Graham city council members scaled back by more than half the water and sewer system development fee increases that they had been considering for the new fiscal year that begins July 1.
The fees are charged – often in the past referred to as a “connection” or “tap-on” fees to the city’s water and sewer lines – to developers of new subdivisions when newly-built houses come on line for utility service.
The intent of the fee system, according to the city, is to fully or at least partially offset the costs of additional public capital facilities and infrastructure that will be needed to meet the demand created by the new development projects.
State law mandates a formula that engineers are to use in calculating the “maximum” level of fees that can be charged for such new projects within the city (based on that city’s costs). The city’s engineer, Josh Johnson with the Burlington firm of Alley, Williams, Carmen, & King, had made those calculations, which called for a significant increase in Graham’s fees – which it was noted several times, had not been adjusted in years.
Throughout the spring, councilmen have been discussing the need to adjust the city’s fees with a significant increase.
But when a 271 percent increase was unveiled at the council’s June 14 meeting, mayor Jennifer Talley said she was taken aback.
[Story continues below rate charts, those proposed and one adopted to be effective July 1, 2022.]
Talley was particularly surprised, as she expressed then and again this week, that her colleague, councilman Bobby Chin, had backed away from his previously-expressed interest in cutting the increased fees by 25 or even 50 percent.
“You threw me for a loop,” she told Chin at the June 14 meeting after he announced that he no longer favored any reduction from Johnson’s original proposal.
Three options were under consideration that night: the full, estimated costs (as estimated using a state-required methodology by Josh Johnson, the city’s engineer); a 50 percent reduction in the fees; or a 25 percent reduction.
In comments at the city council meeting this week, and in a subsequent interview with The Alamance News, Talley says she was fully expecting that the council would adopt the 50 percent reduction.
“Everybody [on the council] seemed to be on board [that night for the 50 percent reduction, from the levels established by the city engineer’s analysis],” she said.
For his part, Chin explained at the time, “We’re only hurting the citizens of Graham to lower our rates and fees [below the maximums Johnson had calculated].”
“We’ve got an infrastructure that needs to be repaired,” Chin pressed on June 14. “The future is now,” he said, urging that the city build up its reserves to handle existing needs and future projects.
At that earlier June meeting, Talley had insisted to her colleagues that the magnitude of the increases – almost three times the level of existing fees – meant citizens, including local builders and developers, should be apprised of the significant proposed level of the increases.
During that initial June 14 discussion, Talley was the only member who expressed any reservations about enacting the proposed rates and fees that ostensibly reflected the city’s full costs for infrastructure and other costs associated with the new developments.
The other four members either stated or nodded in favor of proceeding with enacting the proposed higher rates. However, they ultimately acceded to Talley’s repeated entreaties to postpone a final decision until two weeks later, the meeting this week on Tuesday night, June 28.
Background and the options
The city’s current fee structure for a two-bedroom home is predicated on charging a developer $483 for water and $1,185 for sewer, or a total cost of $1,668.
Johnson’s calculations for covering the city’s full costs were to increase these rates to $2,772 for water and $1,748 for sewer, or a total maximum cost of $4,519, a total increase of approximately 271 percent – a number that was frequently rounded by some council members and speakers as a 300 percent, or threefold increase in fees.
“More than doubling the rate is unfair,” Talley summarized. She had stated at the earlier meeting that such a dramatic increase could bring a halt to Graham’s growth, inasmuch as she said builders would no longer consider Graham’s rate structure hospitable.
“Several members of the council felt [at the June 14 meeting] that was too much – was too much to handle [all at once],” Talley said this week. In fact, Talley has been the only council member to raise concerns or reservations about the proposed full rate at that meeting.
Part of the impetus for the higher rates is the city’s need to find additional revenues to finance a state-required upgrade of the city’s wastewater plant. Informal estimates from a year ago had been $32 million, Talley described, while a recent bid opening for actual implementation was for a whopping $74 million.
Talley also emphasized that all finances for the wastewater plant must come from the water and sewer fund. The city may not use funds from the property tax rate, in the general fund, for this or other water and sewer projects.
Talley said she was constantly looking for grants for which the city could apply, hoping to lower the amount that Graham would have to come up with directly.
She said funding would have to come “either from future fees, development fees, or grants, or fund balance.” It “really restricts” where [the city] can get the money from to fund the $74 million, she said, costing $2 million annually just in likely finance charges to pay off the project.
One topic that arose periodically was whether the city’s rate structure should reflect any variation for so-called “infill projects,” usually smaller projects that are built within the areas already served by city water and sewer lines.
“For a small developer who’s doing something here within Graham,” Chin said, “we don’t want to burden you with the full costs of something that a new developer who’s going to build a large subdivision would be required to incur because they need water and sewer brought to where they are.”
Developers not keen on (any) higher rates
Several local builders and developers addressed the council about their concerns over the proposed rate increases – both those originally contemplated, as well as the somewhat scaled-back version on this week’s agenda.
“You can’t tax yourself into wealth,” said local builder Chris Foust.
He challenged Talley and the council, “If you’re counting on these fees [to finance the upgrades at the wastewater treatment plant], you’re not going to have enough,” he suggested.
Foust also predicted a slowdown in what has been a building boom in the city.
“Graham is not going to keep going like it has the past five to seven years. . . [As for the proposed higher rates] This ain’t Mebane. This ain’t Cary. And this ain’t Apex.” – Graham builder Chris Foust
“Graham is not going to keep going like it has the past five to seven years,” he said.
As for the proposed higher rates, Foust said, “This ain’t Mebane. This ain’t Cary. And this ain’t Apex.”
Foust also took aim at the economic incentives that the city had given to Walmart and Lidl for the huge distribution centers built in the Hawfields-area industrial park.
He said it was “not fair” for those large industries to be subsidized by the city, via city council offers and endorsements of incentives, with smaller businesses having to shoulder the taxes to support city operations.
Builder Nathan Sawyer, of Heritage Homes of the Carolinas and the president of the local homebuilder’s association, cautioned the council that a 300 percent increase in rates [in the original proposal] would “put you way outside your competition.”
“Have you considered higher water and sewer rates for the citizens rather than just sticking it all to the builders?” – Builder nathan sawyer
Sawyer asked, “Have you considered higher water and sewer rates for the citizens rather than just sticking it all to the builders?”
Sawyer also questioned, “What’s the hurry in raising these fees 300 percent?”
Sawyer lamented the higher building costs, which he said had gone up 21 percent just in the last six months. Higher fees would only layer on additional expenses. “There’s [going to be] no incentive for me to building Graham.”
“We have to go up,” the mayor responded, outlining again the upgrades needed at the wastewater plant, to fund other system and utility line upgrades, and the years long overdue need to adjust rates.
“[Graham’s growth rate has been] alarming. . . We can’t [continue to] absorb these costs.” – Council member Bonnie Whitaker
Council member Bonnie Whitaker noted, “We can’t [continue to] absorb these costs.” Whitaker also described Graham’s recent growth as an “alarming rate” that has “exploded” during the past 18 months.
Tom Hall, the president of Greensboro-based Windsor Homes which has built several residential developments in Graham and other areas of Alamance County, urged the council to take “more of a collaborative approach” by meeting and consulting with developers. “I hope you won’t vote tonight,” he said, although others noted the council had to establish new rates by July 1 with the start of the new fiscal year.
Councilman Joey Parsons said, “I think we need to pump the brakes” on the size of the original increases.
Councilman Ricky Hall also said he agreed with an “incremental jump in these rates.”
Council members ultimately opted to adopt the recommended July 1, 2022 rate schedule, which represented slightly less than half the original proposed increase.
The council decided not to formally implement what had been offered as a second phase of a second step up in rates on January 1, 2023. And the council said it would consider both that rate hike and the proposal for next July as simply guidelines for consideration.
There was also discussion about having additional discussion about differentiating infill residential projects.
The city may also seek an exemption from the state for the reality that sewer flows are typically not as high as water flows and that even water flow estimates are overstated, based on actual usage. Mebane was repeatedly used as one local municipality that has used such an exemption to offset some of its fee structure.
The final vote to approve the new rates was unanimous, 5-0.
See related story on Alamance News publisher challenging secret meetings in between council meetings: https://alamancenews.com/publisher-criticizes-mayors-little-side-meetings-and-huddles-one-that-included-the-mayors-contractor-husband/
See editorial page opinion on the need to have total openness in government decision-making: https://alamancenews.com/backroom-deals-are-never-a-good-idea-in-local-government/