Saturday, October 17, 2009

Fees to raise cost of new homes

Fees to raise cost of new homes

By Laura Matthews • Pacific Sunday News • October 18, 2009

Real estate and construction industry professionals said the proposed additional fees for water and wastewater system hookups for new construction projects could move homeownership out of reach for some low-income island residents.

On Tuesday, the Consolidated Commission on Utilities approved the Guam Waterworks Authority's proposed system development charge. The proposal now moves to the Public Utilities Commission, which is the last step in the approval process.

The system development charge would give GWA money to add capacity to its water and wastewater facilities. The system development charge, which applies to new construction of homes and buildings, will also fund other improvement projects to meet the authority's growth needs.

If approved, the cost for a 5/8-inch waterline hookup will be $2,126. A 5/8-inch wastewater line connection would cost $3,474, according to statistics from GWA. A 5/8-inch line is the average size for a residential waterline.

That means the water and wastewater system development charge combined will increase the cost of building a new, average-size home by $5,600 -- if PUC approves the proposed charges. For major commercial projects, water and wastewater hookup can cost upward of $600,000.

"We look at it as another tax, and homeowners can only afford to pay so much money for a home," said W. Nicholas Captain, president of Captain Real Estate Group.

"We understand utilities need to be paid, but for homeowners at the lower end of the economic scale, it will certainly have a negative impact on them," he added.

Captain said that unless there is a way of discounting or waiving the cost for home buyers at the lower end of the market, the low-income homebuyers will "suffer a disproportionate share of the burden."

He added that it could cause home construction to lag.

"It makes it difficult for development to justify the risk and cost of building new property. It will tend to slow down the construction of new subdivisions on Guam ... and increase the value of existing products on the market," he said.

Ed Banayat, president of GEMCCO, a construction business, said he suspects with the additional water and wastewater charges, lower-income residents would rather rent than buy a home because they may need to have a certain income to afford the new costs.

"If they have the required salary, then the higher-income people will buy homes, but the lower-income people could suffer," Banayat said.

The new proposed system development charge is a reduced version of the fee structure GWA proposed around March last year.

Under the previous proposal, the average water and wastewater line hookup for a new home construction would have cost about $8,000.

CCU Chairman Simon Sanchez has said the proposed system development charge helps to cushion existing GWA customers from having to pay for water and wastewater facility upgrades directly related to making room for new customers. It's common practice among stateside utilities to implement the charge, Sanchez said in a previous interview.

"The basic logic is -- as new customers need water and wastewater -- (they) pay for the expansion of the system to service their new demand," Sanchez has said.

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