Agenda - 04-05-2011 - 8d - Laserfiche WebLink

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2 Mebane does provide a useful benchmark for the rate structure. The City of Mebane's current water and sewer rate schedule is provided at Attachment 3. ANNUALCGMPARISGNS As shown in Attachment 2, the current rate customers in Efland pay for sewer consists of a base charge of $10.16 and a commodity, or usage, charge of $8.82 per 1,000 gallons. This rate is scheduled to increase in July 2011 to a base charge of $14.12 and a commodity charge of $12.26 per 1,004 gallons. The scheduled rate change represents an increase of approximately 40% compared to the current rate. To place this increase into context, the increase in July 2009 and the increase in July 2010 were each 40°/° increases as well. The sewer bill for someone using 5,000 gallons per month in fiscal year 2008-2009 original rate, before any increases was $24.20. The current sewer bill for someone using 5,000 gallons per month is $54.26. If the increase in July 2011 follows the currently approved schedule, the sewer bill for someone using 5,000 gallons per month would increase to $`5.42. GPERATING FUND DEFICIT It was suggested by Justice United that the Efland sewer rate be frozen at the current level until an agreement can be reached with Mebane to accept the flow or some other solution is developed to lower operating costs. Staff believes that freezing the rates is not the solution far a number of reasons. First, the rates were frozen for the first twenty years of operation, which has led to the need to implement such dramatic rate increases to bring the system back into acceptable fiscal shape. Second, the costs to operate the system cannot be frozen, so the system would become less financially stable as revenue stayed constant and operating costs rose over time. Finally, even if the operating costs were to remain relatively stable over the next few years, the system is currently operating with a revenue deficit of approximately $95,000 per year in the operating budget. This means that the revenue collected based on the current rates provides approximately 56°/° of the operating budget for the system, with the remainder of the operating cost provided from the County General Fund. Since the revenue collected does not provide enough money to cover the operating budget for the system, the General Fund must also provide funds far any capital expenditures required by the Efland sewer system. PR~PC~SAI County staff does recognize, however, that continuing to follow the approved schedule of rate increases would represent a hardship to the average Efland sewer customer who has already experienced two 40% rate increases over the last two years. To lessen the burden of the projected increases, yet continue to work towards good fiscal health for the system, staff proposes the following alterna#ive to the existing rate increase schedule. "Proposal 1" in Attachment ~ is to hold the base charge at $10.16, and increase the commodity charge over the next two years to equal Mebane's out-of town rate, which is projected to be $12.50 per 1,000 gallons by fiscal year 2012-2413. This would be accomplished in two steps. The first increase from $8.82 per 1,000 gallons to $10.86 per 1,000 gallons would increase the commodity charge to equal the amount the County is currently being charged by Hillsborough to treat the wastewater from Efland, The sewer bill for someone using 5,000 gallons per month would increase from $54.26 to $64.46. This increase represents roughly an 18% average increase to the total bill across all customers. The second step would occur in July 2012 and would increase the commodity charge from $10.86 per 1000 gallons to $12.50 per 1,ODO~gallons, which is the projected Mebane out-of-town sewer usage rate at that time. For a sewer customer using 5,OD0 gallons per month, this would increase a sewer bi11 from $64.46 to $72.66, ar an average increase of 12°/° to the total bill across all customers. Based on current budget projections, the increase to $12.50 per 1,000