MOUNT PLEASANT— A water agreement between Mount Pleasant, the City of Racine and the Racine Water Utility took a major step forward as the village voted unanimously on Thursday to approve an Intergovernmental Agreement between the village and the utility.
The agreement still needs to be approved by the city, although a date for discussion has not yet been formally set.
As the Foxconn Technology Group project continues to develop in Mount Pleasant, the need for an adequate water supply has become paramount. For months the city and the village have been negotiating a deal that is valued to be roughly $100 million, to pay for the infrastructure upgrades.
Alan Marcuvitz, attorney working with the village on matters related to Foxconn, said funding for the upgrades will be paid for by the tax incremental district (TID) set up in the Foxconn area.
“That’s going to cost approximately $100 million of funds that are being borrowed by the village in order to (pay for the project),” Marcuvitz said. “It’s going to be funded through the TID … it will be recouped through the collection of revenues flowing from the future as a result of development that occurs in the TID area.”
If approved by the city, Marcuvitz said this deal would be completely unique compared to what has been done in the past.
“Normally what has happened in the past is the Racine Water Utility has fronted the money and has recouped the money through REC (residential equivalent connection) fees,” Marcuvitz said. “But in this case, all of the new infrastructure, whether it’s mains or tanks or booster stations or pumper stations, anything to do with this at all is being paid for by the village.”
Who pays the difference?
The debt created by upgrading the infrastructure, in the past has been paid for using REC fees.
During the negotiation process, there was an issue of who pays a $26.8 million estimated deficiency between revenue from REC fees and the cost to pay down the debt, Marcuvitz said.
“The Racine Water Utility is going to go out and finance that $26.8 million, the village is covering any shortage that does not pay for the debt service based on (water) consumption,” Marcuvitz said. “Let’s say two years from now there’s a payment that needs to be made on the debt service and (the city) is short because the revenue is not sufficient to cover it, the village will cover that shortage for that year. (The village) will cover any shortage for any succeeding year.”
In the event that the revenue from the water surpasses the costs associated with the upgrade, the village will be able to recoup those funds to pay itself back.
“We should be paid back over a relatively short period of time because of the volume that’s anticipated to be forthcoming,” Marcuvitz said.
The most immediate impact the deal is going to have, if approved and signed by the village and city, is going to be a major reduction in REC fees.
Currently if a single home needs to connect to the water and sewer lines, it would cost $3,623. If, for example, a business or apartment complex needed 10 connections to those lines, then the fee would be $36,230.
In the past, the REC fees have scared off some businesses that were looking to build in the village.
When the agreement is final, the REC fees plan to be $500 to connect to the water and sewer lines.
The fee plans to remain at $500 until the entire debt from the infrastructure upgrade is paid off.
“When the debt is paid off, there will be no fund that needs to be funded with REC fees,” Marcuvitz said. “The purpose of this whole thing is to get the REC fees down to the point where Racine Water Utility area is hopefully at a competitive advantage, instead of a competitive disadvantage.”
As per the agreement with the village, Foxconn is not subject to REC fees, but, Marcuvitz said this will benefit the entire village, beyond Foxconn.
“We understand that while Foxconn is going to be here, the impact of Foxconn as to its needs, as to the growth and development of it, is far more than Mount Pleasant wide,” Marcuvitz said. “And so we are stepping up to do this. We’re not altruists. We’re not getting tax deductions for charitable contributions.”
If a community, like Sturtevant, wants to put in a large development that would require work to be done by the Racine Water Utility, Marcuvitz said it’s possible a REC fee could be established to pay for that.
“We bit the bullet here in Mount Pleasant, we should be encouraging the other communities to do the same thing,” Marcuvitz said. “This is one step toward maybe every community that’s involved in this common enterprise in Racine County having a seat at the table when these decisions are already made. Maybe that day will come.”
Upon hearing the approval, Mayor Cory Mason said in a statement, “I am encouraged by the additional resources proposed in the agreement. Ultimately the decision will be made by the full City Council.”
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Jenny Trick, executive director for the Racine Economic Development Corporation said this is a “huge win for our entire community.”
“This agreement is a great example of how municipalities can work together to produce enormous benefits for their residents — creating jobs, supporting public services and fostering increased development opportunities throughout eastern Racine County,” Trick said.
“This is one step toward maybe every community that’s involved in this common enterprise in Racine County having a seat at the table.” — Alan Marcuvitz, attorney working with Mount Pleasant