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Sturtevant trustees are reluctantly agreeing to a compromise over water connection fees – including an increase – for large commercial customers to try and attract additional business development that will bring much-needed jobs to the area.
While still saying that prohibitive connection fees are driving away potential employers, village officials drafted a letter agreeing with a deferred payment proposal presented at a Racine Waterworks Commission meeting last month. The letter also reiterates Sturtevant’s objection to the $130 per REC increase.
Under the terms of the landmark water agreement signed 10 years ago, municipal customers can object to situations like increases and connection fees, but they have very little recourse, village officials said.
“The way the water agreement is written there is no recourse,” Sturtevant Trustee Chris Wright explained. “We can object, but they can pretty much do whatever they want. REC fees are not regulated by the Public Service Commission.”
In short, commerical and industrial customers are charged connection fees – REC (residency equivalent charge) – based on how much water they anticipate using during a calendar year.
REC fees are based on how much water a typical single-family residence uses in a year, about 72,000 gallons. For commercial and industrial developments, a complicated formula estimates how much water they will use in a year, and the Racine Water and Wastewater Utility charges that year up front.
An engineering study was conducted and Utility management returned the deferred payment plan idea with an admission that the current pay structure could drive away potential business development. Under the proposal, businesses that will use up 50 to 99 RECs would have a 15-year payment plan and customers with anticipated use of 100+ RECs can have up to 20 years to pay their connection fee. Both plans would include a 1 percent interest rate.
“While the proposal presented to you was not our first choice in solutions, we believe it is a good compromise,” the letter from Sturtevant reads. “We would like to point out to the Commission that any interest rate added to the REC charge actually makes it more expensive to develop a parcel, not more affordable.”
Sturtevant officials asked last spring for the Utility to find creative ways around the REC fees since neighboring communities like Oak Creek and Pleasant Prairie only charge connection fees for new development based on the size of the pipe needed.
In an email to Racine County Eye in June, Utility Manager Keith Haas said many factors go into a company’s decision on whether or not to locate in Racine County and that communities can put together creative plans on their own to cover REC fees.
“There are a host of considerations that developers consider. Location to I-80 and I-94 seem to be paramount as long as it is not in Illinois. That makes Kenosha County a hands down winner more often,” he wrote. “The retail water agreement does not tell Sturtevant, Mount Pleasant or Racine how to fund or finance REC charges. So if they want to pay us and collect from a developer over twenty years they have had that ability since 2007 and 2004.”
Trustees maintain that the actual use of water by these businesses over the long haul would exceed any short-term gain from REC fees, and is better for both the Utility and existing customers because while revenue goes up, prices go down for everyone else.
“A little something is better than nothing, and we are fast approaching nothing,” Village President Steve Jansen noted Tuesday during discussion of the issue. “It’s in the best interest of everyone to make development easier, not more difficult or more expensive. You can’t complain that times are hard and then have obstacles like this REC fee.”
Sturtevant trustees say the idea that growth pays for growth to lessen the impact on existing customers was fine 10 years ago when the water agreement was put together and the economy was booming. Since economic conditions have changed drastically since then, village officials want the Utility to reconsider the REC fee formula.
“We’re trying to make the REC more feasible because any development east of I-94 benefits everyone,” Wright said Tuesday. “We’re not just looking out for our village but for the entire eastern half of the county.”
In any event, the deferred payment plan proposal was sent to the Commission’s finance committee, and that body is tentatively scheduled to meet Nov. 20, according to a response from Haas Wednesday morning.