Agenda - 10-21-2008 - 6e - Laserfiche WebLink

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Mr. Kevin Lindley September 24, 2008 Orange County page 5 financial impacts of the customers of the Efland system, as well as the potential impact on the County, we developed three alternative rate scenarios. These rate scenarios include the following. 1. Maintaining the current rates would require the County to provide an FY 2009 subsidy of $142,000 which represents the anticipated revenue deficit. Should the current rates continue to be maintained, the County would be faced with continued and increasing rate subsidies under the anticipated operating costs and capital improvement plan. 2. Adjusting the rates to make up the $40,000 in operating costs eliminated from the Efland wastewater system operating budget would require a January 1 rate increase of 150%. Under this scenario, the County would still incur a FY 2009 rate subsidy of approximately $100,000 with continued and increasing rate subsidies under the anticipated operating costs and capital improvement plan. 3. Adjusting the rate to achieve financial sufficienry in FY 2009 would require a January 1 rate increase of 300%. Under this scenario, the rates should be sufficient to address anticipated operating costs and capital improvements for FY 2010 as the rates would set higher than would be required had rate increases been implemented on July 1. Less substantial rate increases would be needed in later years to maintain revenue sufficienry thereafter. As opposed to these scenarios, the County may prefer to incorporate a phased approach in implementing a program of annual rate adjustments to move closer to financial sufficienry. This type of phased approach will help to avoid customer "rate shock" that often results after a substantial rate adjustment occurs after years of minimal or no rate increases. Rate shock is a situation where the public is outraged when major rate increases aze implemented seemingly out of nowhere. To avoid this, RFC recommends the County implement a program of annual rate adjustments beginning with an initial 150% increase in FY 2009 followed by gradually more substantial increases in the following years. The County should develop bill inserts to notify customers of the planned rate program and educate them about the current deficits and future capital needs that aze driving the need for the rate adjustments. This will help to avoid rate shock and reduce the potential for customers who feel utility bills aze burdensome. Alternative Strategies to Address Rate Affordability Although eliminating the minimum usage charge will help to improve customer equity and affordability for low income customers, the County should also consider alternative strategies to further address rate affordability for the low income customers of the Efland System. Although developing effective affordability strategies and policies can be a challenging exercise, the benefits can be substantial. Not only will affordable utility service benefit the Efland System's general economic and social health, but properly structured assistance programs can yield tangible returns in terms of cost management, revenue stability, and public opinion. If customers aze faced with utility bills that they find burdensome, the result is likely to be excessive account delinquencies, customer complaints, and utility theft. The County may want to consider a few alternative strategies for Efland System customers that qualify under some financial hardship criteria the County may wish to establish. These criteria will be discussed later and may be linked to qualification to other governmental low income programs to minimise administrative costs to the County. The affordability alternatives the County may wish to consider include: