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INDIAN RIVER COUNTY IMPACT FEE ANALYSIS Any or all of these changes could affect the equity and revenue sufficiency of the water and sewer impact fees. 1.3 General Overview One of the principal sources of revenue for financing water and wastewater system expansions is a one-time initial charge for connection to the systems.These fees are typic- ally referred to as impact fees,system development charges,capital contribution fees,or connection fees. Capital improvements to provide capacity in a water or wastewater system must generally be constructed in large increments.As a result,system expansions are often constructed years in advance of when the added capacity will be fully utilized.As a result,current sys- tem users are often forced to pay rates that are partially used to pay for a portion of the sys- tem to serve future users.Impact fees,designed to recover the water or wastewater system's investment in this extra capacity,are often collected to either avoid charging existing users for these extra capacity costs,or to partially compensate the existing users for the costs they have previously incurred to provide this capacity. Revenues generated through the collection of impact fees are generally used to directly pay for improvements that expand the system capacity or to repay debt issued to finance the system expansion.The revenues may also be held to offset the costs of future system expan- sions.Use of these revenues to offset debt service costs reduces the amount of revenue that ` would otherwise need to be generated through the water and wastewater rates.In this way, il the impact fee revenues can be used to either finance the plant expansions directly,or to reimburse existing users(through lower rates)for the costs they have incurred to provide capacity for new users. Impact fees are typically collected when a new user or developer connects to the system, when a new development permit is issued,or when a user changes the usage of their prop- erty.There are a number of alternative impact fee structures:a simple charge per connec- tion,a charge per equivalent residential unit(ERU),and charges that vary with the size of the users water meter.The County currently collects a charge per ERU. Impact fees for the water and wastewater system were calculated by first determining the capital investment per million gallons per day(mgd)of capacity in each system.The capital investment per mgd of capacity is an amount that,if charged,new customers would have paid for their proportionate share of the capacity in the system.However,after these cus- tomers connect to the water or wastewater system,they will pay rates that include a capac- ity charge element.An adjustment is thus made to the unit capital cost calculation for future principal payments that the new connections will make on the respective utility's outstand- ing debt.In addition,the unit capacity charge does not compensate existing customers for the use of their funds to provide this capacity,until such time as the new user connects to the system.An adjustment is thus also made for past interest payments on debt issued to finance the improvements to serve the new customers.The resulting adjusted charge per mgd of capacity for each system is then multiplied by the capacity requirements of an ERU to derive the impact fee per unit.The water impact fee was separated into charges for water treatment and for water transmission and distribution.The wastewater impact fees were IDF61`12072.001; 1-2