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HomeMy WebLinkAboutCorrespondence Miscellaneous 6/22/2004 (2) THORP PURDY =~& WILKINSON. Pc. ATTORNEYS AT LAW 1011 HARLOW ROAD, SUITE 300 SPRG':GFJELD, OREGON 97477 PHONE' (541)747,3354 FAX' (541) 747,3367 June 22, 2004 E-MAIL ADDRESS: Ithorp@thorp-purdy.com MARVIN O. SANDERS (1912-]977) JACK 8. LIVELY (1923-\979) JILLE. GOLDEN (1951-199]) Laurence E. Thorp Susie L. Smith Metropolitan Wastewater Management Commission 225 N. 5th Street . , Springfield, OR 97477 Re: MWMC / Systems Development Charges Our File No. 434-122 Dear Ms. Smith: The attorney for the Home Builders Association of Lane County; Andrew H. Stamp, submitted a lengthy letter dated June 14,2004 to the Eugene Mayor and City Council urging rejection of the Metropolitan Waste Water Management Commission ("MWMC") Facilities Plan and Capital Improvement List and the proposed Methodology (Methodology) for determining System Development Charges. You have asked for comments on that letter. A number of the issues raised in the letter have previously. been addressed. No attempt will be made in this letter to respond to those issues. This letter will summarize the Staffs position and respond to allegations for which responses have not been previously given,l In reviewing Mr. Stamp's letter, readers should be mindful of its failure to distinguish between the Methodology used to determine rates and the rates themselves and the unstated assumption that if the City adopts a policy with which he disagrees, the policy must be illegal. Also bear in mind that contrary to Mr, Stamp's assertion, the City did not send the Methodology "back" or suggest that MWMC "go back to the drawing board" last year. MWMC and the Homebuilders entered into an agreement to try to work out their differences, A copy of that agreement is attached, Unfortunately, it appears that the Homebuilders have not made a good faith attempt to live up to the commitments it made in the agreement. I. Introduction. Mr, Stamp's analysis proceeds from a fundamentally flawed perception both as to the state of the law and as to the actions of the MWMC. With respect to the state of the law, Mr. Stamp asserts that the statute contemplates that an "SDC methodology" is a unitary and indivisible statement ofthe process for determining the basis for a charge, the proj ects to be funded by revenue raised through the charge, and the rates of the charge, Mr. Stamp is perhaps confusing the statute as enacted, with House Bill 2983 (2003) as, originally introduced, That original bill incorporated the project list into the methodology by I This letter was prepared in cooperation with MWMC Staff and consultants and Eugene Staff. Date Received JUN 22 ({J~ Planner: BJ Letter to Susie L.'Smith June 22, 2004 Page 2 proposing to amend ORS 223.309(2) to prohibit amendment of the project list if the amendment would result in the deletion of a project or an increase in the charge, As enacted, however, the law is far different. The methodology and the project list are still dealt with separately in the statute (compare ORS 223.304 and ORS 204.309), Each has a distinct process, both for creation and amendment(compare ORS 223,304 (7)(a) with ORS 223.309(2)). MWMC has carefully complied with these two independent sets of requirements. In doing so, MWMC has followed a process of establishing a System Development Charge which includes three essential, independent but interrelated components; These components, and their essential elements, include: A. Methodology. A Methodology required by ORS 223.304(\) and (2) which establishes the policy and procedure needed to calculate the fee under the System Development Charge Ordinance composed of the elements: 1. The parameters to measure system capacity and the demands of existing and projected new users upon that capacity. (Page 5)2 2. The procedure for valulltion of the existing system and the actual valuation of the existing system using that procedure. (Page 7, and Table A-lattached to the Methodology) 3. The parameters upon which the proportion of the existing system capacity available to meet the needs of growth is to be calculated, (Page 8) 4. Calculation of the capacity available in the existing system, based upon those parameters. (page 8, Table 4) 5. The processes, means and methods of evaluating proposed additions to the system to determine the portion ofthe proposed additions needed to meet growth. (Pages 9-11) 6. The processes, means and methods used in determining unit costs of capacity, and in developing the System Development Charges schedule through application of the Methodology to the project list (Page 12,) 7. The processes, means and methods used in determining how to credit entities paying Systems Development Charges: for (a) taxes previously paid which were used to fund capacity improvements and (b) the portion of future user rates that will be applied to service debt used to fund additions to the system paid for whole or in part by System Development Charges. (page 13) 0 t R . , " a e ecelved 8. The basis for determining the impact on capacity of a particular development which is to be subject to a System Development Charge. (Appendix D) JUN 22 I o~ 2 Page references are to page numbers in the Methodology adopt by MWMC on April 16, 2004. Plan n e r: BJ Letter to Susie L. Smith June 22, 2004 Page 3 B. Plan and List. A Facilities Plan and Capital Improvements Listrequired by ORS 223.309(1) consisting of proposed additions to the system which describes each addition and its costs and which includes the following,material specifically related to the determination of Systems Development Charges: ' ' 1. Calculation of the capacity added by the proposed addition, 2. Calculation of the portion of the added capacity that is available to meet the needs of growth, 3. Calculation of the portion of the costs of the proposed addition that are related to the added capacity which is available to meet the needs of growth, 4. A summation of the capacity added by the proposed additions to the system, calculated on the basis of the paranleters set forth in the Methodology. B. A System Development Charge ordinance required by ORS 223,299(4) for adoption by Eugene and Springfield, which applies the Methodology to calculate System Development Charges using the' following steps: 1. Determination by type of development of the reimbursement charge to be imposed. 2. Determination by type of development of the gross improvement charge to be imposed. 3. Determination of the adjustments to the gross improvement charge to be made on account of the credits for prior payments or future debt service. These three components are being separately submitted to the'City for approval. II. Legal Analysis. A. Specific Agreements. '"C ~ 1. Mr, Stanlp'S fundamental argument is that the City should not and legally oii) cannot approve a System Development Charge Methodology unless it specifically includes the (.) Facilities Plan and Capital Improvements List for the projects to be funded by the System ~ [levelopment Charge within the Methodology. We respectfully disagree. Oregon's System Development Charge law (ORS 223.297 et seq) simply does not contain such a requirement. It .m merely requires approval of both. ~ .... , a ':::l-- . " ... ~ a C<> <:<> C 2; C :;:) -., << - Q, Letter to Susie L. Smith June 22, 2004 Page 4 2. Mr. Stamp argues that if the Methodology is approved independently from the Facilities Plan and Capital Improvement List more judicial appeals of Systems Development Charges are likely than if the two were combined and, the public would not have any input to any change in the amount of System Development Charges actually assessed, Both statements are patently false. (a) IfMr. Stamp's recommended approach is utilized, anytime there is any change in the Facilities Plan, the System Development Charge Methodology, or the Capital Improvements List, all three areas would be open for review and subject to judicial appeal. On the other hand, if the Methodology is adopted independently from the Facilities Plan and Capital Improvements List, future changes could be made to the Facilities Plan or Capital Improvement List to adjust System Development Charges without affecting the Methodology, In that case, only the changes to the Facilities Plan and Capital Improvements List would be subject to judicial review and the Methodology itself would not. Consequently, the scope and number of legal challenges using the procedure recommended by the Homebuilders would undoubtedly be greater than the challenges which are likely to occur under the approach recommended by MWMC. Apparently that is what the Homebuilders want without explicitly saying so. (b). The statement that the procedure proposed by MWMC would allow staff to adjust System Development Charge rates without any public process or input is simply wrong, Once the Methodology, Facilities Plan and Capital Improvements List are adopted, rates will be fixed, Under the Systems Development Charge statutes, the Facilities Plan and Capital Improvements List must be approved by the cities imposing the System Development Charges, Consequently, if-circumstances necessitate a change in the Facilities Plan or Capital Improvements List, MWMC and Eugene and Springfield would all have to hold public hearings on the changes, allow for citizen input and the ultimate decisions would be subject to judicial review under the writ ofreview procedure, No change could be made without going through that process, 3. Mr. Stamp's argument is largely based upon his interpretation of what he perceives to be the intent of the Oregon legislature in enacting the System Development Charge law. He cites as authority for the legislature's intent, quotes from lobbyists who appeared before legislative committees, That is not evidence oflegislative intent, that's evidence of the lobbyist's intent. Furthermore, legislative intent is totally irrelevant unless the statute being, analyzed is ambiguous. The statutes dealing with System Development Charges are not ambiguous and in his 25 pages, Mr. Stamp fails to identify any specific ambiguity except the ones he has attempted to create. "0, ~ .05 (.) Q) a: Q) m o """) CO .~ D D .... " Q) oN CN c: ::z C => .... a:1 - a.. 4. Mr. Stamp also suggests some dishonest motive on the part ofMWMC and City Staff and ulterior motives by elected and appointed officials who serve without compensation and make the hard decisions related to issues such as System Development Charges, Such allegationsdcin't even warrant a response, Letter to Susie L. Smith June 22, 2004 Page 5 5. Mr. Stamp frequently cites court decisions and other authorities related to Oregon's land use law. The legislature specifically provided in the System Development Charge statute that the "establishment, modification or implementation of a system development charge, or a plan or list...or any modification of a plan or list is not a land use decision," See ORS 223.314, Oregon land use laws are irrelevant. B. Allocation of Wet Weather Flow Costs. Mr.Stamp's comments in this section reflect incorrect assumptions and a lack of understanding of how infiltration and inflow (III) have been addressed in the local and regional collection systems. While the existing wastewater collection system does allow a much greater percentage of the total wet weather flow to enter the system, some III unavoidably enters the collection system in newly developing areas. That amount of III increases over time. Existing customers pay for the costs to reduce III through the local wastewater portion of rates charged by Eugene and Springfield, These investments have no relationship to the MWMC System Development Charge calculations. The III that occurs and increases over time must be addressed and accounted for by planning and constructing adequate peak flow capacity at the treatment plant. New developments connecting to the facilities are responsible only for a share of the peak flow capacity that is attributable to the III contribution of their development over time. It is a much smaller share than that borne by existing system users. While the III generated may be a small amountimmediately after construction, the design life of a pipeline can be 50 years or greater, and the wet weather flows received by the treatment plan must be estimated to meet the deIIlands of future conditions, Therefore, future facilities are sized to meet estimated peak flows after subtracting out the projected III removal achieved through the local system maintenance and rehabilitation programs. Nationwide experience over the last 25 years has shown that III cannot be considered simply a collection system deficiency resolved through ongoing collection system repair and rehabilitation, That is why wastewater treatment plants must be designed with capacities to handle a projected peak flow, The MWMC Wet Weather Flow Management Plan, completed in 2001, determined the most cost-effective combination of III work in the collection system and treatment capacity at the regional wastewater facilities. To estimate the amount of III from future developments, MWMC analyzed the III contribution from selected, existing developments that were constructed within the last 20 years using construction techniques and materials similar to those used today. That analysis and the experience of other agencies resulted in the establishment of the III contribution amount from future developments. C. Allocation of Quality Improvement Cost. Mr. Stamp states that growth should only be assessed for the portion of the cost of meeting new and more stringent regulating requirements, He does not state, but implies, that is not what is happening. In fact it is. The cost of items on the Capital Improvement List which are required as a result ,of more stringent regulations are allocated between existing users and new users in an equitable manner. A careful analysis of the Facilities Plan and Capital Improvement List as well as the Methodology and the ~~ ::> " "- ~ Q) ~' (.) '- Q) cq o:cq Q)~ '...... -,. CO o . { Letter to Susie L. Smith June 22, 2004 Page 6 underlying data makes it clear that the proposal does not require new users to bear a disproportionate share of the costs associated with more stringent regulatory requirements, D. Timing of Adoption. Mr, Stamp argues that the MWMC Facilities Plan and Capital Improvements List must be adopted 60 days prior to the time that it adopts the SDC methodology. That is a misstatement of the law, There is no such legal requirement. E. Standard of Review. An app,eal of a City's decision related to System Development Charges would be to Circuit Court under Oregon's writ ofreview procedure. That procedure states among other things, that a court may overturn a city's decision regarding System Development Charges if the decision is not supported by "substantial evidence". Mr, Stamp's argument implies that there is no substantial evidence to support the City's decision ifit follows Staffs and MWMC's recommendation and approves the System Development Charge Methodology and Facility Plan and Capital Improvements List. That is simply untrue. If the Homebuilders truly believe that its position is correct, Mr. Stamp should point out the specific parts of the recommendation which are not supported by substantial evidence. F. System Valuation. Mr. Stamp asserts that the system valuation must be made as part of the Methodology and that has not been done, Mr. Stamp is incorrect. The system valuation is contained in Table A-I attached as supporting material to the Methodology when it was released to interested parties and the public. That table clearly demonstrates that the assets were valued at original cost, net of grants, inflated by the ENR index, as recommended by the CAC and as approved by MWMC. While Mr, Stamp is entitled to disagree with the CAC and MWMC decision to endorse that method of system valuation, which is one of several different methods used throughout the State, his disagreement on a matter of policy does not make the method illegal. ' G. Adjustments. As noted above, Table A-I explicitly sets forth, by individual asset, the portion funded from federal grants and specifically excludes that amount in calculating the system valuation, H. Assumptions. Mr, Stamp challenges the assumptions regarding future population growth, current population, household size and per capita contribution to the loading on the treatment facility used by MWMC and its consultants in developing the Methodology, Mr, Stamp argues that because he disagrees with those assumptions, they are necessarily wrong"O and a court would refuse to approve the Methodology using those assumptions. Q) > Assumptions by definition cannot be guaranteed for accuracy and it would be foolish to .~ assume that they are totally accurate, Assumptions in any kind of model necessarily require the Q) exercise of professional judgment. ex: Q) hi o That is why experts are hired to make assumptionssince their likelihood of being correct is far greater than someone who is not an expert, MWMC employed a qualified, ""') CO ~ . D J... '- Q) cq cq c: z c: => --, a:s - Q.. Letter to Susie L. Smith June 22, 2004 Page 7 independent consultant with the necessary expertise to make realistic assumptions,3 The mere fact that the assumptions may prove to lie less than 100% accurate (and probably will to some degree) does not make the assumption invalid or illegal. So long as the expert making the assumptions has reasonable grounds for doing so, the assumptions will not be subject to successful legal challenge, III. Conclusion. The Homebuilders seem intent on linking the Methodology with the Facilities Plan and Capital Improvements List so that every change will open up all parts of the program to review and legal challenge. If that is done, it will add to the cost and time necessary to make even the most minor changes to the Capital Improvements List. It's a policy matter whether to combine them. But, combining everything is not legally required, Very truly yours, THORP, PURDY, JEWETT, URNESS & WILKINSON, P.c. Laurence E. Thorp LET:mkf 00085544,OOO,DOC Date Received JUN 2. 2. I elf Planner: BJ 3 That is what the agreement between MWMC and the Homebuilders requireq" Mr. Stamp takes the position that because the consultant hired by MWMC used assumptions that the Homebuilders dislike, the assumptions are necessarily wrong as a matter oflaw. That is not true, A copy of the Agreeirient is attached,