September 28, 2007

Brain Teaser (dis)solved

Back in June I posted a brain teaser:
How can 1883 people pay $2,840 each and have it cover a $16,000,000 dollar tab? Think I'm all wet well your probably right! Lets see how you think it could work then in a day or two I'll share what's really happening.
Well. It's been a day or 90 so lets try to explain Wanchese water expansion.
The expansion of the system will cost $16,000,000. It will connect a total of 1883 homes. Each would pay fees totaling $2,840 to connect and connection would be mandatory. This would yield a total of $5,347,720 hardly the full amount. My question is who pays the rest of the cost?
The answer, I suspect, is that it will come from the revenues of the County water system. Revenues paid by water customers in Kitty Hawk, Southern Shores and Duck and on Hatteras Island. Water customers who have already paid to have the lines installed to provide them water without help from Roanoke Island. Put succinctly, it appears the beach is subsidizing Roanoke Island again.
There is a lot of history in Dare County water. Most of it involves fairness, really good planning and cooperation between the County, Nags Head and KDH to construct and operate 3 water plants north of Oregon Inlet. The County also took over the system on Hatteras Island and made the necessary expansions. You can read a history of the system at the Dare County Water website
Generally when land is developed water lines are installed as part of the subdivision process and the cost is included in the price of the lots. When most water systems expand into unserved areas the costs of installing distribution lines are assessed against the new properties being served, not paid by the existing rate payers. If that formula were applied to the Roanoke Island expansion each new customer would be assessed just shy of $8,500 plus the impact and connection fees of $2,840 already proposed. Imagine the hue and cry when the County tries to sell that deal.
The difference has to come from somewhere and that somewhere is the system revenues. I don't know how many customers the system serves, probably in excess of 10,000 maybe 15,000. Those customers have been paying a little more that it costs to produce water. That's good, it allows the system to maintain itself and expand as demand grows. The impact fee charged by the county to new customers in developed areas can be seen as a "buy in" to the system. Existing users have paid for the production facilities and when you hook up you pay your share. It doesn't generally cover extending lines.
Ok, so what,who cares! The beach may be paying some of the costs of expanding the water system on Roanoke Island, no big deal. Your water bill won't go up so why care. Well for one thing its not fair. The County won't pay to put lines in for new customers on the beach why do it for new customers elsewhere? Secondly, the expansion of the water system will facilitate growth. Richard Johnson is correct when he says that zoning controls growth but there are other factors as well. If you want to build in areas without central water and wastewater you must site both on your property. That's not too hard for a single family home on a single lot but try to do it for a large multi-family development and it gets much harder. Imagine Pirates Cove having to provide is own water and sewer, it takes land and money and it quickly becomes impractical. That's why Pirates Cove wanted to be part of Manteo. Its why Manteo guards its sewer capacity so closely, they understand the relationship between density and central services.
From where I sit the expansion looks like a bad deal all the way around. Wanchese doesn't want it, the beach shouldn't have to pay for it and it will facilitate high density development. Why is this being considered?
There are two good reasons for the extension, drought and fire. I am writing this in Greensboro, a city with about 160 days of water left in its reserves and severe water use controls in place. Wells in Wanchese are much more susceptible to drought than the central system. Replacing them will help the owners avoid future problems. The fire issue is straight forward as well. A central water supply aids fire suppression and lowers insurance rates, both good things.
I have no clue how this will end. My hunch is that the county will simply let it die for now. The opposition is too entrenched, the margin of loss in a referendum might make folks forget other recent policy rejections (I can hope). Anyway it will make for interesting reading.
The numbers I have used are taken from the Coastland Times. They seem right. They fit with a proposal by the Roanoke Island Volunteer Fire Dept. to use fire tax revenues to reduce the charges. I may have missed something but I don't think so. Basically, the county is offering new customers on Roanoke Island a really sweet deal at the expense of its existing retail customers. The only problem is the ones getting the deal think they are getting the shaft. Thats local government for you.


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