Agenda -11-06-2008 - 6c - Laserfiche WebLink

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2 the Rate Study, made a presentation at the October 21, 2008, BOCC meeting highlighting the main findings of the Study (Attachment 1). This year, in anticipation of BOCC implementation of a new rate schedule, the General Fund contribution to the system's budget was reduced by $40,000. To make up for this budget reduction, the rates would need to be increased an average of 150% this year. This percentage increase is derived from the assumption that the rates would be raised in time for the January billing cycle, giving only six months to generate the revenue necessary. The 150% increase would serve only to bridge the gap between the system's requested operating budget and the approved budget. Capital needs funding and establishment of a fund balance for the system are not included in calculation of the 150% increase. At the October 21, 2008, BOCC meeting, a handout was made available to the BOCC which showed the effect on typical monthly bills of a suggested 3-year cycle of rate increases designed to eliminate the General Fund Subsidy by FY2011-12. That handout is included as Attachment 2. The timeline required for implementation by the January billing cycle is included as Attachment 3. For reference, the FY2008-09 rate schedules for the City of Mebane, Town of Hillsborough and Orange-Alamance have been included as Attachment 4. There was a question that arose regarding the rates charged by Town of Hillsborough to the schools that they service. According to the Town, every customer is billed the same way, so the rate for schools is the same rate as that of a residential customer. Also, staff was requested to find out if Orange-Alamance charges atiered-rate to their water customers. Orange-Alamance has a two-tiered rate, which is shown in Attachment 4. Customers using below 20,000 gallons per month pay less than customers using above 20,000 gallons per month. If implementation of a new rate structure were to be delayed beyond the January billing cycle, the County would need to budget all the funds in that account or the suggested rate schedule (Attachment 2) would have to change in order to recuperate the $40,000 reduction to the FY2008-09 operating budget. The percentage increase in FY2008-09 would go up because there would be fewer billing cycles to make up the budget shortfall before the end of the fiscal year. Every month of delayed implementation would cost approximately $8,000 in revenue. If the new rates could not go into effect before the March billing cycle, raising rates substantially in March and then again in July would cause undue hardship for the customers. The better strategy might be to implement the new larger rate in March, then wait until FY2010-11 to raise rates to the level required for sufficiency. If the new rates do not go into effect until April 2009 or later, the percent increase required to recuperate $40,000 this fiscal year would be larger than 300%. Since 300% is the increase necessary to bring the system to sufficiency, it would not be practical to set the rates higher. Therefore, implementation in April 2009 or later would result in a budget shortfall for FY2008-09. A summary table of these rate schedule delay implications is shown in Attachment 5. None of the discussion so far takes into account the impacts to low income residents who may find the increased rates onerous. At the BOCC meeting on October 21, the program used to qualify Rogers Road residents for subsidized water taps was mentioned as a possible model for use with the low-income Efland Sewer customers. In initial discussions with Tara Fikes, Director of Housing/Community Development, this qualification program appears to be useful in the context of the Efland Community. Discussion is ongoing to determine if the Rogers Road criteria will need to be modified and what form the aid for low-income customers will take. The proposed rate schedule in Attachment 2 does not take the costs of such a program into account. Additionally, there is no reliable way to calculate the effect that much higher sewer