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Mr. Jack G. Jennings August 14, 1979 Page -two- 4. Offsetting initial capital cost with an impact fee and/or connection charge for new connections. 5. Offsetting annual expenses with a utility tax liened on the water system users. 6. Offsetting initial capital cost with a front foot assessment charge. The following analyses are provided in reference to each of the above items: Ref. Items 1 & 2 - The attached table shows the funding analysis for re- ducing the system size to 1,345 reserve capacity as compared to the proposed 2,115 reserve capacity. The merit for reducing the system is shown in the average monthly cost per 2,500 connections assuming no grant (reverse osmosis system). The analysis is summarized as follows: 2.5 MGD Plant 2.5 MGD Plant 2.0 MGD Plant With Fire Delete Fire Delete Fire Protection Protection Protection 2,115 Reserve 2,115 Reserve 1,345 Reserve Capacity Capacity- Capacity Avg. Monthly Cost Per 2,500 Connections $ 24.97 $ 23.70 $ 22.17 Based on the magnitude of monthly cost required, the reduction in monthly cost (about $1.77 to $2.80 per month) may be insignificant as the homeowner may save more from lower fire insurance premiums (if area rating is reduced). Furthermore, a reserve capacity reduction to 1,345 will mean higher costs in the future to expand the plant due to inflation. Ref. Item 3 - The effect on the average monthly cost by reserving connec- tions by potential developers is illustrated with the following example: Assuming 500 connections reservation, the cost per connection including the existing 2,500 connections (total 3,000 connections) is about $2,049-$2,474 per connection (smallest project to largest). Using an average of -$2,250 per connection, this would generate $1,125,000 for capital cost. Met result is an average of $2.00 per month reduction in monthly cost -for 3,000 connections. Ref. Item 4 - A potential of 478_ new residential connections was used in the preliminary engineering report. Therefore, based on recovering the con- nection cost of $200 per new connection, this would result in a reduction of monthly cost of only $0.20 per month. Ref. -Item 5 - This effect is also illustrated by the following example: Assume the 2,500 connections utility cost is about $70 per month. Based on a 5% utility tax levied, this would generate $3.50 per connection per month or an amount of about $105,000 annually. This would result in a reduction of $3.50 per month per connection on the water rates. OCT 161979 soo.'� � J