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System Development Charge (Impact Fees)

The system development charge is a contribution of capital towards existing or planned future back-up plant facilities necessary to meet the service needs of new customers. The charges are intended to provide funds to be used to finance all or part of capital improvements necessary to serve new customers.

Since 1996, Pioneer Consulting Group has completed more than 10 system development charge studies. Each of our engagements was to calculate the system development charge for new connections and the expansion of the water and sewer system.

Each study included the calculation of the buy-in method, the incremental method, and the equivalent residential units method. Our process flow for each community is as follows:

  1. Develop Objectives – We establish the goals and objectives of the department. The objectives include funding major capital improvements, minimizing debt, equity recovery, and maintaining the retained earnings and cash reserves to meet the capital needs of the system
  2. Identify and Update Capital Improvements Schedule – The calculation of the SDC may or may not include future capital improvement costs. Many of our studies do include future capital projects
  3. Update the Fixed Assets – Updates on the fixed assets for the water and sewer system are done. We calculate the original cost, accumulated depreciation, and the net book value for all fixed assets
  4. Calculate the System Development Charge - This step includes calculating the SDC based on the updated fixed assets. We quantify the SDC based on the buy-in method and the incremental method
  5. Prepare Reports – We prepare the reports outlining our calculations and recommendations.
  6. Present Our Findings – We meet with the governing officials to discuss our findings and recommendations