MSD considers sharing cost of sewer-line extensions

The Metropolitan Sewerage District’s Planning Committee has recommended changing the agency’s policy concerning sewer-line extensions to new developments and annexed areas.

In a 4-3 vote on Dec. 2, the committee endorsed a two-tiered policy with different cost-sharing rules for new private and public agency developments and annexed areas not already served by MSD.

“We need to make a level playing field,” said General Manager Tom Hartye. “We needed to develop a unified policy to address MSD financial participation.”

For new projects developed by public agencies and annexed older developments, MSD would contribute 50 percent of its actual revenue from those areas over 10 years, up to the full cost of the line extension.

For new private developments, MSD would contribute 100 percent of its actual revenues from those projects for five years, rather than making up-front payments based on estimated revenues, as had been done in the past.

“We are going to wait and see who ties on and how much they pay,” said Hartye. “We are not expending any of our money up front; we will just be giving revenues back.” This approach, he said, could help put more people on the system and, over time, perhaps lead to lower overall rates.

Until 2001, developers, whether public or private, paid the cost of connecting to the system, after which MSD would assume ownership of the lines and cover future maintenance costs. But that year, seeking to encourage new development, the board agreed to share the cost of extending sewer lines to any such project, up to the amount of new revenue it was expected to generate for the agency over five years.

In 2008, however, asserting that the Biltmore Lake developers would probably have gone ahead without any help from MSD, the board decided that in the future, the cost-share policy would apply only to affordable-housing projects.

But city officials, said Hartye, wants MSD to give the city the same deal, saying the agency has been reaping the benefits of additional revenue without having to share the infrastructure cost.

Hartye disagreed, telling committee members, “The rationale is fine, but the data was showing that we are not making a whole lot of revenue out of it. We need to make a level playing field if we are going to offer it for the city.”

With new private developments, he noted, MSD recoups its investment within five years after the cost-sharing ends. But with with older annexed areas, there’s no guarantee that homeowners with septic tanks will ever connect to the system.

To address this problem, the Planning Committee proposed in July that the agency give both public and private developers the first five years of actual new revenue to help cover the cost of the line extensions. In October, however, the city responded by asking MSD to instead contribute 50 percent of its actual revenue for 10 years.

The Planning Committee’s current recommendation, which combines both those approaches, will come before the MSD board for a vote at their next meeting, scheduled for Wednesday, Dec. 15. At that session, MSD board members will also hear a report on the agency’s financial audit. MSD’s annual budget is about $43 million.

— Freelance reporter Melissa E. Dean