Sturtevant trustees want Racine Water Utility officials to understand that raising water connection fees – otherwise known as a REC fee – will only chase companies away that could be providing much-needed jobs to the area.
REC fees are based on the average amount of water a residential home uses during the year, which is about 72,000 gallons. A complicated formula categorizes businesses and how much water they’ll use compared to a house, and the fee is charged up front based on that usage.
One REC is currently $3,320, and the water utility is proposing a $130 increase for a total connection charge of $3,450 per REC.
For example, village ordinance lists a restaurant as using 20 RECs, so any new eateries that want to set up shop in Sturtevant would pay a $66,400 connection fee.
Village President Steve Jansen said REC fees are driving away business, and he pointed to a fried chicken pick-up/carry-out, a daycare and an unnamed bottling company that all squashed plans to locate in Sturtevant.
“These people can’t afford these fees,” he said Tuesday at a biweekly committee meeting. “The bottling company was looking at a $13 million connection fee. That’s outrageous because we’re losing out on jobs that we really need in this area.”
Because the water utility operates as a separate business, there are profit and loss projections. When water consumption goes down, the utility has to come up with a way to close the revenue gap, but Trustee Chris Larsen said he only sees a fee hike without efforts to reducing operating costs. Still, he thinks the parties can work together.
“We need to work together to get creative,” he said. “Reducing the REC fee could bring business in and create additional customers instead of all these missed opportunities.”
Village officials want to help find customers and reverse the projected decrease in consumption, Jansen added.
Jeff Seitz from GAI Consultants agreed.
“Back in 2004, when the economy was humming along a $3,000 connection fee was fine, but now, it’s huge. We have to get to a sustainable level to grow and develop,” he said.
Water utility manager Keith Haas wrote, “The concept is that existing ratepayers in the area do not have to shoulder the burden of new growth development, and that growth pays for growth,” according to a story in The Journal Times.
The problem with that, Trustee Chris Wright noted, is that surrounding communities like Kenosha, Oak Creek and Franklin don’t charge connection fees though they do charge for putting the infrastructure in the ground based on the size of the pipes being used.
Seitz advised village trustees to send a letter objecting to the increase because with consumption decreasing they want to see some cost-cutting at the utility; costs are driving away business instead of attracting it; and working together on some “out of the box” thinking like taking a hit up front to make up the money and then some in the long run.