MEMORANDUM 07-12

To: Walt Wrede, City Manager

From: Carey Meyer, Public Works Director

Date: January 24, 2007

Subject: Proposed Fairview Avenue Water Main Extension

Kachemak Way to Heath Street

Approval to Create Deferred Assessments on Benefited Properties

A property owner on Fairview Avenue is preparing to build a house on a lot (designated as Lot C later in this memo) that is not currently served by a water main. The property owner has attempted to initiate a water LID (including paying the LID initiation fee), but the attempt failed due to lack of support. The owner is now proceeding to design and install a water main to serve the property. Due to drinking water quality issues and the importance of looping the water system, Public Works has recommended that the main be extended the entire block (from Kachemak Drive over to Heath Street). See the attached Map #1. A main extension normally only needs to front the property it is intended to serve, but in this case the needed main extension will front additional property not now served by our water system.

The proposed looped water main will benefit other lot owners within the limits of the project. Extending the main across the entire block of Fairview will also benefit the City by providing additional looping within the distribution system and eliminate the need for dead end line flushing by City crews.

Homer City Code does provide for a method that allows a “developer” who extends a main (that benefit other properties) to be reimbursed by others when future connections are made. The method is seldom utilized because it requires considerable upfront documentation, only applies to connections made within 10 years, and the situation is difficult to monitor after construction is complete.

Another approach to this situation, used in the past, is for the City to reimburse the “developer” for the costs of extending that portion of the main that benefits others and create deferred assessments (based on fairly apportioned construction costs) on benefited properties. These assessments are due and payable to the City, only if and when connections permits are applied for.

If this deferred assessment approach is taken, the costs for each party is estimated below. These costs are based on the following methodology:

Western Half

The lot owner needing service (Lot C) is required to extend the water main from Kachemak Way, east to the western edge of their property to be eligible for service (approximately 300 feet). See attached Map #2. This main would front Lots A, B, C, and D. Since lots A and B already have service connections to the water main in Kachemak Way, this main extension does not benefit them. Lots C and D benefit from this extension. Lot C is owned by the person needing service.

Proposal: The owner of Lot C pays for the installation of this portion of the extension main and is responsible for 75% of the cost; the City reimburses the owner of Lot C for 25% of the cost and places a deferred assessment on Lot D equal to this 25%.

Estimated Cost Responsibility

Lot A $ 0

Lot B $ 0

Lot C $ 27,000

Lot D $ 9,000

Total Cost = $ 36,000

Eastern Half

The eastern half of this main extension (approximately 300 feet) potentially benefits four lots (Lots E, F, G, and H). See Map #3.

Proposal: The owner of Lot C pays for the installation of this portion of the main extension, and the City reimburses the owner of Lot C for the cost and places a deferred assessment on each benefited lot (Lots E, F, G, and H) equal to 25% of the cost.

Estimated Cost Responsibility

Lot E $ 9,000

Lot F $ 9,000

Lot G $ 9,000

Lot H $ 9,000

Total Cost = $ 36,000

Recommendation:

The City Council requires the owner of Lot C to initially install and pay for the cost of a new water main from Kachemak Way to Heath Street (estimated cost $72,000); authorizes the City to reimburse the owner for that portion of the main that benefits other property (estimated cost $45,000); and approves the placement of deferred assessments on the other benefited lots (total deferred assessments $45,000 as described above). Actual assessments will be based on documented construction and design costs incurred by the owner of Lot C. Authorize the City Manager to execute all appropriate documents. (Fiscal note: City cost to come from HAWSP fund)