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August 30, 2009

Developers successfully lobby water authority to delay rate increases

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By Brian Wheeler & Tarpley Ashworth
Charlottesville Tomorrow
Sunday, August 30, 2009

The Albemarle County Service Authority voted 5-1 at their meeting on August 20, 2009 to raise fees for connections to the County’s water and sewer systems, but responded to developers’ concerns at the meeting by adopting fees much lower than the average 42% increase originally proposed. The compromise will break the fee adjustments into two phases, with a maximum 15% increase effective on September 1, 2009 and the remaining increases postponed until March 1, 2010.

Podcast produced by Charlottesville Tomorrow * Player by Odeo

Listen using player above or download the podcast:Download 20090820-ACSA-rates

The ACSA currently charges connection fees to help pay for continued maintenance and upgrades of its infrastructure. The current “system development fee” is $1,037 for a new water connection and $1,532 for a new sewer connection.  After review of a rate study by the Municipal & Financial Services Group (MSFG), ACSA staff had recommended the Board approve a 58% increase for water connections to $1,640 and a 30% increase for sewer connections to $1,995.

Additionally, the ACSA levies a capacity charge on behalf of the Rivanna Water and Sewer Authority (RWSA) of $2,095 for each water connection and $2,425 for each sewer connection. ACSA staff asked the Board to approve increases in this area of 78% for water to $3,725 and 11% for sewer to $2,680. 

20090820-ACSA-SamCraig
Local developer Sam Craig speaks at the ACSA public hearing

When the rates were first advertised for a public hearing held in June 2009, not a single community member offered comments to the ACSA Board of Directors.  In response to the MSFG rate study and advertising requirements for some fee changes, the ACSA decided to hold another public hearing in August and have the new rates go into effect September 1st instead of July 1st when the new fiscal year began  

At this public hearing, members of the development community showed up in force to share their frustration with the timing and scale of the fee increases.  

“I don’t feel like these rates have been effectively communicated,” said Andy McGinty of Coleway Development. McGinty, who acknowledged he missed the June public hearing, is developing the 206-unit Arden Place project near Fashion Square Mall.

McGinty described how the rates that applied to his apartments (1/2 of a connection fee) had gone from $2,400 per unit to more than $5,000 per unit over the past fourteen months.  He said he expected growth to pay for growth, but that the development community needed more warning to properly finance their projects.

“Once I’ve started a project, I can’t have such an essential capital cost component change [in] mid-stream,” McGinty said. He said it was too late to return to his investors to ask for more capital to cover the fees proposed by the ACSA.  

McGinty’s project is currently under review by the Albemarle County Planning Commission.  He said a 15% increase was the most he could absorb in a year and that the “rate shock” being proposed would impact housing starts.  He was one of several developers who shared plans for building housing that would generate about 400 new “equivalent residential connections” in Albemarle that would be immediately impacted by the new rates.  

The ACSA budget for all of 2009-2010 is based on only 170 new water connections.  In the six months leading up to the new fiscal year, only 109 building permits were issued in Albemarle’s designated growth areas (January to June 2009).

McGinty, along with other developers, suggested the ACSA implement a pre-payment option which would allow developers to pay connection fees years in advance when they can lock in the costs. Another idea proposed by developers was to enact a mandatory notice period of twelve months before rates change.

Neil Williamson, Executive Director of the Free Enterprise Forum, said many developments come in over budget because of rate hikes enacted while a project is reviewed by Albemarle County.

However, ACSA Board member John Martin (White Hall) said the utility’s budget could become unbalanced if the entire increase was not approved as proposed. ACSA Executive Director Gary Fern estimated that the Authority would lose approximately $480,000 if the full increase was not enacted, which would require some proposed infrastructure projects to be scaled back.

20090820-ACSA-Colbaugh After some discussion, Board member Jim Colbaugh (Scottsville) proposed the compromise to adopt an average connection fee increase of 13% effective September 1, 2009, with the rest of the proposed increase going into effect on March 1, 2010. He also proposed during the interim that board members and ACSA staff analyze the specifics of a pre-payment program.

Board member Liz Palmer (Samuel Miller) agreed with Colbaugh’s proposal out of concern for developers during the economic slump. She agreed that any budget shortfall caused by the adjusted rates would have to be offset by reserve funding.

“We don’t know how much revenue we are going to lose by voting [yes on this proposal],” said Martin before the vote. “I would be very reluctant to vote favorably on this without knowing what the budget implications are going to be for this fiscal year. We spend months and months and months developing this budget. We argued, talked, and scrimped, and we’ve got a budget… This is real. This to me is extremely important.”

“Today we have more people opposing any issue that has ever come before the board since I’ve been here, for the past eight years,” said Board member Clarence Roberts (Rivanna) after the public hearing. Roberts suggested that the ACSA board hold workshops with the authority’s staff and local developers in the future to review further rate increases.  Colbaugh’s proposal passed the board by a 5-1 vote with only Martin dissenting.

After the meeting, McGinty told Charlottesville Tomorrow that he thought the ACSA has reached a reasonable decision.

“I would look forward to taking advantage of a pre-purchase option,” McGinty said. “We have done that in Spotsylvania County.”

Charlottesville Tomorrow asked Colbaugh if he had come to the meeting with the compromise proposal in mind.  . He said the idea came to him during the public hearing.

“People in the audience drove us to be as considerate as we can be,” Colbaugh said. “Public feedback made a difference.”

TIMELINE FOR PODCAST

 01:00 – Staff report from ACSA Executive Director Gary Fern
11:16 – ACSA Chair Don Wagner indicates concern for eliminating local facility charge
12:01 – Colbaugh clarifies that eliminated local facility charge increases system development charge
13:50 – Wagner asks question about how local facility charge affects on-site credits?
14:10 – Palmer asks to clarify what the exact increase is in system development charge16:07 – X asks question about how ACSA can affect changes to RWSA fees
16:25 – Fern says RWSA can vote not to implement new charge
18:48 – Wagner asks to talk about new projects proposed through FY 2018
19:11 – Fern says expansion and maintenance account for most costs
21: 14 – Public comment from area builder Sam Craig who calls fee increases a - “regressive tax
24:28 – Colbaugh wants to know about if allowing builders to prepay connection fees will help
26:55 – Public comments from local developer Andy McGinty,
37:15 – Public comment from civil engineer Scott Collins who says he has projects in County which will bring 413 new units in next year
42:27 – Public comment from local developer Rip Cathcart
46:28 – Public comment from local developer David Hilliard
48:17 – Public comment from Neil Williamson of the Free Enterprise Forum
51:04 – Public comment from local developer Wendell Wood
1:00:51- Public comment from Jay Willer Executive Vice President of Blue Ridge Homebuilders Association
1:03:03 – Public comment from local developer Wendell Gibson
1:04:05 – Public comment from local developer Carter Hilliard
1:06:03 – Public hearing closed; matter goes before ACSA board members
1:06:06 – Clarence Roberts suggests workshop between staff and developers for the purpose of reviewing rate increases- wants impact statement
1:09:00 – John Martin points out that budget this year is 93.8% of last year’s budget- wants to know what budget impacts are of not raising the rates
1:10:15 – Fern says $480,130 would be lost in budget if new rates were not adopted (left rates the same)- we would have to eliminate projects from the CIP
1:12:52 – Colbaugh makes compromise motion
1:17:30 – Martin wants to know budget implications of proposal
1:19:02 – Gary Fern says he can’t answer what the implications are right since he needs to analyze the specific proposal’s effect
1:19:15 – Wagner says that change would come out of reserves
1:19:59 – Colbaugh says that it is a possibility that the number of connections could increase, especially with new prepayment system
1:21:21 – Wagner calls budget reconciliation process a “housekeeping” item
1:21:31 – Martin thinks that this is not housekeeping at all- wants to know budget implications before he votes on Colbaugh’s motion- says that budget was hashed out over a long period
1:22:14 – Carter says many new home sales are “lower end”- says ACSA can’t help developers cut through red tape of regulation- Colbaugh’s motion is “temporary help”- supports Colbaugh’s motion
1:26:16 – Martin says budget would lose less than $480,000 under Colbaugh’s motion since rates are increasing
1:27:27 – Palmer says she sympathizes with developers, but ACSA has to cover costs
1:31:50 – vote on Colbaugh’s motion; resolution passed 5-1 with Martin dissenting
1:35:01 – Wagner takes roll call vote since rate changes require roll call vote
1:36:28 – Martin clarifies that the board will not know whether they are losing or gaining revenue with vote
1:38:17 – Colbaugh moves that his motion is adopted; roll call vote is same before, 5-1 years, with Martin dissenting 

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