After hearing protests from developers, the Madison Metropolitan Sewerage District is delaying a whopping 400 percent increase in treatment plant connection fees for new projects until Jan. 1, 2019, and then phasing it in over eight years.
The nine-member district commission, which had been aiming to impose the full increase on July 1 this year, on Thursday morning voted unanimously for the delay and phase-in plan. One member was absent.
The decision came on a third vote after the commission failed to get seven-vote super-majorities on motions to phase in the increase over five years or 10 years, the latter the least onerous to developers among several options offered by district staff and favored by the cities of Madison, Fitchburg and Middleton.
The development community has argued that a sudden, big rise in the fee would jeopardize projects in the pipeline and push others outside the sewerage district. The delay will help current projects; but the phase-in, when cost-of-living adjustments are factored in, will still result in a significant annual increase in fees for a decade, they said.
The district will also revisit rates annually in relation to operating and capital budgets.
“The decision fairly balances the interests of existing and future ratepayers while supporting economic development and environmental sustainability,” said Michael Mucha, the district’s director and chief engineer. It will also provide the district with a path forward to fuller cost recovery on added plant capacity, he said.
“We’ve moved a long way from where we started,” said Matt Brink, executive director of Smart Growth Greater Madison, which represents a majority of major developers and general contractors in Dane County and over 60 associate members. “Eight years is a big win. But that’s the floor. There’s no cap on it.”
Developers will still see more than a 45 percent annual increase, Brink said. “We were very clear in our numbers that projects will be impacted by this. What extent that will be remains to be seen.”
The increases are needed to ensure adequate funds to cover capital needs and address a growing inequity in the district’s rate structure caused by changing development patterns, which has left existing customers bearing the burden of paying for the infrastructure needed to serve growing areas, district staff said.
District Commissioner Sara Eskrich, a Madison City Council member, favored the five-year phase-in so existing ratepayers don’t bear too much cost for new development.
But Commissioner Tom Wilson, administrator, attorney and clerk-treasurer for the town of Westport, who supported a 10-year phase-in, said a longer period offers a balance with less impact on the housing market.
The commission had already decided to raise two fees that would increase one-time connection costs for a new, average-size, 11,500-square-foot residential lot by $1,102, or 129 percent, to $1,954.
A breakdown shows charges for the pipes and pumps to move wastewater rising by $138, or 23 percent, for the average lot, while treatment plant connection charges to cover increased capacity for new development are set to rise by $964, or 392 percent, over eight years starting Jan. 1, 2019.
Developers had been frustrated that they learned of looming increases only in April, even though the district has been studying the matter for years.
On May 11, the commission voted unanimously that it intended to accept the new connection fees and policies, but amid protests from developers also asked staff to explore and offer options to phase them in.
Smart Growth, the Madison Area Builders Association and others recognized the need for more revenue and did not oppose the new charges for pipes and pumps, which the commission made effective for Jan. 1, 2018.
But the larger treatment plant connection fee, if imposed right away or even over five years, would have had serious negative impacts, Smart Growth and others said.
Developers and industry representatives on Thursday applauded district staff for listening to concerns and developing phase-in options of two, three, five and 10 years.
“We’ve got a new dialogue for the future,” said Chad Lawler, director of government affairs and advocacy for the builders association.
“Going forward, we will continue to work with all of our stakeholders to make cost-effective choices that ensure reliable service,” Mucha said.