Sewer and water tap-in fees charged by the Brunswick-Glynn County Joint Water and Sewer Commission are much lower than the full cost for the utility to complete the work. They have been for so long, that officials say increasing them now won’t make much of a difference in the short term.
Utility Executive Director Jimmy Junkin said the overall costs involved in a tap-in go beyond just connecting a building to the water and sewer systems. In areas where systems are not already in place, lines first have to be expanded to reach new development. As new buildings are added to the system, parts of the system must be updated to accommodate the new customers.
If you take all the money that is put into expansion and improvement to the system, and divide it by the number of water and sewer customers, you get the true cost to the utility per tap-in, Junkin said. The latest calculations suggest that, to make up for the money lost, the utility would need to charge $9,000 per Residential Equivalent Unit, REU, which is a water and sewer usage measurement unit. Currently, the JWSC charges $3,550 per REU for a tap-in, which is well below what it should be, Junkin said.
“By the arithmetic involved, we’re charging half of what it’s worth. The arithmetic does not match the price,” Junkin said. “We’re doing the verification now, but we’re not going to get back the number we’re charging.”
Once the system is ready to be tapped into and the tap fees are paid, the utility doesn’t make much money compared to what it lost on the tap fee, said Donald Elliot, chairman of the utility commission’s board.
“We don’t see any revenue stream from a development after (the infrastructure is complete) other than the funds we get from providing water and sewer service, and that’s not enough to cover the capital expansion costs, so the tap fee is the only way we can do that,” he said.
The utility has already taken steps to increase the tap fee, and may continue to do so. In June last year, the commission approved a phased rate increase across three years. In July 2016, the tap-in fee was increased to the current rate. In July of this year, it will increase to $5,375 per REU and in July 2018 it will increase to $7,200. That price is on the higher end, but still less than preliminary calculations of the true costs, and less than what both Kingsland and Hilton Head, S.C., charge.
While the phased increase is something the utility commission approved, it could still increase more.
“Having said that, every year we look at it again, so it may go up more in (fiscal year 2018) based on what we look at for capital expansion projects,” Elliott said. “We look at it all the time.”
But, according to Junkin, even if the fee were bumped up to what the commission really needs, it still wouldn’t make a difference in the short term. The tap-in fees have been so low for so long, he said, that there are no reserves built up like there should be. Just accruing enough to pay for what they already have is going to take time.
According to Elliott, past commissions may have felt that they could make up for having a low tap-in fee with the increased development it would draw.
“There’s been reasons why previous commissions have lower tap fees and it’s because, in those commissions minds, it encouraged more development,” Elliott said. “I don’t think there’s any study that demonstrates that, and it doesn’t benefit us to do that, and I would say the other (current) commissioners understand that.”
Money has been a consistent issue for the utility, which has been struggling to deal with what Junkin described as a neglected sewer system that is being expanded in multiple directions.
Recently the commission has been discussing altering the rate structure to have customers pay a fixed rate up to a certain amount of water usage. The most recent proposal called for having customers pay a fixed rate up to 4,000 gallons, after which they would be charged for additional usage.
Another part of the same proposal was to take planning and construction administrative costs out of the rates. They could impose these costs only on developers. CFO John Donaghy said this would make rates more equitable, because as it stands rate payers are subsidizing development.
All these calculations are feeding into a capital improvement plan on which Junkin is working. Along with utility staff, he has been working out a plan that includes a priority list of capital improvement projects, and is also working on methods to fund them. Increasing tap fees and altering the rate structure fall into that.
Junkin will release his plan and speak more about funding methods at the utility’s next finance committee meeting, which is scheduled for 2 p.m. April 19 in the utility’s offices located at 1703 Gloucester St. in Brunswick.