2.2.
CC Work Session
- Meeting Date:
- 11/27/2012
- By:
- Tim Gladhill, Community Development
Title:
Review Proposed Amendments to SAC Credit Policy and Consider Policy for Credit Distribution
Background:
In the summer of 2012, the Metropolitan Council Environmental Services (MCES) Division began reviewing potential amendments to the Sewer Availability Charge (SAC). SAC is a fee collected by MCES from the City that ensures future capacity in the Metropolitan Disposal System. SAC is collected by the City, typically at time of Building Permit, and paid to MCES.
In October 2012, a working group formed to review the SAC credit and transfer policies completed several recommendations. Broadly speaking, there are three (3) categories that the City could consider in administering the SAC program (if adopted by the Metropolitan Council):
In October 2012, a working group formed to review the SAC credit and transfer policies completed several recommendations. Broadly speaking, there are three (3) categories that the City could consider in administering the SAC program (if adopted by the Metropolitan Council):
- Net Credits
- Minor Transfer
- Short-Term 'Loan' Program
Observations:
As a result of changes to the SAC Program in 2010 by the Metropolitan Council, SAC Credits created by permanent reduction in demand can only be used on the same site in which the permanent reduction occurred. Currently, SAC Credits cannot be taken city-wide.
Net Credits
A proposed amendment to the SAC policy is to allow for the provision of Net Credits. Net Credits are created when a permanent reduction in demand is created by removal of a structure or permanent change in use to a lower demand. Actual payment will serve as proof of SAC paid. Net Credits are proposed to be allowed to be applied city-wide. The City can choose to develop a policy that either leaves Net Credits site-specific or allows Net Credits to be applied city-wide. Net Credits are proposed to be created for future, permanent demand. Net Credits are not proposed to be retroactive (for structures already removed or use reduced), and the Metropolitan Council's financial analysis did not include a study of looking retroactively.
The result of Net Credits would be a bank of credits that could be applied. There would be a small amount of increased administrative time to track the status of the Net Credit Account and coordinate with the Metropolitan Council. Attached is a draft policy for consideration on the City's goals in distributing Net Credits.
Minor Transfer
A Minor Transfer is similar to Net Credit, except that a permanent reduction in demand is not experienced. A Minor Transfer would allow a user move SAC units from one site to another upon relocation, and would be limited to ten (10) SAC Units or less. A potential downside of a Minor Transfer is the fact that a finished space of one site is now removed of its previous SAC payment.
Staff does have concern with allowing the Minor Transfer as part of the City's SAC Transfer Policy due to the liability exposed to the City. Since no actual reduction in demand is experienced, it would be the City's responsibility to ensure that SAC for the existing space was re-paid and made whole. Typically, a Building Permit is the trigger for SAC review. In the case of a Minor Transfer, there may not be a need for any City review if no structural alterations are necessary to occupy the existing space. In addition, Staff does not want to put the City in the position of making a determination of what party actually paid the SAC fee (landlord or tenant). There would be an increase in the amount of administrative time required to track Minor Transfers. Staff would recommend that if if is the City's desire to permit Minor Transfers that this only be used upon approval of the Property Owner (not the tenant) and a lien or recordable document be placed on the Property to ensure proper tracking and survival of sale of property.
Small Business Loan Program
The Metropolitan Council is also recommending implementation of a Short Term Loan Program that allows the City and Developer to pay SAC obligations over time, with interest. The program would be limited to smaller users of ten (10) SAC Units or less. The entire SAC amount would not be required to be paid up front. The City would be responsible to ensure annual payments and be required to enter into a Loan Agreement with the Metropolitan Council. Again, some additional administrative time would be required to administer the program.
It is the Metropolitan Council's intent to have the new policies effective 1/1/13. Staff is placing this item for consideration at this time to attemp to match this date and have any revised policies effective coinciding with the effective date of the 2013 Rates and Fees.
Net Credits
A proposed amendment to the SAC policy is to allow for the provision of Net Credits. Net Credits are created when a permanent reduction in demand is created by removal of a structure or permanent change in use to a lower demand. Actual payment will serve as proof of SAC paid. Net Credits are proposed to be allowed to be applied city-wide. The City can choose to develop a policy that either leaves Net Credits site-specific or allows Net Credits to be applied city-wide. Net Credits are proposed to be created for future, permanent demand. Net Credits are not proposed to be retroactive (for structures already removed or use reduced), and the Metropolitan Council's financial analysis did not include a study of looking retroactively.
The result of Net Credits would be a bank of credits that could be applied. There would be a small amount of increased administrative time to track the status of the Net Credit Account and coordinate with the Metropolitan Council. Attached is a draft policy for consideration on the City's goals in distributing Net Credits.
Minor Transfer
A Minor Transfer is similar to Net Credit, except that a permanent reduction in demand is not experienced. A Minor Transfer would allow a user move SAC units from one site to another upon relocation, and would be limited to ten (10) SAC Units or less. A potential downside of a Minor Transfer is the fact that a finished space of one site is now removed of its previous SAC payment.
Staff does have concern with allowing the Minor Transfer as part of the City's SAC Transfer Policy due to the liability exposed to the City. Since no actual reduction in demand is experienced, it would be the City's responsibility to ensure that SAC for the existing space was re-paid and made whole. Typically, a Building Permit is the trigger for SAC review. In the case of a Minor Transfer, there may not be a need for any City review if no structural alterations are necessary to occupy the existing space. In addition, Staff does not want to put the City in the position of making a determination of what party actually paid the SAC fee (landlord or tenant). There would be an increase in the amount of administrative time required to track Minor Transfers. Staff would recommend that if if is the City's desire to permit Minor Transfers that this only be used upon approval of the Property Owner (not the tenant) and a lien or recordable document be placed on the Property to ensure proper tracking and survival of sale of property.
Small Business Loan Program
The Metropolitan Council is also recommending implementation of a Short Term Loan Program that allows the City and Developer to pay SAC obligations over time, with interest. The program would be limited to smaller users of ten (10) SAC Units or less. The entire SAC amount would not be required to be paid up front. The City would be responsible to ensure annual payments and be required to enter into a Loan Agreement with the Metropolitan Council. Again, some additional administrative time would be required to administer the program.
It is the Metropolitan Council's intent to have the new policies effective 1/1/13. Staff is placing this item for consideration at this time to attemp to match this date and have any revised policies effective coinciding with the effective date of the 2013 Rates and Fees.
Recommendation:
The EDA met on Thursday, November 8th and recommended approval of the policy to allow Net SAC Credits to be applied Citywide and to create a SAC Small Business Loan/Deferred Payment Program and to recommend that the City Council monitor the success and administrative overhead required to implement these two programs before considering a Minor Transfer Program.
Funding Source:
Implementation of the program is being handled as part of regular Staff duties.
Council Action:
Motion to adopt the policy to allow Net SAC Credits to be applied Citywide and to create a SAC Small Business Loan/Deferred Payment Program and to recommend that the City Council monitor the success and administrative overhead required to implement these two programs before considering a Minor Transfer Program.
Attachments
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Diana Lund | Diana Lund | 11/21/2012 08:37 AM |
| Kurt Ulrich | Kurt Ulrich | 11/21/2012 11:05 AM |
- Form Started By:
- Tim Gladhill
- Started On:
- 10/23/2012 10:54 AM
- Final Approval Date:
- 11/21/2012