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Item 10CCity of Southlake Department of Planning MEMORANDUM July 14, 2004 TO: Honorable Mayor and City Council FROM: Bruce Payne, Planning Director SUBJECT: Application of Impact Fees to the Lakewood Ridge & Indian Creek subdivision Action Requested: Approval of Minute Order pertaining to the assessment of Impact Fees on the Lakewood Ridge & Indian Creek subdivisions. Background Information: In February 2004, the City of Southlake entered into an agreement with AquaSource Utility Inc., for the transfer of Certificate of Convenience and Necessity in the two subdivisions of Lakewood Ridge and Indian Creek. The attached minute order clarifies the application of the City of Southlake and City of Fort Worth Water Impact Fees to the properties. As per the City Attorney's attached correspondence, the city's regular impact and tap fees are not applicable to existing AquaSource customers. However, the pass- through City of Fort Worth water impact fee of $621.32 per customer is applicable. Legal Review: Yes. Supporting Documents: 1. Proposed Minute Order 2. City Attorney's opinion letter dated June 29, 2004 3. Map showing the all the properties in the two subdivisions Attachment 1 Minute Order No. 04 - 01 The City Council of the City of Southlake has been requested to make a formal determination as to the applicability of the provisions of Ordinance No. 657 -A relating to the imposition of the City's impact fees on the Lakewood Ridge and Indian Creek subdivisions. The Lakewood Ridge subdivision was platted pursuant to state law in 1997 and the Indian Creek subdivision was platted pursuant to state law in 1984. Homes have been constructed on forty -five (45) of the fifty -eight (58) lots within the combined subdivisions and those properties have secured the required utility meters and taps to the existing water system operated by AquaSource and its predecessors. All properties now receiving water utility service from AquaSource have fully complied with the "tap" requirements to secure formal authorization to receive service from the public system. In February 2004, the City of Southlake entered into a settlement agreement with AquaSource Utility Inc., for operations and maintenance, sale of ground water supply and distribution systems and transfer of Certificate of Convenience and Necessity (CCN) in the Lakewood Ridge and the Indian Creek Estates subdivisions. The agreement has been approved by the Texas Commission on Environmental Quality authorizing the change of the CCN from the name of AquaSource to the City of Southlake. The City of Southlake has now become the utility provider for these subdivisions. Chapter 395 of the Texas Local Government Code authorizes cities to impose impact fees on new development at the time that a final subdivision plat is being approved by a city or when the property is seeking to "tap" into the municipality's utility system. The developed properties within the Lakewood Ridge and Indian Creek subdivisions currently possess water utility meters properly authorized by AquaSource or its predecessor and will not be requesting tap authorization from the City of Southlake. Subsequently, these developed properties are not subject to the city's water impact fee. The developed properties are also not subject to the city's roadway impact fee and will not be subject to the waste water impact fee until such time as they make application to connect to the city's sanitary sewer system. However, each of the developed properties within these two subdivisions will be subject to the pass - through Fort Worth impact fee of $621.32, which the City of Southlake is obligated to assess for all properties connected to the water system for which Fort Worth provides the wholesale water service. Property owners in the two subdivisions of Lakewood Ridge and Indian Creek were advised of this requirement prior to the service agreement between the City of Southlake and AquaSource. The City of Southlake, by this minute order, imposes an assessment of $621.32 on each developed lot within the Lakewood Ridge and Indian Creek subdivisions. All vacant, undeveloped properties within these two subdivisions that do not currently have a utility meter in place shall be subject to the full impact fees of the cities of Southlake & Fort Worth at such time as they may seek to secure an initial "tap" to the public utility system and shall be subject to the Impact Fee Ordinance as amended. 2 Attachment 2 6000 WESTERN PLACE, SuiTE 200 1 -30 AT BRYANT- -1RviN ROAD FORT WORTH, TEXAS 76107 -4654 EMAIL: TOASE @TOASE.COM WEESITE: WWW.TOASE.COM Taylor Olson Adkins Sralla Elam L.L.P. Attorneys * Counselors TELEPIrow: (817) 332 -2580 TOLL FREE: (800) 318 -3400 FAcsimiw: (817) 332 -4740 DENTON: (940) 383 -2674 DENTON MPTRo: (972) 434 -3834 E. ALLEN TAYLOR, JR. extension 212 ataylor@toase.corn June 29, 2004 Mr. Bruce Payne Director of Planning City of Southlake !400 Main Street, Suite 310 Southlake, Texas 76092 Re: Application of Impact Fee Charges to the Lakewood Ridge and Indian Creek Subdivisions Dear Bruce: I have now had the opportunity to review, in some detail, the materials that you transmitted to my office relating to the Lakewood Ridge and Indian Creek subdivisions which have historically been provided water utility service by AquaSource and its predecessor entities. The question presented for review is the applicability of the city's impact fee program implemented by Ordinance No. 657 -A to these particular developments. As you are aware, the authority of a city to impose an impact fee is derived from the provisions of Chapter 395 of the Texas Local Government Code. To deter - nine if an impact fee is applicable, it is necessary to do a factual investigation to determine the status of the property and whether or not it qualifies for assessment and collection of a fee pursuant to the statute and the local ordinance. The records of the city reflect that the Lakewood Ridge addition was platted in 1977. The Indian Creek subdivision was platted in 1984. Both subdivisions received final subdivision plat approval pursuant to the provisions of state law prior to the adoption of Chapter 395 of the Texas Local Governznent Code which occurred in 1987. Information presently available to the city indicates that there are a total of fifty -eight (5 8) lots existing within the combined subdivisions. The city's records reflect that there are forty -five (45) existing residential units located within these two developments, forty -seven (47) water utility accounts exist of record and thirteen (13) lots are identified as vacant at this time. As we are all aware, the City of Southlake recently entered into an agreement to purchase the water utility system owned by AquaSource which has traditionally provided water utility service to these two subdivisions. The agreement was entered into on February 3, 2004, and has been approved by the Texas Commission on Environmental Quality authorizing the transfer of the Certificates of Convenience and Necessity for water utility service from AquaSource to the City of Southlake. The majority of the homes in the two subdivisions were built in the 1980's and early 1990's. One home was constructed in May of 2003. All of the existing residential units had already connected to the AquaSource water system prior to its acquisition by the City of Southlake. The city's impact fee ordinance provides that new development must be assessed an impact fee and that fee must be collected prior to the connection to utility service. New development is June 29, 2004 Page 2 defined in Section 4 under Subheading (19) New Development - The subdivision of land; or the construction, reconstruction, redevelopment, conversion, structural alteration, relocation, or enlargement of any structure; or any use or extension of the use of land; any of which increases the number of service units for water, waste water or roadway services or requires the purchase of a new water or waste water tap. New development includes the purchase of a water tap resulting from the conversion of an individual well to the city's water utility and includes the purchase of a waste water tap resulting from the conversion of an individual septic or other individual waste disposal systems to the city's waste water utility. The definition of new development makes it clear that new development occurs when a subdivision plat is filed or when a structure or lot proposes to tap into the city's water or waste water utility systems. It is an undisputed fact that the subdivision process on both Lakewood Ridge Addition and Indian Creek had been completed by 1984 prior to the adoption of the city's impact fee system. All ofthe existing residential units in the subdivision had been constructed and tied into the public utility system operated by AquaSource and its predecessor entities. The AquaSource system was operating pursuant to a permit issued by the Texas Commission on Environmental Quality and/or its predecessor entity the Texas Natural Resource Conservation Commission. On February 3, 2004, the date that the city entered into a written agreement with AquaSource to buy the AquaSource system and secure the transfer of the Certificates of Convenience and Necessity, all existing residential units were customers of the AquaSource system. Each residential unit had complied with whatever requirement AquaSource had imposed to secure permissions to tap into the system. None of the existing residential units or structures will be approaching the City of Southlake to secure permission to tap into the water utility system. The "tap" process, procedure and requirement had been undertaken and completed within the AquaSource system. The City of Southlake has voluntarily purchased the AquaSource system and pursuant to the provisions of Texas Property Law takes the purchased items with the benefits and burdens enjoyed by the seller. Southlake becomes subrogated to the position of AquaSource and is simply the new owner. It is clear from the analysis of the factual history of the subdivisions that the existing residences within the subdivision are not subject to a requirement to pay a new tap fee to the City of Southlake and, therefore, they are not subject to the water impact fee imposed by the city at this time. They would only be subject to the waste water impact fee if they should at, some point, in the future seek to tie into the city's sanitary sewer system. At the time those residential units make application for that connection they would be treated as any other similarly situation propertymaking an initial application for connection to the sanitary sewer system. The properties in question will be receiving benefit from the City of Fort Worth wholesale water contract for the first time and as such may be assessed the pass through fee that the City of Southlake has committed to pay to the City of Fort Worth for all new connections to the interrelated systems. The purpose of this fee, established by interlocal agreement between the cities, is to allow Fort Worth to acquire raw water resources and facilities, water treatment plant capacity, treated water 4 June 29, 2004 Page 3 storage and distribution capability to deliver wholesale water to customer cities. Residents of these subdivisions were advised prior to the city's purchase of the AquaSource system that this contractual fee to the City of Fort Worth would be assessed and collected in order to comply with the terms of the Interlocal Agreement. It is my understanding that the individual lots owners have agreed to accept this burden without question and, therefore, this is not an issue in our analysis. The only question remaining concerns the vacant properties upon which no residences now exist. Apparently, two of these tracts have secured taps onto the AquaSource system and have meters that would permit utility service to the property. The two vacant lots that have already paid their "tap" fee to the AquaSource entities and who have meters in place, would be exempt from the water impact fee requirement as they would not be required to secure a new tap when taping out a single family residential construction permit. The remaining vacant properties have not completed the "tap" process or procedure and if they should, at some point in the future become home sites, the owner will be required to go through the "tap" procedure with the City of Southlake. At the time that an application for a tap is made the property owner will be assessed the impact fee and it will be collected prior to the authorization for meter placement. The properties in this category have simply not "vested" any rights to service as they did not avail themselves of the option available under the AquaSource system. If the owner of a vacant tract should object to the payment of an impact fee at the time that a permit is sought for new construction, they may institute an appeal pursuant to Section 18 of Ordinance No. 657 -A. A specific element of appeal is the applicability of an impact fee to the specific development in question. A property owner who believed that they could present compelling evidence that they should not be subject to the fee would have the opportunity to secure an individual review of their case by the city council if they feel that the imposition of the fee is unjust or unreasonable based upon their circumstances. I would recommend that in order to document the status of these two subdivisions relative to the imposition of impact fees under Ordinance No. 657 -A that the city council issue a Minute Order affirming the determination that they are not subject to the water impact fee because they will not be subject to the "tap" requirement mandated by the definition of new development contained within the ordinance. I am attaching to this letter a copy of a proposed Minute Order which might be adopted by the council to achieve this purpose. If I may provide you with any additional information or assistance, please feel free to contact me. Sincerely, E. Allen Taylor, EAT /ds 1207.001 Enclosure W :1SouthlakeU,ETTERS1 Payne \'ayiie.EAT.re.impacifees.wpd cc: Billy Campbell City Manager City of Southlake 1400 Main Street, Suite 310 June 29, 2004 Page 4 Shana Yelverton Assistant City Manager City of Southlake 1400 Main Street, Suite 460 Southlake, Texas 76092 M Aquasource to City Water Conversions in Lakewood Ridge & Indian Creek Subdivisions Total number of lots in both subdivisions = 58 Number of existing residential units = 45 Number of accounts = 47 Number vacant lots = 13 (including 1 lot used for pasturing /grazing) All Utility Billing accounts are only for water & garbage service 0 Vacant Residential Lots D Household activities ® Flood control, dams, and other activities ® Mass water storage activities =Active leisure shorts and related activities 0 Passive leisure activities Pasturing, grazing, and livestock related activities 0 No human or unclassifiable activities n C C r9 W