Agenda - 11-21-2002-1 - Laserfiche WebLink

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3. The Town should merge or equalize in-town and out-of--town rates to the extent determined by an analysis performed by a qualified technical consultant. A portion of the Town of Hillsborough budget workbook for FY 2002-03 dealing with the utility fund and revenues, and • Two newspaper articles outlining issues related to annexation of Churton Grove by the Town of Hillsborough and reduction of utility rates for out-of--town customers. The material submitted by Mr. Atherton does demonstrate that Town of Hillsborough utility rates are high for both in- and out-of--town customers. Of course, this is not information that was or is previously unknown. The Town's utility rates have increased dramatically over the past several years to cover the high costs associated with improving utility infrastructure and developing the west fork Eno River reservoir and to compensate for the revenues lost when the Town's largest utility customer (Flint Fabrics) closed its plant. Mr. Atherton's information does support an inference that the Town's existing utility rates make it very difficult to provide housing at "affordable" cost for lower and moderate income families when high out- of-town utility costs essentially consume a significant portion of the savings that maybe achieved with lower mortgage costs. Furthermore, the Town's citizens advisory task force report supports Mr. Atheron's contention that it is difficult -perhaps even impossible -for the Town of Hillsborough to fully justify the use of double utility rates for out-of--town customers. However, the material submitted by Mr. Atherton does not present the analysis/conclusion that, given basically equal numbers of in- and out-of--town customers, equalizing in- and out-of--town rates would entail essentially a fifty percent rate hike for in-town customers while providing atwenty-five rate reduction for out-of--town customers. Nor does it include or acknowledge anecdotal information that indicates that charging double or nearly double in-town utility rates for out-of-customers is the norm for nearly every municipally-owned and operated utility in North Carolina. However, data collected by Orange County engineering staff (utility rate data from Durham, Oxford, Mebane, Graham, Pittsboro, Oxford, and Burlington) does show that the standard utility rate practice for this area is a utility rate structure where the out-of--town rate approaches or even exceeds double the in-town rate. The usual financial model for North Carolina municipal water/sewer utilities is that of an enterprise operation or one in which all utility costs (capital reserve, equipment replacement, debt service, personnel, maintenance, power, chemicals, billing, etc.) are recovered entirely through a utility's rate and fee structure. It is not uncommon, however, for shortfalls in utility revenues or a municipal utility fund to be addressed by transferring funds from a municipality's general fund or fund balance reserves. Furthermore, some portion of most utilities' capital and operating costs have historically been subsidized by sales tax revenues legislatively earmarked for that purpose or from other municipal funding sources such as bonds or grants. The historical precedents of utility funding and rate-setting procedure are undoubtedly a primary cause for continuing the practice of charging out-of--town customers a much higher rate than in-town