Carroll County Justice of the Peace Lamont Richie has concerns about current and proposed rates structures for water and sewer, saying water rates have been subsidizing sewer services, which is unfair to 500 plus water-only customers in the city.
“Because water rates have generated more revenue than sewer rates for years, water customers have contributed a substantially higher amount to paying down the debt on the 2000 and 2002 bonds,” Richie said. “Though the bonds were entitled water and sewer bonds, most of that money went to sewer-related projects.”
To meet bond obligations, the city has advocated raising sewer rates by 21 percent without adjusting water rates, and adding an infrastructure fee of $5 to $50 per month depending on usage. Richie said the current rate structure has been unfair and inequitable for some time, and changes now proposed add a percentage increase and a flat fee that perpetuate unfairness.
In 1999, the city council raised water rates so that someone using 2,000 gallons would pay a minimum charge of $6.70 per month (or $3.35 per thousand gallons); someone using 8,000 gallons would pay $28.48 per month (or $3.79 per thousand gallons); and someone using 40,000 gallons would pay $182.22 per month (or $4.56 per thousand gallons).
“In 2002, water rates were adjusted again,” Richie said. “But the result was that the lowest user saw a 23 percent increase in their monthly rate while someone using 8,000 gallons had a 23 percent decrease in their rate. A 40,000-gallon/month user had a fourteen percent drop.”
Since 2002, there have been six water rate increases but no sewer rate increases.
“Currently, we have a rate structure with three tiers,” Richie explained. “The lowest, up to 2,000 gallons, has a minimum fee of $11.20/month. So, whether someone uses 500 gallons or 1,500 gallons, the cost is the same. I’ve asked, but have not been given an answer, how the minimum fee was set. Is it based on certain costs that every user ought to share or is it just a number that was set, then increased whenever additional revenue was needed? If every water customer has the minimum fee included in their bill, it seems that the city should be able to define what it represents.”
Richie sees unfairness in how rates are distributed, such as a low-use customer paying $5.60 for every 1000 of gallons of water use, with an $11.60 per month minimum. As a result, a person using only 1,000 gallons of water each month has to pay $11.60. But, if that same person uses 2,500 gallons they will pay $5.34 per thousand gallons.
The rates climb the more you use until passing the 10,000-gallon threshold, after which the cost per thousand gallons stays the same. A customer using 30,000 gallons per month will pay 12.4 percent more per thousand gallons than someone using 10,000 gallons. But a customer using 10,000 gallons will pay 13.5 percent less per thousand gallons than someone using 2,000 gallons.
From 2008 through 2016, the water department (excluding debt service, grants and capital transfers) had average net annual operating revenue of nearly $140,000.
“For that same period, the sewer department had average net operating revenue of about $37,400,” Richie said. “While sewer revenue was mostly adequate to cover operating expenses, it was a fraction of what water rates produced, making water revenue the main contributor to debt service.”
He said that’s unfair. “And it becomes even more so when I take into account the number of water customers who are not hooked up to the city’s sewer system,” Richie said. “I am one of them. So are most of the handful or so citizens who have attended council meetings or the public hearing to express dissatisfaction with any rate increase at this time. The five hundred or so water customers not on sewer include some outside the city limits and some irrigation meters, but a majority are business and residential customers who do not have sewer service and who, in all likelihood, will not have sewer service in the foreseeable future.”
Richie said the fact that water rates were maintained at a level higher than necessary to cover sewer expenses is troubling, although he said he understands the need to address the city’s infrastructure. Last year while the city was contemplating the proposed one percent sales tax, three-fourths of which was to be applied to infrastructure, he acknowledged that such a step would likely be necessary. “But I also argued that the city was derelict in its obligations to state law and to the bond covenants to adjust water and sewer rates to meet all operating expenses, debt service and bond obligations.
“That had to be done first,” he said. “After proposals began coming from the city about potential rate increases, I turned my attention to those. I have studied water and sewer rates for the past ten years. Looking at our history, revenue and expenses, and at how rates were distributed through the tier structure, it became clear to me that while rates needed to be adjusted, it was important to first establish a rate structure that could be defended as fair and equitable. Is the one we have now fair and equitable? I don’t think so.”
There are firms that will perform a rate analysis for municipalities, including the firm that handles audits for the water and sewer departments.
“I think now is the time to do that… not after another rate increase when I suspect the city will not be inclined to face this issue again anytime soon,” Richie said. “The cleanest rate structure would be one in which every customer was charged the same amount per thousand gallons. If you use it, you pay for it. If you don’t, you don’t get charged. It would not be an onerous project to establish a rate that covers all expenses, including debt service. That rate could be reviewed annually at the conclusion of each year and adjusted accordingly. No more arbitrary rates for 2,000 gallons, 10,000 gallons, 30,000 gallons or whatever. And, I wish the city could figure out a way that the 500 plus water-only customers are assured that their water payments are not underwriting the sewer department, in any way, shape or fashion.”
A public hearing is scheduled at 6 p.m., Monday, April 24 at city hall.