Sec. 37-35. Water repayment program for Class 1 and Class 2 off-site infrastructure needed for development.
A. The repayment program is a program that allows for the orderly and efficient extension of the City public water system by allowing for the construction of infrastructure with capacity in excess of the needs of a single development and providing for equitable distribution of the costs of the infrastructure capacity and repayment to the original developer. The repayment program applies to Class 1 and Class 2 projects.
1. For the purposes of this article, a Class 1 project is an off-site water main that is extended by one developer and connected to later by one or more developers and that does not qualify as a Class 2 project.
2. For the purposes of this article, a Class 2 project is a project that includes an off-site water main 12 inches or greater in diameter, a booster station, a pressure reducing station, or a combination of such water mains and stations, that meets all of the following conditions:
a. The project is constructed by one or more developers and provides a benefit to a defined area.
b. One or more additional developers will likely directly or indirectly connect to the project.
c. The infrastructure costs exceed $1,000,000.00, or the area benefited by the project, except for the first developer’s property, is comprised solely of State trust land and the Director has agreed to waive the $1,000,000.00 minimum requirement.
3. For the purposes of this article, indirect connection means that a development is hydraulically benefited by, but is not directly connected to, a Class 2 project.
4. For the purposes of this article, off-site infrastructure means infrastructure necessary or beneficial to a development that is not located on the property of the development.
B. The Director may require a developer to increase the capacity of off-site infrastructure. If increased capacity is required, the City will be responsible for the cost of the increased capacity. The City’s contribution to the project will be subtracted from the total costs used to calculate the repayment amount that is owed to the developer under a repayment agreement.
C. The developer must employ a civil engineer registered in the State of Arizona to perform field engineering, submit detailed plans and specifications, and submit information on existing or proposed infrastructure, development plans, local drainage conditions and other items that are necessary to establish the benefiting area to be served by the Class 2 project. The Department, using local drainage conditions and other appropriate factors, will make the final determination of the area to be served and benefited by the Class 2 project. The Department must approve the final detailed plans and specifications for the water facilities before construction begins. The construction must meet Department specifications, requirements, and approval and will be subject to inspection by the Department during construction.
D. The cost of distribution mains within the boundary of a development is not eligible for repayment and will not be included in a repayment agreement.
E. Direct project costs eligible for recovery under the repayment program are costs of engineering and design plans, direct labor costs, subcontract costs, costs of materials and equipment incorporated in the completed construction, and staking and materials testing. The developer must include all cost items except those related to engineering and design plans, materials testing, and staking in the bids that are submitted to, and reviewed by, the Department. The developer must show all unit pricing on all bids. The developer must provide, and submit to the Department for review, all cost items related to engineering and design plans, materials testing, and staking on the engineer’s letterhead. The City and developer will agree on the engineering costs for determination of total construction cost before execution of the repayment agreement, except that the engineering costs may not be more than 20 percent of the construction low bid. Eligible project costs do not include costs associated with temporary facilities, permit fees, taxes or attorney fees. The Department may allow additional direct construction costs to be included in the total project cost, except that the additional direct costs may not in the aggregate be more than ten percent of the lowest construction bid submitted. Interest is not eligible for recovery under the repayment program.
F. To qualify for a repayment agreement, the developer must submit a minimum of three written sealed bids for the project construction to the Department before acceptance of the project by the Department. The City may review all bid submissions, reject any or all bids, and require that the process be repeated using bids submitted by different contractors. The developer must ensure that bids adequately represent the full extent of the anticipated contract requirements, including facility locations and sizes, site constraints, material and labor quantities. The costs eligible for repayment may not be more than the lowest of the three bids except that the Director may approve reimbursement of additional costs that would have been eligible if included in the low bid but were unforeseeable when the contract was bid, except that unforeseen costs may not in the aggregate be more than ten percent of the low bid.
G. On completion of the Class 1 or Class 2 project and final acceptance of the project by the Department, the project becomes property of the City, is subject to exclusive control by the City, and is subject to all provisions of this chapter. The developer must ensure that the project is free and clear of all encumbrances and liens.
H. If the Director determines that the Class 1 or Class 2 project qualifies for the repayment program, the City may enter into a repayment agreement with the developer. In addition to other appropriate conditions, the repayment agreement will include all of the following:
1. For Class 1 projects, a just, equitable and reasonable charge to be paid by persons along the frontage of the Class 1 project making a connection to the Class 1 project. The connection charge will be determined on a cost-per-frontage-foot basis utilizing the Class 1 project’s construction cost. Project costs associated with that portion of the developer’s frontage requirements specified by Section 37-33 will not be included in the total construction cost used to calculate the repayment fee and are solely the responsibility of the developer.
2. For Class 2 projects, a just, equitable and reasonable charge to be paid by persons within the benefiting area making a connection to the Class 2 project. The connection charge will be determined by dividing the Class 2 project cost by the maximum service area acreage. The maximum service area acreage is the developer’s service area plus the benefiting area. Project costs associated with that portion of the maximum service area that falls within the developer’s service area will be excluded from the total repayment amount and are solely the responsibility of the developer.
3. Repayment agreement charges will not affect the right of the City to assess any building permit, connection fee (water tap), water service or other charges, fees and taxes against the owners of property located along the frontage of the Class 1 project or within the maximum service area of the Class 2 project.
4. The repayment agreement for Class 1 projects will terminate ten years from the date of execution by the developer, or when the total repayment amount is repaid, whichever occurs first.
5. The repayment agreement for Class 2 projects will terminate 20 years from the date of execution by the developer, or when the total repayment amount is repaid, whichever occurs first.
6. In order for the Department to recover costs associated with the administration of a repayment agreement, the Department will charge a fee. For Class 1 projects, the charge will be $500.00. For Class 2 projects, the charge will be $500.00 or $2.00 per acre times the benefiting area, whichever amount is greater. The developer must pay the charge at the time of execution of the repayment agreement. In addition, the Department will retain three percent of the monies collected under a repayment agreement.
7. Any person connecting directly to a Class 1 project or within the benefiting area connecting to a Class 2 project must pay the connection charge. The Department will remit the appropriate amount to the person entitled to receive the payment under the repayment agreement within 90 days of receipt but will retain the three percent administration fee referenced in subsection (H)(6) of this section.
8. If a project is located in an area in which water impact fees are assessed and the facility is eligible for credit against fees, the developer will only receive credit against impact fees for that proportion of the project cost that the repayment agreement allocates to the developer. The developer may not be repaid for project costs for which impact fee credits were issued.
9. In certain situations, it may be desirable for the developer to increase its proportion of the project cost to increase its share of impact fee credits. The developer may request that the connection charges in the benefiting area be reduced so that the total proportion of cost attributable to the developer is increased. At the sole discretion of the Director, a reduction in charges may be permitted, and if implemented, will be applied uniformly to all benefiting areas in the repayment agreement. (Ord. No. G-6741, § 2 (Exh. A), 2020)