Wednesday, April 24, 2024

Water, a basic need that comes with a cost: CFPUA’s role in the affordable housing crisis

The Cape Fear Public Utility Authority is recommending to its board that a $5 credit be issued to the thousands of residences affected by high fluoride levels. The spike in fluoride levels was caused by a mechanical malfunction. (Port City Daily photo | Benjamin Schachtman)
The Cape Fear Public Utility Authority has been in existence for 10 years now. (Port City Daily photo | Benjamin Schachtman)

WILMINGTON — Where does affordable housing start? Far before a security deposit for an apartment is paid and even before a foundation is laid, money is being spent. Of course, land values will always be a significant driver behind what a developer or landlord chooses to use their property for, but another cost that is sometimes overlooked is the cost of utilities.

In New Hanover County, the Cape Fear Public Utilities Authority controls water and sewer for much of the population with little to no choice given to residents. Unlike public utilities in other parts of the state, CFPUA is not operated directly under a municipality or county; it was formed by both New Hanover County and the City of Wilmington and operates as its own entity, controlled by a board with members appointed by the county and city.

With administrative fees, deposits, late fees, new service fees, and high base fees, just getting the most basic of needs — water, and sewer — is not cheap.

Port City Daily spoke with developers and landlords about how CFPUFA fees affect affordable housing, as well as CFPUA, which addressed some of the criticisms directed at the utility.

From the developer’s point of view

One of the more expensive parts of building new homes in the region for Cape Fear Habitat for Humanity is getting water and sewer hooked up (Port City Daily/Courtesy Habitat for Humanity)
One of the more expensive parts of building new homes in the region for Cape Fear Habitat for Humanity is getting water and sewer hooked up. (Port City Daily/Courtesy Habitat for Humanity)

For Steve Spain Executive Director of Cape Fear Habitat for Humanity, CFPUA does hinder the group’s ability to construct affordable housing.

“From the builders perspective, the fees that you have to pay CFPUA when you start form a pretty big part of the package. Here in Wilmington, if there hasn’t been a house on the lot before it’ll run about $10,000 to get water and sewer and that is if it is right there off the street. You know maybe $2,000 or $3,000 of that is the actual digging and pipes, the rest is all in fees to CFPUA,” Spain said.

When looking at the bigger picture, these higher costs associated with building a home, even before any ground has been broken can put developers in the red before ever selling a home. This, in turn, drives up the cost of new construction in the area.

“That adds a lot to the base price of the land and that is what you’ll hear from people. Other Habitats in North Carolina and elsewhere, when I talk with my colleagues they almost all have some arrangement with their local utilities for a reduced price for Habitat. But that’s because most of their utilities are city or county-owned whereas CFPUA was essentially spun off from the two of them … they simply will not consider any kind of discounting, they think any sort of discount is the thin edge of the wedge and everybody will want a discount,” Spain said.

Spain does concede that as a utility provider there are certain things they have to maintain and a responsibility to the ratepayers.

“It’s partly a heartless bureaucracy and its partly being in a position where they can’t go and make a public interest appeal and get money, whereas a government-run utility you can … if it was still the city that is what I would be doing, going to City Council and saying look, if you could just forgive $1,000 of the fees or even defer it until we sell the house so then we don’t have to put that money up upfront. We’re building a 27-unit development and we’re going to pay like $150,000 in fees before we can sell a house,” he said.

Landlords and renters

Water is a necessity of life, but in the Cape Fear Region getting that water comes with a sometimes high price (Port City Daily/File)
Water is a necessity of life, but in the Cape Fear Region getting that water comes with a sometimes high price. (Port City Daily/File)

Building new homes is always going to come with additional costs regardless of the water provider, but what about homes that are already built and ready for renters? How does CFPUA play a role in affordable housing?

For Josh and Adrienne Hodges, CFPUA is one of the biggest problems they face as landlords, and one of the biggest hurdles for their renters.

Between multi-unit buildings and single-family homes, the Hodges own about 50 different rentals in the area — but the water utility continues to provide them with problems regardless of the price point.

“The true problem that people don’t want to talk about is that the cost of water is often higher than some of our rentals. We include water for most tenants at this point to help fill vacancies because they’re so afraid of CFPUA bills and their billing policies,” Josh Hodges said.

So what exactly are these excess costs? Well for one, the initial deposits just to get the water turned on into a renter’s name can be costly.

“CFPUA also tried charging us a $200 deposit for 51 units and also wanted to charge our tenants the same deposit. Totaling over $20,000. We fought it and won on our end, but our tenants still needed to provide a deposit,” Josh said.

Living paycheck to paycheck is a reality for many renters and when “life happens,” things can go downhill fast.

“The number one reason that we think, that we see on a month to month basis as to why renters can’t pay on time is water bills,” he said.

Late fees coupled with high water and sewer rates can quickly take a seemingly affordable water bill to overwhelming fast.

Empty houses and units are costing the Hodges anywhere from $100-150 each month just because base rates are so costly, they said. These fees include  Wilmington’s recycling and trash services, which are included on CFPUA bills.

“When were rehabbing houses our bill a month when we are not using water, we have at least $100 to $150 just in water bills for that one unit — and the water is shut off. It is just their fees, their base fees for water and sewer and they are charging up just for trash and recycling bins,” Adrienne Hodges said.

Because of these high rates, landlords are already behind when units go unrented and could make up for the costs by raising the rent.

CFPUA responds

While there are plenty of criticisms about CFPUA, there are also things the utility provider simply cannot do (Port City Daily/File)
While there are plenty of criticisms about CFPUA, there are also things the utility provider simply cannot do. (Port City Daily/File)

CFPUA spokesman Vaughn Hagerty responded to the criticisms against the utility provider.

“CFPUA is aware of the shortage of affordable housing in New Hanover County. As a water and wastewater utility, we provide critical services to the community. In doing so, we contribute to the monthly cost of living for residents in our area. We believe affordability is an important issue and have a number of ongoing initiatives aimed at addressing it:

  1. Surplus property policy change- Last Tuesday, CFPUA staff presented to the Board a new option allowing us to dispose of properties that CFPUA owns but no longer needs. Moving forward, CFPUA properties may be conveyed at no cost to New Hanover County to be used for affordable workforce housing.
  2. CFPUA Assist – CFPUA Assist is a program that seeks to help customers in financial need. This program is administered by the New Hanover County Department of Social Services and provide one-time payments to customers faced with losing access to water service. The program is currently in the process of being formalized into a 501c(3), which will make it eligible for additional funding opportunities.
  3. Payment plans – CFPUA offers payment plans to customers who may be struggling to pay bills.
  4. Future changes – We are in the process of moving to a new billing software. We hope this new software will allow us to switch from bimonthly to monthly billing, which will help make it easier for customers to manage CFPUA bills. We also hope to provide an optional bill-leveling service.”

In fact, Cape Fear Habitat for Humanity did recently receive former CFPUA property to be used for affordable housing — although, CFPUA had little say in that, according to Spain.

Hagerty also points out that CFPUA cannot legally waive fees for groups.

“As a public utility authority, CFPUA is governed by state statute. Unlike cities and counties, which can participate in community development programs, legally CFPUA cannot waive fees and treat people differently,” he said.

As far as the high costs to hook up service to new homes, Hagerty said the fee structure is as follows:

“Let’s assume a regular, residential 5/8-inch to 1-inch meter service. We’ll also assume the house is connecting for the first time to our water and sewer services and that no tap to the main currently exists. Using these assumptions, here is the most a developer would pay to connect an average-size home to the system:

  • Water tap fee to tap into the water main: $1,850
  • Meter set: $250
  • Water SDC: $1,830
  • Sewer SDC: $1,800
  • Sewer Tap: $2,200
  • Total: $7,930

As for the difficulties landlords and tenants might face when trying to get service in their names, that is to protect ratepayers according to Hagerty.

“The services we provide and the ongoing, necessary upgrades and improvements we make to the CFPUA system ultimately are funded largely by our customers. The more unpaid balances we must write off, the greater pressure these debts could put on rates for all customers,” he said.

Ultimately, affordable housing is a multi-pronged issue without a simple solution. It will take the collaboration between developers, landlords, local governments, and utility providers to find common ground and start making progress in the Cape Fear Region.

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