Middletown town council voted unanimously last week to temporarily cap sewer hook-ups fees for commericial and industrial businesses at $50,000 in an attempt to attract more economic development.
New businesses looking to move to Middletown will be able to get a deal on their sewer hook-up fees if they take action in the next year.
Town council voted unanimously last week to temporarily cap those fees at $50,000 per user in an attempt to lure additional commercial and industrial businesses to the area.
"The idea is to encourage commercial development, particularly some of those businesses that have been on the fence about coming to Westown," Middletown Town Manager Morris Deputy said, referring to the 2,000-acre residential, commercial and industrial development on the west side of U.S. Route 301. "There are some businesses that have been looking to move there for a long time that would benefit from this and we want to do what we can to entice them."
The one-time sewer hook-up fees, also referred to as capital recovery charges, are calculated based on several factors, including a standard fee schedule that increases by 4.5 percent from year to year.
In 2014, the town's one-time, hook-up fee based on a single gallon of sewer discharge will be $47.76.
Residential buildings are charged at an assumed rate of 250 gallons per day, regardless of square footage or whether they are a single family home or apartment, so that hook-up fee will equate to $11,940 per residential unit next year.
But for commercial property, the fee calculation does vary by use and size. A restaurant, for instance, will be charged the $45.70 rate multiplied by 0.4 gallons for every square foot of building space, while a retail store greater than 50,000 square feet will be charged the same rate multiplied by 0.01 gallons for every square foot.
Chic-fil-A, for example, paid a roughly $84,000 sewer hook-up fee in 2011 for its 5,000-square-foot restaurant off of U.S. 301, while Westown Movies off Merrimac Avenue paid $22,400 this year for its nearly 50,000-square-foot building.
A quarter of the capital recovery charges for both residential and commercial properties are collected when a construction permit is issued, while the remainder is due prior to an occupancy permit being granted.
Funds collected through the capital recovery charges, along with other permits and impact fees, are then used by the town to make its semi-annual payments on about $42.7 million in outstanding debt incurred through various water, sewer and electric infrastructure projects undertaken over the last 20 years.
However, that fund has dwindled from about $16 million in 2010 to roughly $4 million last year, as revenue coming in from permits and impact fees has failed to keep pace with money being spent to cover those debt payments. This year, for instance, the town is expecting to add $2.35 million to the Captial Projects Fund, while spending $3.2 million on debt payments.
It was that decline that Moody's Investors Service cited as a concern when it downgraded the town's bond rating from A1 to A2 in October.
At that time, Mayor Kenneth Branner said he expected the Captial Projects Fund to rebound in the coming years, as new construction begins picking back up.
"The curve has turned up now," he said in late October. "We've issued more building permits in the last seven months than we did all of last year and we're talking to more people about coming here."
Deputy said it's difficult to calculate how much revenue the town will lose out on as a result of the $50,000 cap on sewer hook-up fees for commercial and industrial business, because there is no way to know what new development might be attracted by the enticement.
"What we do know is that if we didn't do this and nobody came, it would have a big negative impact," he said. "But if it attracts enough businesses to fill up all the available commercial areas, that would be a huge win, so you have to look at it as a trade-off."
Deputy said town officials plan to spend the one-year duration of the cap to re-examine the town's capital recovery fee schedule to determine if further adjustments would better encourage new commercial and industrial development in town.