 1.37 1.49 1.62 1.77
Pumped Two Times 2.30 2.50 2.74 2.98 3.24 3.54
Pumped Three Times 3.45 3.75 4.11 4.47 4.86 5.31
Variable Charge, $ per 1,000 gallons
First 5,000 gallons per ECU 1.69 1.79 1.90 2.01 2.13 2.26
Next 10,000 gallons per ECU 2.19 2.32 2.46 2.61 2.76 2.93
Next 5,000 gallons per ECU 3.12 3.31 3.51 3.72 3.94 4.18
Over 20,000 gallons per ECU 4.68 4.96 5.26 5.57 5.91 6.26
Raw Water Rates
Unmetered service, $ per 1,000 scl ft 8.90 9.65 10.45 11.30 12.20 13.20
Metered service, $ per 1,000 gallons 1.02 1.11 1.20 1.30 1.41 1.53
(1) Charges shown are for Billing Area No. 1. Rates for other billing areas are the product of Billing Area
No. 1 rates times the appropriate billing area factor(See Appendix B).
3.5.2. Alternative 2 - Uniform Adjustment
Uniform rates reflect consistent percentage adjustments to each rate component. These
rates will generate sufficient revenue to meet the City's Long Range Plan net revenue
requirements for years 2013 through 2017. Table 3-3 compares existing and proposed
Alternative 2 monthly water rates.
City of Aspen,Colorado
REf? Water Utility Business Plan 3-3
""""' Draft Report
Section 3
Rate Design
Table 3-3.
Comparison of Existing and Uniform Monthly Water Rates
Existing
Uniform Rates
Description Rates 2013 2014 2016 2016 2017
Demand Charge, $ per ECU 4.57 4.74 4.92 5.10 5.29 5.49
Fire Protection Charge, $ per ECU (') 1.30 1.35 1.40 1.45 1.51 1.56
Pumping Charge, $ per 1,000 gallons
Pumped One Time 1.15 1.19 1.24 1.29 1.33 1.38
Pumped Two Times 2.30 2.38 2.48 2.58 2.66 2.76
Pumped Three Times 3.45 3.57 3.72 3.87 3.99 4.14
Variable Charge, $ per 1,000 gallons
First 5,000 gallons per ECU 1.69 1.75 1.82 1.89 1.96 2.03
Next 10,000 gallons per ECU 2.19 2.28 2.36 2.45 2.54 2.63
Next 5,000 gallons per ECU 3.12 3.24 3.36 3.48 3.61 3.75
Over 20,000 gallons per ECU 4.68 4.86 5.04 5.22 5.42 5.62
Raw Water Rates
Unmetered service, $ per 1,000 sq ft 8.90 9.23 9.58 9.94 10.31 10.70
Metered service, $per 1,000 gallons 1.02 1.06 1.10 1.15 1.20 1.25
(1) Charges shown are for Billing Area No. 1. Rates for other billing areas are the product of Billing Area
No. 1 rates times the appropriate billing area factor(See Appendix B).
3.6. Comparison of Monthly Bills
3.6.1. Alternative 1 -Transition to Cost of Service
Table 3-4 compares monthly bills under existing and proposed Alternative 1 (Transition)
rates for a typical residential customer located in Billing Area No. 1 who has 2.4 ECUs
and does not require pumping. The monthly median bill (6,000 gallons) increases $0.89
under proposed 2013 rates. The monthly average bill (15,000 gallons)increases $1.88
under proposed 2013 rates.
Table 3-5 compares monthly bills under existing and proposed Alternative 1 (Transition)
2013 rates for a typical commercial customer located in Billing Area No. 1 who has 5.0
ECUs and does not require pumping. The monthly median bill (15,000 gallons) increases
$2.10 under proposed 2013 rates. The monthly average bill (35,000 gallons) increases
$4.40 under proposed 2013 rates.
City of Aspen,Colorado
• RECD water Utility Business Plan 3-4
Draft Report
Section 3
Rate Design
Table 3-4.
Comparison of Monthly Residential Water Bills
under Existing and Transition Rates
(2.4 ECU, Billing Area 1, No Pumping)
Transition Rates
Water Existing
2013 2014 2015 2016 2017
Usage Rates Amount Change Amount Change Amount Change Amount Change Amount Change
1,000 gallons $ $ $ $ $ $ $ $ $ $ $
0 14.09 14.38 0.29 14.66 0.28 15.00 0.34 15.38 0.38 15.77 0.39
1 15.78 16.17 0.39 16.56 0.39 17.01 0.45 17.51 0.50 18.03 0.52
2 17.47 17.96 0.49 18.46 0.50 19.02 0.56 19.64 0.62 20.29 0.65
3 19.16 19.75 0.59 20.36 0.61 21.03 0.67 21.77 0.74 22.55 0.78
4 20.85 21.54 0.69 22.26 0.72 23.04 0.78 23.90 0.86 24.81 0.91
5 22.54 23.33 0.79 24.16 0.83 25.05 0.89 26.03 0.98 27.07 1.04
6 24.23 25.12 0.89 26.06 0.94 27.06 1.00 28.16 1.10 29.33 1.17
7 25.92 26.91 0.99 27.96 1.05 29.07 1.11 30.29 1.22 31.59 1.30
8 27.61 28.70 1.09 29.86 1.16 31.08 1.22 32.42 1.34 33.85 1.43
9 29.30 30.49 1.19 31.76 1.27 33.09 1.33 34.55 1.46 36.11 1.56
10 30.99 32.28 1.29 33.66 1.38 35.10 1.44 36.68 1.58 38.37 1.69
15 40.94 42.82 1.88 44.84 2.02 46.95 2.11 49.22 2.27 51.68 2.46
20 51.89 54.42 2.53 57.14 2.72 60.00 2.86 63.02 3.02 66.33 3.31
25 62.84 66.02 3.18 69.44 3.42 73.05 3.61 76.82 3.77 80.98 4.16
30 73.79 77.62 3.83 81.74 4.12 86.10 4.36 90.62 4.52 95.63 5.01
50 133.73 141.18 7.45 149.14 7.96 157.54 8.40 166.28 8.74 175.89 9.61
City of Aspen,Colorado 3-5
A Water Utility Business Plan
Draft Report
Section 3
Rate Design
Table 3-5.
Comparison of Monthly Commercial Water Bills
under Existing and Transition Rates
(5.0 ECU, Billing Area 1, No Pumping)
Transition Rates
Water Existing 2013 2014 2015 2016 2017
Usage Rates Amount Change Amount Change Amount Change Amount Change Amount Change
1,000 gallons $ $ $ $ $ $ $ $ $ $ $
0 29.35 29.95 0.60 30.55 0.60 31.25 0.70 32.05 0.80 32.85 0.80
5 37.80 38.90 1.10 40.05 1.15 41.30 1.25 42.70 1.40 44.15 1.45
10 46.25 47.85 1.60 49.55 1.70 51.35 1.80 53.35 2.00 55.45 2.10
15 54.70 56.80 2.10 59.05 2.25 61.40 2.35 64.00 2.60 66.75 2.75
20 63.15 65.75 2.60 68.55 2.80 71.45 2.90 74.65 3.20 78.05 3.40
25 71.60 74.70 3.10 78.05 3.35 81.50 3.45 85.30 3.80 89.35 4.05
30 82.55 86.30 3.75 90.35 4.05 94.55 4.20 99.10 4.55 104.00 4.90
35 93.50 97.90 4.40 102.65 4.75 107.60 4.95 112.90 5.30 118.65 5.75
40 104.45 109.50 5.05 114.95 5.45 120.65 5.70 126.70 6.05 133.30 6.60
45 115.40 121.10 5.70 127.25 6.15 133.70 6.45 140.50 6.80 147.95 7.45
50 126.35 132.70 6.35 139.55 6.85 146.75 7.20 154.30 7.55 162.60 8.30
100 259.10 273.45 14.35 288.80 15.35 305.00 16.20 321.80 16.80 340.35 18.55
150 493.10 521.45 28.35 551.80 30.35 583.50 31.70 617.30 33.80 653.35 36.05
200 727.10 769.45 42.35 814.80 45.35 862.00 47.20 912.80 50.80 966.35 53.55
250 961.10 1,017.45 56.35 1,077.80 60.35 1,140.50 62.70 1,208.30 67.80 1,279.35 71.05
500 2,131.10 2,257.45 126.35 2,392.80 135.35 2,533.00 140.20 2,685.80 152.80 2,844.35 158.55
City of Aspen,Colorado 3-6
• KID Water Utility Business Plan
Draft Report
Section 3
Rate Design
3.6.2. Alternative 2 — Uniform Adjustment
Table 3-6 compares monthly bills under existing and proposed Alternative 2 (Uniform)
rates for a typical residential customer located in Billing Area No. 1 who has 2.4 ECUs
and does not require pumping. The monthly median bill (6,000 gallons) increases $0.89
under uniform 2013 rates. The monthly average bill (15,000 gallons) increases $1.52
under uniform 2013 rates.
Table 3-7 compares monthly bills under existing and proposed Alternative 2 (Uniform)
2013 rates for a typical commercial customer located in Billing Area No. 1 who has 5.0
ECUs and does not require pumping. The monthly median bill (15,000 gallons) increases
$2.00 under uniform 2013 rates. The monthly average bill (35,000 gallons) increases
$3.50 under uniform 2013 rates.
• RECD ti 4 City of Aspen,Colorado
Water Utility Business Plan 3-7
Draft Report
Section 3
Rate Design
Table 3-6.
Comparison of Monthly Residential Water Bills
under Existing and Uniform Rates
(2.4 ECU, Billing Area 1, No Pumping)
Uniform Rates
Water Existing 2013 2014 2015 2016 2017
Usage Rates Amount Change Amount Change Amount Change Amount Change Amount Change
1,000 gallons $ $ $ $ $ $ $ $ $ $ $
0 14.09 14.62 0.53 15.17 0.55 15.72 0.55 16.32 0.60 16.92 0.60
1 15.78 16.37 0.59 16.99 0.62 17.61 0.62 18.28 0.67 18.95 0.67
2 17.47 18.12 0.65 18.81 0.69 19.50 0.69 20.24 0.74 20.98 0.74
3 19.16 19.87 0.71 20.63 0.76 21.39 0.76 22.20 0.81 23.01 0.81
4 20.85 21.62 0.77 22.45 0.83 23.28 0.83 24.16 0.88 25.04 0.88
5 22.54 23.37 0.83 24.27 0.90 25.17 0.90 26.12 0.95 27.07 0.95
6 24.23 25.12 0.89 26.09 0.97 27.06 0.97 28.08 1.02 29.10 1.02
7 25.92 26.87 0.95 27.91 1.04 28.95 1.04 30.04 1.09 31.13 1.09
8 27.61 28.62 1.01 29.73 1.11 30.84 1.11 32.00 1.16 33.16 1.16
9 29.30 30.37 1.07 31.55 1.18 32.73 1.18 33.96 1.23 35.19 1.23
10 30.99 32.12 1.13 33.37 1.25 34.62 1.25 35.92 1.30 37.22 1.30
15 40.94 42.46 1.52 44.09 1.63 45.75 1.66 47.46 1.71 49.17 1.71
20 51.89 53.86 1.97 55.89 2.03 58.00 2.11 60.16 2.16 62.32 2.16
25 62.84 65.26 2.42 67.69 2.43 70.25 2.56 72.86 2.61 75.47 2.61
30 73.79 76.66 2.87 79.49 2.83 82.50 3.01 85.56 3.06 88.62 3.06
50 133.73 138.94 5.21 144.05 5.11 149.40 5.35 154.96 5.56 160.64 5.68
i City of Aspen,Colorado
,,,;,} Water Utility Business Plan 3-8
Draft Report
Section 3
Rate Design
Table 3-7.
Comparison of Monthly Commercial Water Bills
under Existing and Uniform Rates
(5.0 ECU, Billing Area 1, No Pumping)
Uniform Rates
Water Existing 2013 2014 2015 2016 2017
Usage Rates Amount Change Amount Change Amount Change Amount Change Amount Change
1,000 gallons $ $ $ $ $ $ $ $ $ $ $
0 29.35 30.45 1.10 31.60 1.15 32.75 1.15 34.00 1.25 35.25 1.25
5 37.80 39.20 1.40 40.70 1.50 42.20 1.50 43.80 1.60 45.40 1.60
10 46.25 47.95 1.70 49.80 1.85 51.65 1.85 53.60 1.95 55.55 1.95
15 54.70 56.70 2.00 58.90 2.20 61.10 2.20 63.40 2.30 65.70 2.30
20 63.15 65.45 2.30 68.00 2.55 70.55 2.55 73.20 2.65 75.85 2.65
25 71.60 74.20 2.60 77.10 2.90 80.00 2.90 83.00 3.00 86.00 3.00
30 82.55 85.60 3.05 88.90 3.30 92.25 3.35 95.70 3.45 99.15 3.45
35 93.50 97.00 3.50 100.70 3.70 104.50 3.80 108.40 3.90 112.30 3.90
40 104.45 108.40 3.95 112.50 4.10 116.75 4.25 121.10 4.35 125.45 4.35
45 115.40 119.80 4.40 124.30 4.50 129.00 4.70 133.80 4.80 138.60 4.80
50 126.35 131.20 4.85 136.10 4.90 141.25 5.15 146.50 5.25 151.75 5.25
100 259.10 269.20 10.10 279.10 9.90 289.50 10.40 300.25 10.75 311.25 11.00
150 493.10 512.20 19.10 531.10 18.90 550.50 19.40 571.25 20.75 592.25 21.00
200 727.10 755.20 28.10 783.10 27.90 811.50 28.40 842.25 30.75 873.25 31.00
250 961.10 998.20 37.10 1,035.10 36.90 1,072.50 37.40 1,113.25 40.75 1,154.25 41.00
500 2,131.10 2,213.20 82.10 2,295.10 81.90 2,377.50 82.40 2,468.25 90.75 2,559.25 91.00
City of Aspen,Colorado
RED Water Utility Business Plan 3-9
W IR,''"` Draft Report
4. Utility Investment Charges
4.1. Introduction
Utility investment charges are one-time fees assessed to a new customer connecting to
the water system or to an existing customer who is increasing their demand on the
system. The charge recovers the capital cost of the potential system capacity required by
the new or expanded connection.
4.2. Existing Charge
Existing charges have been in effect since 1985. The charges are based on the number of
ECUs and vary by billing area. The lowest charge is for Billing Area No. 1 (Central
Aspen) and is $3,585 per ECU.
4.3. Proposed Charge
The utility investment charge is the quotient of the water utility value divided by the
system capacity. Red Oak developed utility investment charges using replacement cost
less depreciation (RCLD). These values were provided by Merrick-McLaughlin Water
Engineers from their recently completed asset management plan (see Appendix A). Red
Oak used equivalent capacity units (ECU)to estimate the system capacity.
Table 4-1 summarizes the development of the proposed utility investment charge for
Billing Area No. 1. The proposed charge is $5,795 per ECU and represents an increase
of$2,210 per ECU. Red Oak recommends using the existing water rates BAFs to
calculate the utility investment charges for other billing areas.
RFC) City of Aspen,Colorado
n ,
'Water Utility Business Plan 4-1
Draft Report
Section 4
Utility Investment Charges
Table 4-1.
Development of Proposed Utility Investment Charge
Line Description
Water System Value(RCLD)
1 Water Supply and Treatment $ 21,985,000
2 Potable Water Storage 11,510,000
3 Pumping and Pressure Reducing 3,813,000
Stations
4 Distribution Pipelines 97,959,000
5 Total Water System Value $135,267,000
Water System Capacity
6 Total Equivalent Capacity Units (Billing 23,342
Area No. 1 equivalents)
Utility Investment Charge(Billing Area No. 1)
7 Proposed Charge, per ECU $5,795
8 Existing Charge, per ECU $ 3,585
9 Increase, per ECU $2,210
City of Aspen,Colorado
• RELY ` Water Utility Business Plan 4-2
Draft Report
City of Aspen, Colorado
Water Utility Business Plan
Q.
X
D
APPENDIX
Replacement Cost Development
by Merrick-McLaughlin Water
Engineers
• RED CONSULTING
92 ARCADIS
TABLE 3 - REPLACEMENT COST TOTALS
CITY OF ASPEN - ASSET MANAGEMENT PLAN
Water Supply and Treatment(Table 3A)
Estimated RCN $57,325,000
Accumulated Depreciation $35,340,000
Subtotal— RCNLD $21,985,000
Potable Water Storage (Table 3A)
Estimated RCN $20,000,000
Accumulated Depreciation $8,490,000
Subtotal— RCNLD $11,510,000
Pumping and Pressure Reducing Stations (Table 313)
Estimated RCN _ $7,650,000
Accumulated Depreciation $3,837,000
Subtotal— RCNLD $3,813,000
Distribution Pipelines (Table 3C)
Estimated RCN $147,287,000
Accumulated Depreciation $49,328,000
Subtotal — RCNLD $97,959,000
Total—Water Utility Infrastructure
Estimated RCN $232,262,000
Accumulated Depreciation $96,995,000
TOTAL- RCNLD $135,267,000
TABLE 3A-WATER SUPPLY AND STORAGE
CITY OF ASPEN-ASSET MANAGEMENT PLAN
2012 AVERAGE USEFUL ESTIMATED
AVERAGE AGE LIFE REPLACEMENT COST ACCUMULATED
REM DESCRIPTION-EXISTING FACILITIES YEARS YEARS NEW-$ DEPRECIATION-$ REMARKS
Raw Water Supply
Maroon Creek Diversion 40 50 1,2DD DD0 960,000
Maroon Creek Pipeline 40 65 2,100,000 1,292,308
Castle Creek Diversion 40 55 11500,000 11090,909
Castle Creek Pipeline 40 65 1,425,000 876,923
Thomas Reservoir 40 90 1,300,000 577,778
Rio Grande Wei and Blending 5 50 $QDQQQ am
Subtotal-Raw Water Supply 8,325,000 4,878,000
Water Treatment
East Water Treatment Plan 30 60 18,000,000 91000,000
West Water Treatment Plant 4S 65 31.000.000 21,451.53
51.53$
Subtotal-Water Treatment 49,000,000 30,462000
Potable Storage Tanks
Clearwell 45 75 3,800,000 2,280,000
Ridge of Red 35 80 3,800,000 1,662,500
Lower Aspen Grove 30 60 100,000 50,000
Aspen Mountain 25 40 2,000,000 1,250,000 Near future repairs required.
Tiehack 27 75 3,100,000 1,116,000
Buttermilk 17 75 1,100,000 249,333
Highlands 27 60 1,500,000 675,000
Thunderbowl 8 75 2,500,000 266,667
Lower Red 45 50 400,000 360,000 Replace with 100,000 gallon capacity.
West Red 20 75 1,500,000 400,000
Upper Red 45 50 200,000 180,000
Knollwood 45 49 (150,900) (138,582) To be replaced in 2016-MP$.
Upper Aspen Grove 45 49 (200,000) (183,673) To be abandoned,replacement cost in Master Plan.
Mountain Valley 45 60 (200,000) (150,000) To be abandoned,replacement cost in Master Plan.
Subtotal-Distribution Storage 20 8,490,000 (Figures not included in total)
TOTALS 77,325,000 43,830,000
TABLE 3B-DISTRIBUTION APPURTENANCES
CITY OF ASPEN-ASSET MANAGEMENT PLAN
2012 AVERAGE USEFUL ESTIMATED
AVERAGE AGE LIFE REPLACEMENT COST ACCUMULATED
ITEM DESCRIPTION-EXISTING FACILITIES YEARS YEARS NEW-S DEPRECIATION-$ REMARKS
Pumping Stations
Little Nell 15 40 800000 300,000
Mountain Valley 40 60 400000 266,667
Upper Aspen Grove 45 48 0 0
Knollwood 30 60 450000 225,000
Ridge of Red 32 60 400,000 213,333
Eagle Pine 17 60 801000 226,667
Tiehack 35 60 600,000 350,000
Thunderbowl 8 60 450,000 60,000
Upper Red 45 55 0 0
Ruby Red 45 60 600,000 450,000
Nighthawk 10 50 350,000 70,000
West Red 20 35 700,000 400,000
Subtotal-Pumping Stations 51550,000 2,561,667
PRVs
18 Stations 4"-6"-8" 30 40 1,500,000 1,125,000 Replacement for 14 stations,6 to be abandoned-see Master Plan.
2 Large Stations 15 60 600,000 150,000
(Note:Elec Op Valve to be replaced in Master Plan)
Subtotal-PRVs 2,100,000 1,275,000
TOTALS 7,650,000 3,837,000
TABLE 3C-PIPELINES
CITY OF ASPEN-ASSET MANAGEMENT PLAN-WATER DISTRIBUTION SYSTEM
2012 AVERAGE USEFUL ACCUMULATED
AVERAGE AGE LIFE ESTIMATED RCN DEPRETIATION
REM DESCRIPTION-EXISTING FACILITIES YEARS YEARS $ $ REMARKS
Distribution Pipelines L.F.
4"and Smaller
Installed before 1980 1,615 40 60 400,000 266,667 Some small galvanized-replacement with 4'
Installed before 1980-2000 3,400 22 60 850,000 311,667
6"S"Downtown-Before 1960 20A00 65 80 8,400,000 6,825,000 CIP
Downtown 1960-1980 19,000 42 80 7,980,000 4,189,500 Mostly CIP
Downtown 1980-2000 20,000 22 80 8,400,000 2,310,000 DIP
Downtown 2000-2012 51000 6 80 2,100,000 157,500 DIP
Other Locations 1960-1980 50,000 42 100 18,500,000 7,770,000 Mostly CIP-small ACP
Other Locations 1980-2000 151,200 22 80 55,900,000 15,372,500 DIP
Other Locations 2000-2012 20,000 6 80 0 0 DIP
10"-12"Downton 1960-1980 3,500 42 40 116001000 1,680,000 Mostly DIP/CIP-minor stl.
Downtown 1980-2000 1,200 22 80 540,000 148,500 DIP
Downtown 2000-2012 0 6 80 0 0 DIP
20"-12"Other Location 1960-1980 900 42 75 360,000 201,600 CIP some stl.
Other Location 1980-2000 74,730 22 80 17,574,000 4,832,850 DIP
Other Location 20OD-2012 5000 6 80 0 0 DIP
14" 1980-2000 6,000 22 100 2,700,000 S94,ODD Almost all DIP
2000-2012 9,070 6 100 4,080,000 244,800 DIP
16"-18"1960-1980 1,000 42 100 520,000 218,400 Assume CIP
1980-2000 19,960 22 100 10,978,000 2,415,160 DIP
2000-2012 1,700 6 100 765,000 45,900 DIP
20"1960-1980 3,145 45 70 1,180,000 758,571 Concrete
1980-2000 7,300 25 100 2,740,000 685,000 DIP
24"1980-2000 2,940 22 100 1,230,000 270,600 DIP
2000-2012 1160 6 100 490,000 29,400 DIP
TOTALS 427,820 147,287,000 49,328,000
General Notes:
1.Actual lengths by age approximated(not available).Total lengths by size as measured by the City.
2. Private lines and service line lengths not included.
3. FH's with 6"branch(average length=29)assumed to be replaced with pipe with F.H.;one/520'of distribution line.
City of Aspen, Colorado
Water Utility Business Plan
APPENDIX
B . D
m
Billing Area Factors x
RELY Co) \-� _l LTI NC_,
0 ARCAOIS
Sec.25.08.070. Billing areas and billing area factors.
(a)The billing areas of the Water Department shall be known as follows:
Billing area Name
1 Central Aspen
2 Eastside
3 Northside
4 Westside
5 Maroon/Castle Creeks
5A Moore Project Highlands Base Area
6 Airport
7 Music School
8 Reserved
A customer shall be located in the billing area in which either the customer's point of connection to the
water system is located or in which the customer consumes any water. Where a customer's point of
connection and any point of consumption are in different billing areas,the customer shall be located in
one of the areas at the Superintendent's discretion.
(b)Annual debt service and other annual fixed costs approved for the water system shall be allocated
among billing areas in accordance with the following weighting factors:
Billing area WeiEhtin2 Factor
1 1.00
2 2.00
3 2.00
4 1.25
5 1.75
5-A 1.75
6 2.00
7 1.50
(c)The billing area weighting factors in Subsection(b)above shall be applied in calculating the demand
and fire protection charges under Sections 25.16.010 and 25.16.020, except as otherwise provided herein.
(Code 1971, § 23-42; Ord.No. 27-1985, § l; Ord.No. 34-1988, §§ 4, 5; Ord.No. 39-1993, § 2; Ord.No.
41-1998, § 2)