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Jax Daily Record Monday, Sep. 20, 202105:00 AM EST

JEA increases water fees for builders, will reconsider grandfathering on-going projects

Developers say the fee hike is coming too quickly and after projects have already been financed.
by: Mike Mendenhall Associate Editor

The JEA board of directors Sept. 17 unanimously approved a more than 149% increase on one-time water and sewer fees for new housing and commercial development after keeping the charges flat for 15 years. 

But after testimony from Jacksonville-area builders and developers, the board will consider giving projects under construction or near groundbreaking a grandfather clause to keep existing rates.

The municipal water and electric utility board’s 6-0 vote starts an 18-month phase-in that begins Oct. 1, increasing JEA’s capacity and meter fees paid by developers and builders from $3,649 to $9,098 by April 2023.

JEA executives said the fee increase is needed to pay for an estimated $327 million in projects in JEA’s five-year capital improvement plan related to water and sewer capacity growth.

The water plant capacity fees would increase from $339.50 for a standard ¾-inch residential water line to $936 by April 2023, according to JEA August board materials and presentations by utility Director of Financial Planning and Analysis Juli Crawford.

The board action also bumps JEA’s one-time sewer capacity fee 301% from $1,274 to $5,114 and the irrigation fee 210% from $339.50 to $1,053 by April 2023. 

The meter fee would rise 48% from $202.33 to $300.

JEA CEO Jay Stowe said phasing in the fee increases came from discussions with the Northeast Florida Builders Association.

After hearing concerns at the Sept. 17 meeting, board members said they would consider allowing developers to make a nonrefundable prepayment of fees by the end of the year on projects underway.

The resolution as approved allows developers to lock in the current fees if the project is ready for connection and metering within 90 days. 

The board and JEA executives still need to determine at what stage of development an existing project can qualify for the existing fee structure.

Driver, McAfee, Hawthorne & Diebenow partner attorney Cyndy Trimmer addressed the board Sept. 17 representing multifamily developer Trevato Group.

She suggested the longer grandfather period and prepay option. Her comments followed a similar request by NEFBA leaders in an Aug. 20 letter to the board.

Trimmer said developers understand that it is time to increase the water and sewer fees.

“We have projects that have already been underwritten, closed but haven’t come out of the ground. We have projects that have already have the pro formas done and that are under contract. All of these are materially affected by this proposed change and wouldn’t benefit from the grandfathering clause that’s contemplated,” she said.

Rise: A Real Estate Company Vice President of Development Matthew Marshall said in a letter to JEA officials that the company project on Race Track Road and Florida 9B would see a $233,837 cost increase with the new fees.

“Our financing is already approved and the closing is scheduled to be finalized with construction commencement in 30 days,” he wrote.

“Fee increases are certainly part of reality and I’m sure needed for your operations,” he wrote.

“However, what I’m concerned about is how quickly they were implemented, especially for developments like ours that are imminent. We will be able to set our meter between Oct. 1, 2021 and April 1, 2022; however, that’s a $233,837 increase we do not have in our approved lender budget.” 

The company also is developing the 247-unit mixed-use apartment project The Doro near VyStar Veterans Memorial Arena.

Stowe said the board will reevaluate the grandfather clause at its Oct. 14 Finance and Audit Committee meeting. 

He said any changes to the grandfather clause would require board approval.

“What we heard really only in the last few days was a specific concern about large developments and multifamily developments that could take longer than this 90 days to implement,” Stowe said after the meeting. 

“So, what I hope that the people that spoke today heard was the board heard them, listened to this, and said ‘let’s find a way to work with our community.’” 

Michael Herzberg, vice president of development at Sleiman Enterprises, said that JEA would be “chasing us out” of the utility’s service area if the board did not reconsider the speed of the fee increase and the 90-day grandfather clause.

“Due to the pro forma impacts, we would be definitely be looking to go outside of the JEA area,” he said.

Housing affordability 

After the meeting, Stowe said JEA expects the fee increase will help sustain the Jacksonville area’s economic growth and expanded infrastructure needs. 

“I appreciate that any increase has an impact on the people that are having to pay it,” Stowe said.

“We think that we’ve been thoughtful and deliberate about the numbers, and part of our job is to encourage economic development and we’re going to keep on doing that.”

JEA expects the combined fee increases for water and wastewater services will generate $36 million in annual revenue by fiscal year 2023, according to board documents.

The board also is considering a 123% tap fee increase from $610 to $1,360, which would affect existing neighborhoods or homes connecting service lines.

Some NEFBA members say builders likely will pass along some of the fee hikes to the buyers in a market where home prices are rising.

Curtis Hart, NEFBA political action committee chair and Hart Resources LLC president, told board members Aug. 24 that for every $1,000 increase in Jacksonville’s median home price, 800 buyers are priced out of the market.

A chart in the Aug. 24 meeting materials shows that the increases would make JEA’s combined capacity fees some of the most expensive in Florida, with the cities of Apopka, Ocoee, West Palm Beach and Collier County higher.

The process 

JEA first met with NEFBA about the fees in December 2020. The board discussed the proposal at its May 14 Finance and Audit Committee meeting. 

It tabled a final vote Aug. 24 after a public hearing because not enough board members were in the room for a quorum. 

Stowe said JEA executives will analyze the fees at each incremental increase over the next 18 months to ensure it matches the revenue the utility needs.

JEA Finance and Audit Committee Chair Marty Lanahan called the testimony Sept. 17 “quite completing.” 

Board member Tom VanOsdol agreed that the utility should reanalyze the grandfather clause.

“Imagine having developed a project and secured the capital funding, you understand how pro forma works and then that piece changes before construction is initiated,” VanOsdol said. 

“I’m sensitive to that.” 

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