4 Apr
2009
4 Apr
'09
11:29 a.m.
Russ and Rodger,
I have had a chance to look at the background material provided by Dale Crisp for the
Council Agenda on Tuesday and am sending you my thoughts now that I have a better picture
of what is being proposed. Everywhere you look there are significant increases in usage
and connection fees but no mention or evidence of cost cutting proposals. The 17% increase
for all water users seems to be split 7.5% to cover increased operating costs, 6% to
cover lost revenue due to fewer new connections, water conservation and imposed water
restrictions due to drought conditions; 3.5% to pay back developers an increase of $3.9M
in reimbursement fees for previous over sizing of lines to benefit future development.
It looks like the Director of PU is also recommending the city wait until the new updated
billing system is in place before implementing the tiered rate billing the Council wants
to have in place sooner rather than later. Looking at the justification it appears a
reasonable recommendation given the current system has some capacity and stability issues.
There is no specific recommendation on how that tiered billing will be implemented so
until a proposal is on the table there is not much to address.
The Water Conservation Incentive initiative has merit (transferring $500,000 from the
reuse water project surplus)but it is really a drop in the bucket, so to speak, covering
only 3500 toilet replacements on a base of 167,000+ residential dwellings. Also, I see the
Sewer Nutrient Fee will increase by $200 to help fund this initiative which is really
asking new customers to pay for existing customers to upgrade there home plumbing. Anyway,
there are probably double that number of toilets (300,000) out there that are not up to
current conservation standards so 3500 is a small number but it is a start. Of course,
extra conservation measures are what caused the budget shortfall so presumably being
overly aggressive on an incentive plan would add to that issue if significant cost cutting
measures are not likewise addressed. It seems to me customers could be rewarded with a 1
or 2 % billing reduction if their previous year's monthly usage was used as a baseline
so that if the current matching month was less they could receive the reduction. This
would help keep water conservation on everyone's mind and encourage all consumers to
conserve to get the bonus on billing. Perhaps that should be worked into the new billing
system as a capability similar to the type of bill we get from Progress Energy (although
they do not offer a similar bonus but it is worth pursuing there as well).
There are a number of charts and summaries dealing with the relationship of Raleigh's
water and sewer rates and connection fees compared to other municipalities. Water rates
for Raleigh are in line with Charlotte, Fayetteville, Greensboro and Durham all of which
are at the lower end of the scale and are larger towns like Raleigh. There are others that
charge more but are smaller towns, many of which are dependent on Raleigh water. One thing
you realize when looking at this comparison there are many different ways to justify the
charges. You may recall in a recent N&O article on tiered water rates there was much
confusion over what was the typical water usage per SF residential dwelling. The
consultant stated 6000 gallons, the city said 6 ccf which is 4488 gallons and my own view
was closer to 7000 gallons. The N&O had 6000 gallons in their Feb article on the
subject. In any case, I notice that in the details of the comparison the base for SFR use
is 250 GPD which equates to 7500 gallons per 30 day month. The city claims the average
family unit is 2.5 people so that would translate to 100 GPD per person. Given most
families are 3-4, and some larger, the family of 4 would use 400 GPD and 12,000 gallons
per month. A far cry from the 4488 that the city said was the average family usage and
they would see no increase (in fact some decrease) in rates over the current billing
approach.
Setting that aside for the moment and looking back at the various billing bases by
municipality in the report you find billing for new connections based on pipe/meter size,
or square feet of the building, or number of bedrooms in the dwelling, or per lot, or in
the city versus outside the city, and water used at a variety of rates. Raleigh has an
acreage ( explain that to an average citizen)fees for water and sewer separately, plus a
meter connection fee and usage fees. Now they want to add something they call a "W/S
Capacity Replacement Fee". The new "impact" fee would be based on the $10
per gallon ( no details justifying this number)and the 250 gallon per day average per
dwelling(so on one hand Public Utilities acknowledges that 250 gallons per day or 7500
gallons per month is average for new connection capacity planning and yet in their
proposal for tiered rates they say it is really 4488 gallons per month or 6ccf; go
figure!). That that would be a total of $2500 per new connection; a 154% increase in
connection fees over Y09 fees. Even without this new fee, the fees are being increased
another 42% (on top of this year's 53%) due to the special $500 Water Nutrient fee and
$200 Sewer Nutrient fee increases proposed for Y10.
The comparison of water rates based on Y09 numbers places Raleigh in the lower 3rd of
rates along with Charlotte, Durham, Fayetteville and Greensboro. In looking at that
picture it appears that initial connection fees based on higher fees for the larger users
is allowing lower rates for the average SF users in other cities. This is similar to the
telephone network principal that business customers with higher usage subsidized
residential rates to keep service affordable for the average user.
Given the complexity and variety of billing methods I think it is time for Raleigh to
select a method that is easy to understand and easily defended. I would clearly state that
there is a need to replace and plan for additional capacity when new connections are made
to the system. This is capacity replacement costs that need to be borne primarily by new
users. They need to combine all the various fees into one fee for water and one for sewer
and come up with a method to distribute costs based on the type of connection. For
residential it should be the size of the connection/ meter (3/4" being typical of
Residential)and so much per bathroom (or "sink" room). In truth bedrooms and
square feet do not relate very well to water usage but bathrooms, kitchens and laundry
rooms sure do. Then as the size of the connection is increased and the number of
"sink" rooms increases the cost of the connection goes up. Wake Forest and
Charlotte have done a good job of pipe size related fees and that makes sense to me. This
would then be the new "impact" fees. Then the rates can be set with a sold base
point say of 6000 gallons per SF dwelling as tier one and an incentive plan implemented
with a bonus % for reducing water usage from last year to this year based on a monthly
comparison. I think most people would understand the fees and be encouraged to conserve to
reduce their costs. Beyond that the City needs to find ways to cut operating expenses (at
least 10% in my opinion)and I have not seen any ideas put forward up to this point.
Finally, there is a need to educate the public on what the 17% increase will do, ie break
it down in pieces help them understand why this level of increase is essential for the
sound and stable management of this vital City service whiling maintaining our excellent
bond rating. With that explanation we need the cost management initiatives that go along
with sharing the grief of higher bills.
Paul Brant
NECAC Chairman
paulbrant(a)mindspring.com