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Utilities: Fees don’t cover impact of some water users

By Charles Swenson
Coastal Observer

When the community pool was built at the Pawleys Pavilion condos between Pawleys Island and Litchfield, the developer paid an impact fee based on an estimate that the pool would use as much water as two single-family homes.

Last year, the pool used over 20 times that much water, having the same impact on the water supply as 43 homes.

As a result, the homeowners association pays $214 a month as a penalty, known as a “demand charge,” to the Georgetown County Water and Sewer District. If the developer had paid the impact fee based on last year’s use, it would have added $40,590 onto the $1,980 that was paid for the pool.

By paying the demand charge, it will take almost 16 years before the utility collects the additional impact. Instead of using the impact fee to pay for upgrades to the system to provide the additional water, the district will have to take the money from a fee paid by all its customers.

“The demand charges don’t make up for the loss in impact fees,” said Ray Gagnon, executive director of the water district. He took over this year from Bob Barker, who is working as a consultant for the district through the end of June.

The Pawleys Pavilion pool is among scores of commercial water and sewer customers who use more capacity than is covered by their impact fees. The utility’s board is now looking at ways to encourage them to buy additional capacity by changing the demand fee structure.

Almost a third of the customers who paid excess demand charges over the last year are homeowners associations with swimming pools.

“We figured No. 1 would be restaurants,” Gagnon said.

Impact fees are based on “residential equivalent units” or REUs. When the peak use is greater than the number of REUs bought through the impact fees, the customer is assessed a demand charge based on the average use in the highest three-month period. “It applies to less than 10

percent of our commercial accounts,” said John Buck, the district’s finance director.

Only 11 of about 140 restaurants pay a demand charge equal or greater than five REUs, he said. But five of those are on Business 17, an area in Murrells Inlet where the district needs to spend an estimated $1.4 million to upgrade sewer lines.

“We had planned to upgrade the infrastructure, but didn’t have the impact fees,” Gagnon said.

The project is in the five-year plan.

“Who should pay for that? That’s what it comes down to,” Barker said.

Bill Schwartzkopf, who chairs the district’s board, said the state requires an engineering study to expand facilities when they get to 80 percent of capacity. When they hit 90 percent, construction needs to be under way to expand those facilities.

“If we didn’t have impact fees our rates would have to go up,” Schwartzkopf said.

The district’s rates have stayed flat over the last 20 years. The availability fee, which customers pay to fund the district’s capacity, is scheduled to drop $1.06 a month for sewer in the next budget and rise 14 cents for water.

“Impact fees have a lot to do with that,” Barker said.

Utility board members say the district needs to change the demand charge process so it becomes cheaper to pay for the additional capacity than pay the penalty. “You need a bigger number to motivate them to buy the REUs,” board member Chet Maslowski said.

“A strong incentive may actually decrease the rate of our other customers,” Gagnon said.

Currently, a commercial customer that uses five more REUs of peak water and sewer capacity than it has paid for pays a $63.10 a month demand charge. The charge is calculated every year.

The most expensive option proposed by district staff would raise that to $260 a month financing the impact fee ($11,950 for five REUs) over five years. Less costly would be adding an availability fee to the demand charge for a total of $103 a month, or just raising the demand fee over time.

The district board is reviewing the options. It is also reviewing whether to finance impact fees for commercial customers.

The district requires customers to buy additional REUs when property changes hands, there is a change of use or a change in the account.

The utility board proposed allowing commercial customers who renovate to finance those REUs for up to a year. The rate would be prime plus 1 percent, but no lower than 6 percent.

Not all customers who are using excess capacity may need to pay additional impact fees. The Pawleys Pavilion pool might be among them.

“We were shocked at that ourselves,” Gagnon said. “I’m pretty confident it’s a mistake.”

Not a billing mistake, but one such as an automatic fill valve that was stuck or an irrigation line that is connected to the pool’s meter.

District staff are looking at all the homeowners association accounts with demand charges to see how their usage has changed. They are also looking at the policy for pools in general. Charging impact fees based on two REUs “is clearly not enough,” said Tommie Kennedy, the district’s engineering director.

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