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Exh 8CAGE1'DA ITEM #SC FEBRUARY 28, 2005 . _ customer would have would be loan secured only through a lien on their house with a S% interest rate on a separate bill. Maximum Penalty; The subject of establishing an enforcement mechanism through the Code Enforcement Board with a fine that would be slightly ' ' above the estimated monthly cost a customer would have to install a septic tank and pay the sewer bill was recommended. Using a hypothetical customer with a $5,000 loan and a S% interest for 10 years, the loan ' ' repayment would be $53.30 per month. Assuming the same customer .. would use an average of 7,000 gallons of water, their sewer bill would be $29.40 per month. The total of the two would be $82.70. If the Commission chose to establish a maximum fine that could be levied by the Code Enforcement Board of $1S0 per month, then it could accomplish the purpose of the discussion on January 24tH Maximum on Compounding_Concerning the compounding issue, the maximum amount due for a loan for the same customer for $5,000 at a 4% interest rate would total to $7,454 over 10 years if no payments were made • ~ at all. If the value of the customer's house began at $150,000 and compounded at only 3% over the same 10-year period, then it would escalate in price to $201,587. While the loan would increase by $2,454 ($7,454 Iess the original Ioan amount of $5,000) the house would increase by $S1,S87. Given the 4% interest rate, there does not appear to be a need to cap the amount to be compounded because the value of the house will ' ' go up faster than the loan. Other incentives; CDBG funds are budgeted in the current year in the ' " amount of $40,000 for assistance for income eligible families. A substantial portion of the CDBG funds for FY OS-06 will also be allocated to septic to sewer conversions, although there is some question about how ' ~ much money will be available after the federal budget is adopted. Once , the final financing and enforcement incentives are adopted by the City Commission, staff will attempt to contact each ofthe homeowners that will be up for replacement this year under the current schedule by phone or in person. A strikethrough and underlined version of the policies as proposed above - ~ is attached for your review. BUDGET: Budget implications of the various scenarios were outlined in the staff • report presented at the January 24, 2005 meeting (copy attached). RECOMMENDATION: The Mayor and Commission should consider if any further amendments to the proposed financing plan should be made. When a final plan is acceptable, then the City Commission should adopt the amendments by AGENDA ITE~7 #8C FEBRUARY 23, 2005 resolution. Placing a cap on the maximum fines by the Code Enforcement Board will require an ordinance. ATTACHMENTS: (1) Proposed amendments to the financing incentives resolution adopted June 12, 2000 (2) Staff Report on Septic to Sewer Conversion Options presented at the January 24, 2005 Commission Meeting AcENllA l~l E1VI #sc FEBRUARY 23, 2005 City of Atlantic Beach, Florida Septic Tank Conversion Assistance Policy Revised Mandatory Conversion from Private Septic Systems to the Public Sewer System The following information is provided as an outline of the City's policies to accommodate those property owners that are required to convert from a private septic system to the City's public sewer system. These policies may be amended or modified by the City Manager as needed. Property Owners affected will be informed by certified letter, from the City Manager, of the requirement to connect to the public sewer system. If assistance is requested, Property Owners will be advised to contact the Public Works Department; during regular working hours (7:30am to 4:30pm, Monday thru Friday). The Public Works Department can assist in determining what needs to be done including cost estimates and permits needed. b b b L b .,rnrl~ nr finnr,n:,,rr+l,o,r m vrvrlw , ,._~n11n,:r +l,o .,nrr+,n l +.rnn.,nn of ~ n_an+rnn+; r,lr n r,l„ml,o ., rl vv +l,o of„an ~cTVCa: non„r .. +l,o n „b n+o „n,-,,, +n T,d 1'L +1,,, !"~'+, _ E-t~$~1:5S~Srtfl$lE:--F $e-P-~"vpci~'{~"a~~}2`~S-~ i-i v-roi-~r~p-r-cu".7vzr`iPV~sc-cn~cirf +n_ :n+ , r;th thrirn*++r~n+;,,~,_n£r.l,,,,,l,o,. „a ~,..,.,'+ F 4-t~1-,~w,,,.,...}..~'. ,,../.'1..~.•......•..'..'.........,.......b .~., ~....ala v..l .r a+alu~}r~.vaTa-a'lyl'~.Y,avv~..,.Tivl . T1Y~: .T~ilj TAY'rr`~"~f'L~~`2YT"e~7~''7.L,7~'J/I~,L~i'cC-ZI'B'~~ITSY'~Yl+ `x1rT"VrkJ Dvpa~er~t-{-~S~Ala1T~C~'~tC'FI#fi-} For those Property Owners who for any reason would like financial assistance with the conversion, the City is prepazed to enter into voluntary assessment agreements to finance the cost of the conversion. The City will also consider the applicant's eligibility for Communi Development Block Grant funds for their particular situation. (SEE FINANCING) 1 ~~th: For-tn ~ V l l l 111 o~ avp, VL ~ .. . non:c.+n„na , r:+t, l,n+t, +1, 11V1J YI 1V Jl GLII, 1L. ~.., + +• 1, ,1 f' LLJV11 YTVL `.• o i Li CG f+, o v....~.wavv ... ua Vv..l ~la l V VVa11.1 K.r llllb {.Hall 11 114111,.x11 ~ ; Ci"ice ,n_Ci~r n vv::,r°rnln„ + . v..i.4r a., 4a. va4 O''r ~ c_n nnT~ +o +,,.-. ~GZTCZ'1. C1 GLG~CCC ,~~ 1 ~GZC b +.. 4"t. CO' AGENDA ITEM #8C FEBRUARY 28, 2005 Conversion from Private Septic System to Public Sewer System r'^"~'"^^''~„~; Public Assistance Policy The following policies .,,;'.,,.~ are adopted in conjunction with the City Commission's adoption of Ordinance 80-00-61. 1. All Property Owners required to convert from a private septic system to the City's public sewer system will be notified by certified letter of the program and of its availability upan *~° „°~~^rt° ^~+''° ^~~*'~^..:.,;,,,~ ^~a~^^r^° prior to the deadline for their respective b b ' conversion. The City will also make an attempt to contact the property owner directl~to .. discuss the options available to them in an effort to encourage the property owner to proceed with the elimination of their septic system. b +~ ° a„° +„ the-C--i~~1t,. „~., „+ ;., +~,° ,,,-,,,.° ~~ ~2. b b b b ~~YYCY . , ~-3. b' b YYLZl iZGL YI.-i.i{L L~J L1Ll~ip-FJ1II 6:4. No contracting work may proceed without approved permits and no work is to be performed without the payment of all fees. ~L-1•~oa~~6~~~ziizg `_CL'L'_ii'TAT A AT!''T1~T!'' Dl1T T!''V AGENDA ITElYI #8C FEBRUARY 28, 2005 ~-5. The Public Works Inspector will be available to answer. any questions for homeowners I before, during and after construction, provide key inspections, and arrange inspection by the Building Department. ~6. The Building Department will be responsible for the final inspection. 4-8:7. For Property Owners who are not on City water, a City water meter is to be installed on the private well and the Property Owner must agree to grant access for reading this meter as a basis for billing sewer services. 4-1-8. The Property Owner will pay $85 for the water meter installation. The meter will remain City property. 4-?-9. The~Building Department will be responsible for retaining all documents related to the conversion in the permanent building files as a matter of public record. -1-3-10. The final inspection report will be copied to the Finance Department for entry into the Utility Billing system and the Miscellaneous Receivable system as needed.. ~-4-11. The Property Owner or Tenant will be chazged for sewer service beginning in the following month. AGENDA ITEM #8C FEBRUARY 28, 2005 Conversion from Private Septic System to Public Sewer System Financing Policy For those nronerly owners that want financial assistance, the City will loan the funds to the property owners in the form of a voluntary assessment for those that are required to convert from a private septic system that meet the eli i~ bility criteria. > > b b ' ?-d-The eligible property owner will possess the following qualifications: 1. The Property Owner must currently be on a private septic system with public sewer available. 2. The Property Owner must either: 1) be an existing City water customer, or, 2) allow a City meter to be installed on the Property Owner's private well as a basis for billing sewer volume at the property owner's expense. 3. The applicant must be the Property Owner. 4. The Property Owner and the tenant must be current on ail outstanding amounts owed the City. For thos~roperty owners that qualify, the City offers the following 41. Application for Assistance: The City will enter into a Voluntary Assessment Agreement , with the Property Owner on the basis of an application process. This process is intended to ' assure that the Property Owner is fully educated on the process and that they agree to the terms .. and conditions of the assessment. ~2. Amount: All expenses related to the conversion from a private septic tank to the - public sewer system are eligible to be included in the assessment up to $7,000. -. l b ~ + , o,.o . ..11 1....,.~. ~.-...., ~. ~,. n ., ~ +.,, b , n ' AGENDA ITEM #SC FEBRUARY 28, 2005 ~:3. The City will agree to the Voluntary Assessments with the following terms and conditions: ~l . The Property Owner has the option of choosing any length term in ~ men;th6-month increments up to 10 years. 2. Interest Rate: The total voluntary assessment will include 5% simple interest compounded monthly. The interest rate will be 4% simple interest compounded monthl if the property owner agrees to have the assessment attached to the utility bill. At the time of application, the applicant will have an option of including ' the payments due on the utility bill. Selecting this option allows the city to bill and collect in the same manner as the current utility bill. This will mean that monthly deadlines are imposed for each payment and late charges and cut-offs for non-payment will be enforced. As stated above, the City will charge a reduced interest rate of 4% for those that select this • option. Payments will be due on the location's water and sewer utility bill, whether or not the property owner is the occupant meaningthat landlords and tenants need to address this issue between themselves. For those property owners not wilIin~agree to monthl~payments on the utility bill, the city will send monthly statements separately with interest accruing at 5% on the monthly outstanding balance. ~. ii'~@~h@~~e-1~r6~2i~f~i'~~H@r-iS-+i-rr~c•• r TL.~ c~ , C~bT~ b 2-`l'_}u?-tRrmr ~nr3 .. .~,11:~:.,,, f'r,r + o *1, ~ ~1, !'`'*. ~ ~ .t ..v.. a .v.W 1Vl tJN.J"111~i1L Z.iZt-L311-7. Lill .7C.~T'GrLJZI2: ~3. The City will place a lien on the property for the full amount of the charges with interest for duration of the outstanding balance. The lien will be • . required to be paid in full if theproperty is sold The cost of filing the lien will be included in the lien and payable to the City_. ThP-tr.r~l t~nt„nt•,,.•• A + •11 ..r ,7 '70~ 1 f + J JJL11 V+11L Yl'1T~iiIV1\,[QL ~~FP-or"rlrl l,o .~~ .+~nn14~r ~ ~~~r'z1iEi~t$-TL7Tn~ch caCZie~a~}}cn7.Tdr2'Y't"t7C ~ b . AGENDA ITEM #3C FEBRUARY 23, 2005 0 ~~ -~-4. The City Manager, or his designee will be authorized to sign the agreements b , AGENDA ITEM #8C FEBRUARY 28, 2005 CITY OF ATLANTIC BEACH CITY COMMISSION MEETING ~. • STAFF REPORT AGENDA ITEM: Policy Options for Requiring Septic Tank Owners to Convert to . ' ' the Public Sewer System '' ~, .. ., SUBMITTED BY: Jim Ha.nso . , ~~ DATE: January 14, 2005 ' BACKGROUND: A short report was made at the January 10`~ commission meeting that the .. five-year timetable for delayed enforcement of the State requirement to connect to the City's sewer system was to expire in May of 2005. You ' asked to see a list of options to further encourage those owners to convert • - to the city system. This report is to provide those options and seek guidance from the Commission as to which if any should be prepared for ado~tivn. . .,. ~ ~ ~. . . ~ ~ First; a brief history of the city's septic to sewer policies is in order . . ~ because any policy decisions made must consider not only the group of 53 septic tank owners for which the timetable is expiring this year as well as many others that will be in similar situations in future years. Florida State 'Law requires septic tank owners to connect to a publicly owned sewer ~~ system within one year after the availability of that system. In 1999, there were 279 septic tank owners with public sewer accessibility in Atlantic . . Beach. Septic tanks can often create serious environmental.concerns, ' " particularly if they are located in close proximity to.shallow wells~used . .. . ~ .either for irrigation or drinking water. However, the~cost to convert from aseptic tank to the City sewer system is usually several thousand dollars and can often impose a major financial impact on property owners. With ' ~ these factors in mind, and after considerable public discussion, the Mayor ~. .. and Commission adopted an ordinance in May 2000 delaying the City's .". ~ ~ .enforcement of the state law. Septic tank owners were separated into two ' groups; those with assessments for installation of water and sewer lines • that they were currently paying and those without assessments. For those with assessments, the timetable for the delay of enforcement was to be one • ~ ~ year after the expiration of their assessment. There were three groups with assessments which expire between December 2006 and November 2011. . ~ The second group was those septic tank owners with no assessments. • ~ These were given five years to connect (until May 2005). The City Commission also adopted by resolution a set of financial ' ' ~ incentives to encourage the septic tank owners to convert to the City's _, sewer system as soon as possible. These included loans at 7% simple interest with a 10 year maY;mum term For the first year of the program, ' AGENDA ITEM #8C FEBRUARY 28, 2005 the maximum amount of the loan was not Gaped, although thereafter there - was to $3,000 limit. City staff also offered various assistance to the owners in finding plumbers, getting quotes and otherwise managing the process of conversion. After adoption of the ordinance and resolution, letters were sent to each of the septic tank owners to explain the City's new policies. Follow-up letters have recently been sent to those who are on the five-year timetable. The program has been very,successful so~ far in reducing the number of septic tanks in use from 27~ to 169..Only 53 of the remaining 169 are on the five-year schedule. There will be an additional 116 septic tank customers required to convert to City sewer system in future years. There are seven options identified for the financing incentives as well as one recommendation on how to go about enforcing the state law as follows; ,1) Do nothin ;more than the current program which allows for a loan up to $3,000 with a rate of 7%. The average cost for the septic Zo sewer conversion, including the City's tap and impact fees, is . usually over $4,000 per household. For this reason, and because `~ ' . '•the 7% rate is higher than one could currently get on a second " ~ mortgage, very few of these loans have been made in the last "' :.''couple of years. Unless interest rates increase so that the 7% rate becomes more attractive, we could anticipate that not very many people would take this program in the future except those who may have credit problems and cannot obtain other fnnding. There would be relatively little impact on the City's budget. . ~ ~ .2) Lower the interest rate; a lower interest rate would encourage more people to use the City's financing program. We currently earn about 2% on the City's invested money. An~initial 3% interest rate would reasonably be estimated as the .City's "cost" for the loans anticipating that there is some administrative costs that should ' be recovered. Market interest rates may go up and the City could take on substantial risk by setting a flat rate of 3%. Setting an indexed rate at either prime +1 % or the City's current rate on investments +1 % would be a fair way to lower these rates for both the City and our customers. The `worst case" budget impact to the " City would be if all 169 of the remaining septic tank owners were . to use the city's loan process and over $500,000 could be loaned out and paid back in monthly installments over ten years. The conversion cost includes the City's sewer impact fee of $1,250 so over $200,000 would immediately be returned for a net out-of- pocket amount of about $300,000. 3) Raise the cap on the loans; If most of the septic tank conversions run in the $4,000 to $6,000 range, then raising the ma~cimum loan " ~ to accommodate these higher costs makes good sense. This would. . ~ ~ AGENDA ITEM #8C / FEBRUARY 23, 2005 ~' probably only be done if the previous option to lower the rate was also implemented. The maximum financial impact~of this, using the same 169 customers and a loan amount of $5,000 each would • amount to initial loans outstanding of approximately $845,000. After the impact fees described in the Last option, the net would be $634,000. The most probable scenario for the number of loans would be far less. ' 4) Raise the term .of the loan up from ten years. This is a possible way to minimize the financial impact on the customers. By ~ - spreading the payments out longer, the monthly payment would be ' ' lower much the same as the difference between a 15 year and 30 . , year loan on a house. The financial impact to the City's budget • would be similar to the estimates in the previous two options, but ' ' ,the balance outstanding would run for a longer time. ~5) Use CDBG Funds; The City has used block grant funds for eight income eligible owners in the past. Realizing that the five-year timetable for the first group was upcoming, and with many of these living in the. CDBG eligible area, the budget this year was set at . '$40,000 for assistance in this area. The budget impact is that we ".' :.''have $40,000 less to utilize in other CDBG eligible projects. .6~• 'Loan with Lien on Home; The current financing program requires - ~ •.loans to be paid on monthly installments on the customer's utility ' ~ ~ bills. This allows for the City to cut offwater and sewer service if . ~ the bills go unpaid. A different option would be to issue loans with ~~ ' ~ ~ ~ separate payments. Liens could be placed on the homes and the homeowners could be given the option of either making regular payments or making no payments at all until the house is sold. The homeowners could minim;tee their cost by paying only the regular .monthly sewer bill and delaying the loan repayment until the house is sold. The City would have'to• agree to wait for payment until the. ' ~ ~ property changes hands. In this scenario, the financial impact in .. total dollars could be the same as Listed in previous options, but the amount of time that the loans would be outstanding could be much: longer. To see that the City does not lose money in the process, • and because of the long-term nature of this option, it is suggested that the interest rate be indexed as described in option m2 above. '~ Personal Contacts; Letters have recently been sent to the remaining 53 customers whose timetables expire this May, City . staff has only had personal contact with I7 of those. Once the City Commission has made decisions on the final policy changes and enforcement, personal contacts with the remaining owners may be beneficial. Enforcement; Enforcement of City ordinances as set forth in the Code is handled by the Code Enforcement Board which has the BUDGET: .. RECOMMENDATION: ATTACHMENT: AGENDA ITEM #8C FEBRUARY 28, 2005 authority to impose fines of up to $250 per day as long as the violation continues. One philosophy for setting the amount of the fine for failure to convert would be to set fines that equal or slightly exceed the amount that a customer would otherwise pay for the loan from the City plus the cost of the regular sewer service. In this .way their penalty for failure to convert would be as much or more than it would cost to connect to the sewer system. The Commission could request cooperation from the Board in writing or prepare limits in the enabling ordinance. „ ~ , .: . Budget implications. of various scenarios have been outlined above. . ., The Mayor and Commission should consider the various alternatives suggested and instruct staffwhich of these, or others, you would like to see adopted. Once those instructions have been given, then amendments to the enabling ordinance and/or resolution will be prepared. 1) Ordinance 80-00-61 dated May 22, 2000 .2) Resolution 00-09 adopted June 12, 2000 .•. ,, . . Y. ....._____~____.. ~ I ..