News

Ratepayers, new development likely to pay for water system expansion

Members of the Water and Sewer Advisory Council watch a presentation on city water rates.

By Bill Moss, Published: January 29, 2018

The Hendersonville City Council will consider rate increases for water customers and impact fees for new development as it looks at ways to fund ambitious growth plans.

The Hendersonville Water and Sewer Advisory Council heard the details of a water and sewer rate study and potential new impact fees on Monday night. The city is expected to use a combination of higher rates and impact fees to fund an ambitious expansion over the next five years. The city formed the Water and Sewer Advisory Council at the urging of the county Board of Commissioners, which has been seeking more influence over where water and sewer lines go.
The city’s current rates are not high enough to finance the borrowing the city plans for utility line replacement and extension. The city’s capital improvement program (CIP) calls for investing $39 million in the water system and $19.3 million in the sewer system through 2022.
“The CIP that we have is a very proactive CIP,” City Manager John Connet said. It may be too proactive. We try not to use the word aggressive, but it’s very proactive.”
The city would fund the capital plan using $11 million in reserves and borrowing of $9 million this year, $23 million in 2020 and $9.3 million in 2022. The revenue at existing rates is not enough to cover it all, Melissa Levin, with the Raftelis Financial Consultants of Charlotte, told the board. Based on the CIP, her report said, the city would need to increase rates by 20 to 25 percent over the next five years. Proposed rate increase the City Council will be asked to adopt in the new budget “are not a one and done” proposition, she said. “Several smaller rate increases are projected over the five-year period.”
The consultants recommended increases that keep the rate affordable for households, encourage water conservation and puts more of the load on large users. The recommendation keeps the differential for outside-city customers at 150 percent of inside users. County commissioners have said they want to see the city reduce the outside-rate. Statewide, the average differential for outside users is 182 percent.
“We wanted to share this information because the council will hear this presentation and as we go through the budget we’ll get into using this information to fine-tune it,” Connet said.

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Impact fees

City budget analyst Adam Murr presented a study on impact fees that ranged widely based on the size of the water pipe feeding the home or business.
The impact fee for a home would range from $2,300 to $4,600 while the fee for the largest user (fed by a 12-inch water line) could be $475,000.
“When it gets down to the wire and industry X is looking, this is one of the components that that new industry looks at,” County Commissioner Bill Lapsley said. “If you walk in the door and you say we’re going to hit you with a $40,000 for sewer and 36 for water, it can make a difference.”
Lapsley also mentioned that reimposing impact fees could harm efforts for affordable housing.
Utility Director Lee Smith responded that city policy on new hookups addresses both situations. The City Council can and generally does waive impact fees for affordable housing. “In the industrial recruitment, council can negotiate those fees or waive them,” he said.
After a state Supreme Court decision partially struck down impact fees imposed by local government, the state Legislature enacted a law allowing cities and counties to impose them again. Impact fees generated close to $1 million for the city in the boom year of 2007 and fell to around $300,000 a year after the recession, Connet said.
Councilman Steve Caraker said the city welcomed any input from members, who represent all the cities in the county plus ratepayers and industry.
“The biggest thing in this meeting was to get this information in front of you so you know what we’re up against and we value your opinion, honestly,” Caraker said.
The City Council will review the water rate and impact fee proposals when it meets for a budget-drafting session next month.

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