Town of Smithfield Water and Sewer Rate Study

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Town of SmithfieldWater and Sewer Rate Study

• Presentation to Council
• January 4, 2005

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Introduction

• Objectives of Water and Sewer Rate Study
• Revenues must be sufficient to pay
• Operating expenses
• Capital expenses
• Debt service
• Rates must be fair and equitable
• Rates should encourage the conservation of water
• Rates should be easy to administer and understand
  

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Process

• Forecast expenses for next seven years
• Developed seven rate structures
• Analyzed the impact on residential and
  non-residential users
• Compared to neighboring localities

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Projected Revenue and Expense

• Water System Assumptions
• 70 new connections each year
• Most budgeted items increase 2.0 2.5 each
  year
• Revenues pay all debt service and 12,000 -
  25,000 in vehicle cost each year.
• Fluoride removal project
• 3.98 million in debt
• 4.1 interest rate, 20 years, annual cost is
  290,000
• Operating expenses increase by 225,000

Water revenue must increase by more than 125 in
order to pay the costs associated with the
fluoride removal project.
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Projected Revenue and Expense

• Sewer System Assumptions
• 70 new connections each year
• Most budgeted items increase 2.0 2.5 each
  year
• Revenues pay all debt service and 12,000 -
  25,000 in vehicle cost each year.
• Revenues pay 150,000 sewer replacement and
  repair expenses each year
• No additional debt
• Inflow and Infiltration repairs are paid from
  capital reserves (approximately 2 million over
  several years)

Sewer revenues must increase by 65 - 70 in
order to pay all expenses and undertake the sewer
repair expenses.
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Existing Rates
Average single-family residential usage in
Smithfield is less than 12,000 gallons in two
months.
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Option D

• Service fee
• 6.25 for water
• 5.00 for sewer
• Usage fee
• 3.30/1,000 gallons for water
• 2.50/1,000 gallons for sewer
• Overall increase to residential customer 68
• Service fee does not recover all debt or fixed
  costs
• Option D not recommended

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Option D1

• Applies a debt fee to each water bill based on
  meter size
• Debt fee pays debt service on Fluoride Removal
  Project
• Usage fee
• 2.60/1,000 gallons for water
• 2.90/1,000 gallons for sewer
• Overall increase to residential customer 70
• Some customers with large meters or higher
  consumption have increases of 100, 200 or more
• Structure is not fair and equitable to some
  businesses
• Option D1 not recommended

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Option D1
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Option D2

• Applies a debt fee to each water bill
• Debt fee pays debt service on Fluoride Removal
  Project
• Usage fee
• 2.55/1,000 gallons for water
• 2.90/1,000 gallons for sewer
• Overall increase to residential customer 76
• Increases to non-residential customers are
  comparable to residential increases

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Option D2 - Proposed Rates

• Water
• 2.55 per 1,000 gallons and
• 19.30 on each water bill to pay debt service
  related to the fluoride removal project
• Sewer
• 2.90 per 1,000 gallons (based on water usage)
• No minimum usage

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Proposed Rate - Water
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Proposed Rate - Sewer
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Proposed Rate Combined Bi-Monthly Bill
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Comparison to Neighbors
The proposed rates compare favorably with rates
in neighboring localities.
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Related Issues

• Water Sold to Isle of Wight County
• Town sells water to Isle of Wight at 1.65 /
  1,000 gallons.
• Proposed rate is increased to recover debt
  service costs associate with the removal of
  fluoride.
• Proposed rate is 4.48 per 1,000 gallons.
• Significant departure from existing agreement,
  will need to be negotiated with County.

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Related Issues

• Multi-family units
• Proposed rates applies 19.30 per unit for
  multi-family units.
• The increases for multi-family units will
  parallel the increases to single-family units
  with the same usage.

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Summary

• The debt fee will generate revenue adequate to
  pay projected debt service on fluoride removal
  project.
• Usage fees are based on consumption are adequate
  to pay expenses of the systems.
• Promotes conservation because greater consumption
  results in a larger bill.
• Rates are easy to understand and administer.
• Impacts all customer classes.
• Rates are reasonable when compared to residential
  rates in neighboring localities.
• Debt fee can be easily communicated to public.

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Summary

• Proposed rates will recover costs in a stable and
  predictable manner, will pay for capital
  projects, will encourage conservation and will
  promote fairness amongst the customer classes.