Before the First Shovel of Dirt

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Before you or your contractor turns the first shovel of dirt on property you just purchased—or financed—you may already be facing approximately $34,350 to $46,350 in required connection charges and building systems.

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That is on top of the land, the house, financing, plans, permits, site preparation and ordinary construction expenses.

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Approximately $22,350 of that amount is attributable to HCSD’s system buy-in charges and physical connection costs. Depending on the final solar and fire-sprinkler costs, HCSD represents approximately 48% to 65% of this estimated total—roughly half to two-thirds.

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Where the HCSD Total Comes From

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For a typical single-family connection, HCSD’s charges can include:

• Water capacity charge: $5,597

• Sewer capacity charge: $9,974

• 5/8-inch water meter: approximately $294

• Water-service installation: $2,915

• Sewer installation with the water service: $3,570

Total HCSD cost: approximately $22,350

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The amount can be higher if the sewer is installed separately, the connection is more than 10 feet deep, a larger service is required or unusual site conditions are encountered.

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Permanent pavement and sidewalk replacement are not included. Private excavation and plumbing between the house and HCSD’s connection point may also cost more.

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A “Capacity Charge” Is Really a System Buy-In Charge

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Not all these charges are the same.

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The physical connection charges pay for actual work: tapping the mains, installing service lines, placing the water meter and box, and installing the sewer lateral and cleanout.

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These charges are associated with labor and materials. Although I am not a contractor, I believe they reasonably reflect the district’s costs. HCSD staff presents these charges to the Board for review, generally shortly before or during the annual rate-setting process.

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The capacity charges are different.

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HCSD calls them capacity charges. In plain English, they are system buy-in charges.

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They do not pay for the physical connection. They require a new customer to purchase a share of the calculated value of HCSD’s existing infrastructure and certain planned improvements.

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The term “capacity charge” can make it sound as though a customer is simply paying for new capacity that HCSD must construct. But the calculation includes depreciated replacement value for infrastructure already in the ground.

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A customer can therefore pay $15,571 to buy into the system and still owe thousands more for the physical connection.

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The System Buy-In Increased Almost $10,000

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Before the 2023 study, the typical residential charges were:

• Water capacity charge: $3,045

• Sewer connection charge: $2,958

• Combined charge: $6,003

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Following the study, the combined system buy-in charge became $15,571.

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That was an increase of $9,568, or approximately 159%. The charge became about two-and-a-half times what it had been.

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The increase was approved by a 3–2 vote of the HCSD Board. I voted no.

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“Legal” Did Not Mean “Required”

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The study calculated what it described as the maximum capacity charges HCSD could impose.

That word—maximum—matters.

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California law establishes a ceiling: a capacity charge cannot exceed the estimated reasonable cost of the facilities or service for which it is imposed. But the law does not automatically require HCSD to charge every new customer the maximum amount calculated by a consultant.

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The Fairness Question

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There are reasonable arguments on both sides of connection charges.

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Supporters argue that a new customer receives access to water and sewer systems that existing customers helped build. They believe that the new customer should contribute toward the value of that existing capacity.

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But there is another side.

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Existing customers paid rates for decades—and received water and sewer service during those decades. A person building a home today did not use the system during those years and had no voice in the decisions that established those earlier rates and projects.

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That new customer must also:

• Pay the physical cost of connecting the property.

• Begin paying the same monthly rates as every other customer.

• Help finance future maintenance and improvements, whether HCSD uses pay-as-you-go funding or long-term financing.

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California law allows capacity charges, but it does not establish a required minimum charge. Instead, the law limits a charge to the estimated reasonable cost of providing the service. The consultant’s calculation therefore established a maximum—not an amount the Board was required to impose.

HCSD increased the combined residential water and sewer capacity charges from approximately $6,003 to $15,571—a 159% increase.

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The study projected that the increases would generate approximately $2.35 million in additional revenue over ten years, or about $235,000 per year. It also projected 241 additional sewer connections through 2032, even though the District’s later ten-year records showed an average of approximately 15 new sewer connections per year.

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The question was not simply whether HCSD could legally charge the maximum.

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The question was whether placing nearly $10,000 in additional upfront costs on a small number of people trying to build homes was fair, necessary and reasonable.

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I concluded that it was not. That is why Joe Matteoli and I voted no.

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Pay for Future Benefits—Not Decades of Past Use

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A person connecting today did not use HCSD’s systems during the previous 20, 40, 50 or 70 years.

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That customer received no water, produced no wastewater and placed no demand on the system during those years. In many cases, the home did not even exist.

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Yet the system buy-in calculation assigns that customer a portion of the estimated present value of infrastructure constructed and used long before the customer arrived. Depreciation is applied, but the fundamental fairness question remains:

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How much of yesterday’s system should someone connecting today be required to purchase?

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New customers should pay for the remaining capacity and useful life of infrastructure that will serve them.

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They should also pay a fair share of improvements genuinely needed to accommodate growth.

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But they should not be required to pay for:

• Decades of system use from which they received no benefit

• Costs already recovered through previous rates and charges

• Past decisions to defer maintenance or replacement

• Facilities providing little remaining benefit

• Existing debt they will also help repay through monthly rates

Once connected, the new customer becomes a regular ratepayer and begins paying monthly water and sewer bills, future rate increases, infrastructure expenses and debt obligations.

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New customers should pay their fair share going forward. They should not simply be handed the bill for the past.

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The Developer Is Not the Final Payer

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During discussion of the increases, the view was expressed that developers could pay them.

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But the developer is usually only the first person who writes the check.

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Developers must include connection charges, permits, required building systems, materials, labor and financing when determining whether a project is feasible and what it must sell or rent for.

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Market conditions affect how much can be recovered, but the costs do not disappear. They can result in:

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• Higher home prices

• Higher rents

• Smaller or less desirable homes

• Projects being delayed or canceled

• Fewer homes being constructed

• Fewer opportunities for first-time and lower-income buyers

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The people most affected are often those least able to absorb another increase: young families, first-time buyers, working households, seniors needing smaller homes and renters already struggling with housing costs.

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“The developer will pay” is not the end of the answer.

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The real question is: Who pays the developer?

Ultimately, it is the homeowner or renter.

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The Complete Cost of Building

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HCSD’s charges do not exist in isolation.

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A preliminary estimate for a typical new home includes:

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• HCSD system buy-in charges: $15,571

• HCSD physical connection costs: approximately $6,779

• Required residential fire sprinklers: approximately $2,000 to $4,000

• Required residential solar: approximately $10,000 to $20,000

 

Estimated combined amount: $34,350 to $46,350

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These are illustrative ranges, not contractor quotations. Solar and sprinkler costs vary by home, design and site conditions.

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The estimate does not include private trenching and plumbing, pavement restoration, additional pumps or water storage, engineering, permits, land preparation, ordinary construction, transportation costs or financing.

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Humboldt County’s median household income is approximately $61,160. These required charges and systems alone represent approximately 56% to 76% of an entire year’s median household income—before taxes and ordinary living expenses.

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The former 30% federal residential solar tax credit ended after 2025. Limited assistance may remain for certain qualifying households, but many families building in 2026 must plan for solar without that major federal tax benefit.

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Each requirement may have a legitimate purpose. But the homeowner must pay for all of them. Government agencies must consider the cumulative cost—not defend each charge as though none of the others exists.

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What the New Study Must Answer

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I support hiring a qualified professional to conduct a new study. But it should not simply update the old formula and calculate another maximum charge.

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The study should answer:

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• What does it physically cost HCSD to connect a property?

• What portion of the buy-in represents existing infrastructure?

• What remaining useful life and capacity will the customer receive?

• How much of that infrastructure has already been paid for?

• Are new customers receiving proper credit for debt they will repay through monthly rates?

• Are customers protected from paying twice for the same infrastructure?

• Which future projects are genuinely related to growth?

• What happens if HCSD charges less than the calculated maximum?

• Should a major increase be phased in?

• How would different charges affect homes, rentals and accessory dwelling units?

• How do HCSD’s charges compare with similar districts?

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The contractor should receive the concerns raised by Board members and the public before beginning the work—not after the study is substantially complete.

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The Bottom Line

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The issue is not whether new customers should contribute. They should.

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The issue is determining what is fair.

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The 2023 decision increased the combined system buy-in charge from approximately $6,003 to $15,571. After physical connection costs are added, a typical new home may pay approximately $22,350 to HCSD alone.

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That outcome was not automatic. The full increase was a policy choice approved by a 3–2 vote.

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I voted no because HCSD had not adequately demonstrated that an immediate increase of nearly $10,000 was the fairest or only responsible choice.

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The next study must examine more than what HCSD can legally charge. It must help the Board decide what HCSD should charge—after considering the future benefits a customer will receive, the complete cost of building housing and basic fairness to the ratepayer who ultimately pays every bill.