BRUNSWICK COUNTY — System development fees (SDFs) could be on the rise for H2GO customers. This wouldn’t affect current customers but, if approved, it definitely will have an impact on new development and the cost of new housing.
These fees are costs that developers have to bear when planning a new development. Essentially, it is a fee that developers pay to provide new utilities like sewer and water to undeveloped properties.
It is important to note that while these fees could be rising, no official decision has been made yet, however, an analysis to explain just how much the utility provider could raise these rates to has been conducted.
Many homeowners likely won’t personally see SDFs as a line item in any bills they pay; their cost is typically folded into the total price of purchasing a new home. developers pay these fees to utilities to connect to the utility system before anyone moves in. SDFs are different from “tap on” fees, which homeowners may be more familiar with. Tap on fees cover what the name implies — tapping into the system.
SDFs cover the cost on the utility provider to adequately upgrade and maintain its system to accommodate for more growth.
In 2017 the state legislature made changes to the law regarding the fees that a utility provider could require through what is known as ‘Rational Nexus Text.’ This meant that utility providers could not just charge whatever they felt was reasonable for development fees.
Related: CFPUA wants customer input on proposed system development fee increase
“The new, regulated fees must represent the actual projected cost, based on a professional analysis, to fund capital improvements to expanded water and sewer lines to meet the new customer’s needs. In addition, system development fees can be calculated to include the cost-estimate borne by existing facilities to serve the new development,” Port City Daily previously reported.
From $5,000 to $11,200
Since H2GO has been in a two-year-plus legal battle with the Town of Leland and the Town of Belville, all actions have essentially been put on hold.
But in May of this year, courts lifted an injunction on H2GO (and the Town of Belville) allowing the utility provider to restart work on it’s widely debated reverse osmosis plant.
In May of 2020, the Wooten Company conducted an updated system development fee analysis for H2Go. In 2018 it was determined that the cost that from 2018 — 2028, H2GO would need roughly $100 million in capital improvements to keep up with the growth of the area.
In order to maintain that level of revenue, it was determined that the system development fees should be $11,200 consisting of $4,700 for water and $6,500 for sewer.
Currently, the utility provider charges $3,200 for sewer and $1,800 for water for a total of $5,000 meaning the proposed rates would more than double the current cost for developers.
By contrast, in New Hanover County the Cape Fear Public Utility Authority recently proposed a rate change for its SDFs which still came out to just $3,990.
Again, existing customers will not see an increase in their monthly bills from the increase of SDFs.
“As for rate increases, there will be no increase to our water or sewer rates. These are completely separate from our system development fees,” H2GO Spokesman Tyler Wittkofsky said.
Although existing customers won’t see an increase, developers and builders will — which means these costs will be passed onto the customers buying new homes and looking to live in the area.
In CFPUA’s service area, affordable housing has been an ongoing concern for many and their system development fees have been partially blamed for the higher cost to develop new homes.
Related: Water, a basic need that comes with a cost: CFPUA’s role in the affordable housing crisis
However, while affordable housing is important, utility providers have a responsibility to their ratepayers to keep costs low and not punish them with higher bills because a developer wants to add 200 more homes to a waterline.
The $11,200 price is, according to The Wooten Company, the maximum allowable SDF for a 5/8-inch meter (this is the typical size for a single-family residential home) which means that H2GO does not have to raise SDFs this high, but legally, could.
H2GO will hold a public hearing on June 29, at 6 p.m. to discuss the SDF analysis, anyone interested in attending may do so.