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Guiding South Hall growth proves to be a tricky task

County leaders hope area grows into its sewer investment

POSTED: March 1, 2014 11:39 p.m.

“Growth for the sake of growth is the ideology of the cancer cell,” author and environmentalist Edward Abbey said.

But when it comes to development in South Hall County, that foreboding lament has strings attached.

The Great Recession and slow, plodding economic recovery put government, businesses, schools and the working class in a financial bind. As budgets shrank and fiscal belts tightened, hopes, plans and dreams were sidelined.

Meanwhile, unchecked, perpetual growth, the kind that turned metropolitan Atlanta into a sprawling network of suburban communities, began to look like a thing of the past. The housing market collapsed, strip malls were vacated and new development was halted in its tracks.

But nothing lasts forever, and the sound now heard in South Hall is the engine starting up again.

Look at the number of business licenses issued in Hall County Commission District 1, which includes Flowery Branch, over the past two years. The figure rose to 139 in 2013 from 128 in 2012. Moreover, the number of permits issued in this district over the last two years was greater than anywhere else in the county.

Still, growth and development in South Hall has not met expectations in recent years, problematic for the county’s revenue stream. The sluggish economy is partly at fault, but county officials may have overplayed their hand as well.

Sewer expense

At the risk of understating the fact, Hall County has made a significant financial investment in the southern part of the county to handle and manage growth, such as building out sewer infrastructure long before the use was needed. The county prepared a master plan in 2008 to coordinate the wastewater infrastructure necessary for what officials believe is the coming sprawl.

The county purchased the Spout Springs Water Reclamation Facility from a developer in 2008 for $14.5 million. Then, with the help of two Georgia Environmental Finance Authority loans totaling about $32.5 million, the county built the Mulberry Creek Sewer System.

The county also spent millions to build a 10-mile force main along Ga. 53, connecting with the Gainesville sewer system.

“We’ve positioned ourselves for any type of development,” Public Works and Utilities Director Ken Rearden said.

But as development has lagged, there are concerns the county is not seeing a return on its investment.

For example, revenue from the Spout Springs plant (primarily usage, tap and connection fees) has consistently underperformed, falling below projections every fiscal year since 2008, except for 2011. The county had a net income loss of nearly $950,000 on the plant last year.

Through the first half of the current fiscal year, the county is projecting a net revenue loss on the plant of about $111,000, with usage, tap and connection fees falling well below budgeted projections.

Tap and connection fee revenues are suffering the most, evidence that the projected growth for South Hall is not coming to fruition.

Meanwhile, usage fees, which can fluctuate depending on rainfall and other circumstances, would fall short of budgeted estimates by about $170,000 if revenue averages hold for the remainder of the fiscal year.

Hall officials took a lot of heat when they implemented new sewer rates in 2012, moving from a $42 flat fee to a $15 base charge, $2 administrative charge and $3.50 per ccf used, which equates to 748 gallons, with a cap set at 10 ccf. As a condition of the GEFA loans, use fees were to be set at no lower than $9.47 per ccf. But GEFA has said the county remains in compliance.

Rearden said he would likely address the rate structure with the Board of Commissioners sometime this year, and at least one commissioner agreed.

“I think that is something we will be looking at,” Commissioner Scott Gibbs said.

Phyllis Mercer, a resident of Village at Deaton Creek and an outspoken critic of the county’s development plans in South Hall, believes the county is misleading residents about the success the sewer build-out has had in drawing commercial and residential development to the area.

“The major issue in regard to the South Hall sewage operation is too few customers, so the user fees are not sufficient to cover the operational cost and debt on the plant,” she said. “It is of concern that past growth projections have failed to materialize and that the county has not announced any cost savings to address this financial challenge.”

Rearden said the county is able to cover operating expenses for the plant. But depreciation costs, which totaled nearly $635,000 last year and account for a large portion of the net income losses over the years, are being put off until the county can find a way to pay for the necessary replacements and upgrades needed to keep the facility up to standard. These costs are not cash expenses, but rather a kind of running tally of needs. How and when the county will cover these expenses is unknown.

The county refinanced the interest rate on the Spout Springs plant last summer.

“We are scheduled to make the first principal payment in 2016,” said Financial Services Director Vickie Neikirk. “This debt is paid by fees generated by the sewer system.”

Meanwhile, the county is paying monthly interest and principal on the two Mulberry Creek GEFA loans, officials said. This debt is paid through SPLOST VI, and totals $56,276.19 and $119,000.55, respectively.

Development rising

But despite the fiscal challenges, county officials are moving forward with plans to increase sewer infrastructure in South Hall and elsewhere in the county.

The county has budgeted funds this year to expand sewer infrastructure along Ga. 347. And officials expect the Ga. 211 corridor to take off with the development of the new Northeast Georgia Medical Center in Braselton, which is expected to bring many new jobs and, consequently, new residences to South Hall. Plans are also in the works to widen Spout Springs Road to accommodate new development.

And new development is coming to South Hall, despite the protests of many residents. On Thursday, commissioners unanimously approved rezoning land along Spout Springs Road to allow for the development of a new apartment complex. The project site is located near the intersection of Hog Mountain Road, and as a condition of approval, developer KHTW must pay for 10,000 feet of sewer pipes needed for the apartments to connect with the Spout Springs Water Reclamation Facility.

“... We’re on a sewer system that desperately needs customers,” said Commissioner Craig Lutz, whose district encompasses South Hall, adding that the apartment complex “helps us get that system paid off.”

Flowery Branch is prepared to reap significant benefits from the county’s infrastructure investments. The city has plans of its own to piggyback on the fortune spent in South Hall.

For example, the city recently annexed four undeveloped properties at the intersection of Spout Springs Road and Hog Mountain Road.

“I think the development pressure is certainly beginning to pick back up again, and that’s a positive thing,” said Flowery Branch Planning and Community Development Director John McHenry. “We would obviously like to see the highest and best use take place on that commercial” space.

Meanwhile, Oakwood has agreements with Gainesville, Flowery Branch and Hall County on providing sewer to different parts of the town, such as the Mundy Mill Road corridor.

Because of the investments the county has made, officials have been accused of preordaining the outcome of proposed developments in South Hall, such as the aforementioned KHTW apartments.

“It’s not acceptable to just say that growth happens, so just deal with it,” Preston Fray, a resident of the area, told commissioners Thursday.

With so much debt to be repaid, some local residents wonder if the Board of Commissioners hasn’t backed itself into a corner and is committed to approving any and all commercial projects that come before it.

“I don’t think we’re giving a blank check, per se,” Lutz said. “We understand we have made a significant capital investment in South Hall to enable the growth. Now we have to sit back and see what investments need to be made to match that growth.”

Gibbs agreed, calling South Hall the logical place for growth in the county.

“While it might look like that’s the case ... I think it’s just the evolution of the area,” he said. “You have no growth if you don’t have infrastructure.”


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