News Column

NPU: Sewer hookup fee collects less than hoped for

April 24, 2014

By Claire Bessette, The Day, New London, Conn.



April 24--NORWICH -- A controversial sewer connection fee enacted by Norwich Public Utilities nine years ago has brought in nearly $1.9 million and provided critical cash to launch portions of the $96 million sewer plant upgrade project not covered by state grants and loans, NPU officials said.

The total is "much lower" than NPU officials originally anticipated, attributing that to the recession that severely reduced new residential and commercial construction. Several major projects in Norwich never got off the ground or were halted in midstream during the past 10 years.

The connection fee, which was strongly opposed by developers when it was implemented, imposes a one-time fee of $2,500 per dwelling unit and varying fees for commercial uses to hook into the sewer system.

In a presentation to the Sewer Authority on Tuesday, NPU General Manager John Bilda and Steve Sinko, NPU division manager, said the fees were placed into a capital fund to be used for sewer system upgrades. Of the nearly $1.9 million raised thus far, $1.08 million has been spent on the design and construction of a new digester system at the sewer plant.

Bilda said that project had to be done immediately, and part of the project was not covered by the grants and low-cost loan program. By using the cash generated through the sewer connection fee, the utility avoided accruing debt for the digester.

Sinko said the remaining nearly $800,000 in the fund will be used to pay off project debt. For every $100,000 per year in cash devoted to paying off principal and interest on the loans, sewer customers will save $1.65 million in future interest over the 20-year span of the project, Sinko told the authority.

In 2011, NPU agreed to cut the fee in half for certain projects located in city enterprise zones that also were receiving monetary subsidies from the city. This includes the downtown revitalization area, where city grants and loans are available to developers.

City Director of Planning Peter Davis said that while developers don't like paying the fee, he doesn't know of any projects that were canceled because of the connection fee. He, too, attributed the dramatic drop in development to the recession that hit shortly after the fee went into place in 2005.

Jason Vincent, vice president of the Norwich Community Development Corp., which oversees the city's $3.38 million downtown revitalization program, said new developers often are surprised by the fee and haven't calculated it into the initial plans. He said the reduction offered in the enterprise zones and interest-free payment plans help curb the burden on a project.

For example, if a developer can spread the cost out over a 10-year period, the project would pay $250 per year per dwelling unit, Vincent said.

"There have been times when developers have been surprised by it, especially on existing buildings," Vincent said, "but I've never heard anyone say they're not developing because of it. NPU will provide flexibility and amortize it without interest."

c.bessette@theday.com

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Source: Day, The (New London, CT)