We administer inter-developer financing and cost sharing of sewer systems installed in private development areas.
Cost sharable items
- Any sanitary sewer having an internal diameter of 375 mm or more (sanitary trunk sewers)
- Any storm sewer having an internal diameter of 1200 mm or more (storm trunk sewers)
- Any stormwater management (SWM) system which includes, among others, SWM drainage studies, stormwater retention/detention facilities, the interconnecting and connecting storm sewers, control structures, landscaping, land cost
Installation costs of sanitary sewer of less than 375 mm in diameter and storm sewer of less than 1200 mm in diameter (lateral sewers) are normally not cost sharable. They are installed at the developer's sunk cost. The only exception is when oversized laterals (provide additional capacity and/or depth) are required to service areas external to the development in question. The cost difference can be recovered by an oversize claim from the benefitting areas.
Cost sharing concepts
There are 2 types of cost sharing: on-site and off-site.
On-site cost sharing refers to cost sharing of trunk sewers installed within a pre-defined boundary (drainage basin). The boundary of the cost sharing area is determined on the basis of topographic, political, economic and design constraints. This cost sharing is characterized by the following:
- A number of developers benefitting from a common sewer system within the cost sharing area are involved in the installation and financing of the required system. Construction of the sewer system is staged according to the pace of development. Each developer is responsible for constructing their portion of the system.
- Each developer is required to pay his relative share of the construction cost which is established by an area assessment known as the Permanent Area Contribution (PAC). This rate or area charge is recalculated each year and is derived by dividing the estimated construction cost of the cost sharable items within the cost sharing boundary by the remaining benefitting areas. The PAC for each developer is calculated by multiplying the PAC rate by its development area.
- The developers are also involved in an inter-developer financing scheme. For example, if a developer is required to construct a portion of the sewer system that is subject to cost sharing, they will front-end the required construction costs. Since all that they are required to pay is its PAC, the difference between the actual construction cost and the PAC is treated as an over/under expenditure. An over expenditure can be recovered from subsequent developers. An under expenditure will be held in trust to offset over expenditures from future developers.
- A developer within a cost-sharing area is required to pay its PAC and any interim payments resulting from the inter-developer financing scheme.
Off-site cost sharing refers to cost sharing of intercepting sewers built outside the boundaries of on-site cost sharing basins. An off-site cost sharing area usually consists of a number of on-site cost sharing areas, and is characterized by the following:
- The off-site sewer systems are usually installed and/or financed by one developer or a group of developers who would front-end the costs of the entire system. They will carry the over expenditure which cannot be fully recovered until the entire basin is developed.
- Calculations of off-site PAC and over/under expenditures for subsequent developers are similar to those used for on-site cost sharing.