Investigation Finds Cape Fear Public Utility Authority Raised Rates in Violation of State Law

The Cape Fear Public Utility Authority's rates continue to spiral upward. The entity has plans to potentially raise rates every year for the next decade. The CFPUA has increased rates twice in 2010; a 25% increase in the fixed water and sewer rates in January and another 14% increase to the tiered rate in May. Both of these rate increases appear to have been in violation of state law.

The CFPUA was created under NC General Statute 162A. NC General Statute 162A-9(a) reads as follows: 162A‑9. Rates and charges; electronic notice; contracts for water or services; deposits; delinquent charges.
         "(a) An authority may establish and revise a schedule of rates, fees, and other charges for the use of and for the services furnished or to be furnished by any water system or sewer system or parts thereof owned or operated by the authority. The rates, fees, and charges established under this subsection are not subject to supervision or regulation by any bureau, board, commission, or other agency of the State or of any political subdivision.
        Before an authority sets or revises rates, fees, or other charges for stormwater management programs and structural or natural stormwater and drainage system service, the authority shall hold a public hearing on the matter. At least seven days before the hearing, the authority shall publish notice of the public hearing in a newspaper having general circulation in the area.”

In November of 2009, minutes show the CFPUA Board discussed and approved the 25% increase in the fixed rate portion of the water and sewer rates. That increase went into effect January 1, 2010 with no public notice or public hearing.

In March of 2010 the board approved a second rate increase of 14% in the tiered rate portion of the water rate which went into effect as of May 1, 2010. Meeting minutes again show the rate increases were discussed and approved with no public notice or hearing.

The CFPUA provided affidavits of publication from the Star News for the all Authority’s public hearings since October 1, 2009. Those records confirm that there was no notice of public hearing published for either the November 2009 or March 2010 meeting. Likewise, Authority minutes show there was no public hearing regarding rate increases.

Records from a board meeting in March 12, 2008 indicate the authority was aware of the requirement for public notice and hearing regarding rate increases. In compliance with NCGS 162A-9(a) then interim attorney Bill Lynch advised the Board that it should publish the proposed rates for hearing and approval at the next Authority meeting

Linda Miles currently serves as consulting attorney for the CFPUA Board. Records indicate she was in attendance at both the November 2009 meeting and March 2010 meeting where rates increase were discussed and approved. Minutes do not show that the requirements of 162A-9(a) were mentioned during either meeting.

Since rate hikes were imposed without due process, and in violation of North Carolina general statutes, customers have actually been overcharged for the last 12 months. Technically those overcharges should be refunded and the process completed in accordance with state law. However, that’s not likely to occur.

Refunding overcharges could cost the CFPUA millions of dollars. If the organization was forced to credit customers the overcharges, it would immediately have to turn around and send customers a bill to recoup the refund.

With the Cape Fear Public Utility Authority, citizens find themselves being governed by what is essentially a government corporation. An appointed board with the unlimited ability to spend money and raise rates, rates many would call taxes since they are levied by a government body. A scenario most likely not envisioned by our forefathers. What recourse do citizens have when these government corporations fail to comply with state laws and violate the public’s trust? Little, if any, according to the North Carolina Department of Justice(NCDJ).

Utilities Attorneys with the North Carolina Department of Justice’s Consumer Protection Division said it is the responsibility of local elected bodies, such as the City Council and County Commissioner, to keep entities like the CFPUA in check. In reality, the City Council and County Commission have little control over the CFPUA, other than the ability to appoint members to the board.

Attorneys with the North Carolina Department of Justice admitted there is no regular process for overseeing these government corporations. The only way for citizens to seek relief and force organizations like the CFPUA into compliance with NC General Statutes is by filing a civil action: an expensive proposition average citizens can not afford to undertake.

The Cape Fear Public Utility Authority’s failure to follow statute 162A-9(a) is not only a direct violation of state law, but a serious violation of the public’s trust. It is taking away the rights of the citizens to due process as required by state law. Local elected officials have called for a shake-up at the CFPUA. That shake-up may need to start in Raleigh with changes to the very statutes that allowed for the creation of entities like CFPUA.

Reference documents and links:
North Carolina Department of Justice
NC General Statute 162A
NC General Statute 162A-9(a)
CFPUA Affidavit of Publication October 2009 thru November 2010
CFPUA Board Meeting Minutes March 2008
CFPUA Board Meeting Minutes November 2009
CFPUA Board Meeting Minutes March 2010

Cape Fear Public Utility Authority could spend up to $84,660 on consultants for rate study

The Cape Fear Public Utility Authority could spend up to $84,660 on consultants for its newest rate study. The bids are in and information provided by the CFPUA purchasing department showed a total of 7 firms submitted quotes ranging from $42,900 to a nearly $85,000.

Bid totals were as follow:

Consultant / Total Cost
AUS / 42,900
Municipal & Financial Services Group(MFSG) / $ 44,200
Utility Advisors’ Network, Inc / $ 48,000
Raftelis Financial Consultants, Inc / $ 49,875
Burton & Associates / $ 53,928
CH2MILL / $ 79,500
Black & Veatch / $ 84,660

Municipal & Financial Services Group (MFSG) performed the Authority’s initial rate study and proposed the rate structure in place now. MFSG submitted the second lowest bid this time around coming in at $44,200. Their ongoing relationship with CFPUA makes them a likely front-runner to secure the study this time around as well. Their previous report is only two years old and it’s questionable what new ideas they might bring to the table.

Former CFPUA board member Kathryn Johnston wanted to see the board move away from spending money on consultants for rate structure input. With the decision to nearly double rates already in place there is concern the study will only serve as either a high priced propaganda piece to support the status quo, or a scapegoat on which to blame the impending rate increases.

It should be pointed out that some of the information requested in the rate study proposal is freely available online through organizations like The North Carolina League of Municipalities and the American Water Works Association.

The Authority will continue to move the bidding process forward holding rate study interviews December 6th, from 12:00 to 5:00pm, at their offices on Government Center Drive.

Report Shows CFPUA is Selling Water Below Cost

Budget Woes Continue

When the Cape Fear Public Utility Authority was created in 2008 it changed from a flat rate to an increasing tiered rate structure to bill for water consumption. The current tiers are $2.22, $3.35 and $4.50. A report given at the CFPUA July 2010 board meeting showed that water sold at the first tier of $2.22 is being sold below cost.

Exhibit 5-16 of CFPUA Financial Position Report dated June 30, 2010 shows the average cost of 1000 gallons of water is $3.01, which also represents what the equivalent flat rate would be. The problem is the Authority sells a majority of its’ water at $2.22 per 1000 gallons, or $.79 cents below cost.

At a recent meeting CFPUA Board Chairman Gene Renzaglia was quick to inform fellow board members that the price would have to be raised to keep from selling water below cost. Mr. Renzaglia previously justified the status quo stating that companies sell products below cost all the time.

Budget woes continue as the CFPUA cuts project and freezes employees salaries (all salaries except for CEO Matt Jordan who received a $22,500 pay increase.) A scheme that sells water below cost only compounds the organizations budget problems.

Almost since its inception, long time CFPUA Board member and County Commissioner Bobby Greer has lobbied to change the tiered rate portion of the rate structure. City Councilman Charlie Rivenbark, a more recent addition to the board, has expressed concern as well.

The irony is, with the CFPUA selling water below cost at the first tier, it relies on customers to do the very thing it claims it wants to discourage in order to balance the budget. Under the current rate scheme, the CFPUA needs customers to waste water, paying second and third tier rates, to make ends meet.

The Financial Position Report explained one of the board’s philosophies in forming the rate structure was that it was to encourage conservation. If the board believes a higher price (such as the third tier price of $4.55) encourages conservation, then by default it would agree a lower price encourages consumption. The question then is how does selling water significantly below cost encourage conservation? The answer is, it doesn’t.

The Cape Fear Public Utility Authority continues to take heat for its tiered rate structure on other fronts as well. Since its inception families have complained the rate structure is discriminatory. CFPUA internal reports back up the families claims showing it is indeed punitive to larger families, forcing them to pay 2nd and 3rd tier rates for essential water needs.

With project spending to possibly exceed half a billion dollars in coming years, CFPUA rates will continue to be in the headlines. According to the Authority’s own estimates, the rates it charges will nearly double over the next decade.

American Water Works Association Classifies CFPUA Water Rates Unfair

Some CFPUA board members agree. Leadership defends the status quo.

According to the The American Water Works Association(AWWA), the Cape Fear Public Utility Authority’s tiered water rates are unfair. For over two years families have complained to the 11 member CFPUA board they were being unfairly punished with higher rates. Now it appears the AWWA agrees.

The AWWA says tiered rate structures like the CFPUA’s can potentially be punitive to large families, charging them a higher prices when they may in fact be very efficient water users, and thus not deserving of a higher unit rate. It goes on to say tiered rates should not punish water usage where there is no discretion in usage. The CFPUA’s tiered rate structure fails that basic standard of fairness.

Under the CFPUA rate larger families can pay significantly higher prices while using the same amount of water per person. These families are forced to pay a premium even while conserving water. For example, a typical family of 2 or less would pay 1st tier rates of $2.22 for essential water needs. A family with 3 members, using the same amount of water per person as the family of 2, would pay 2nd tier rates of $ 3.36. Likewise, a family of 5 can easily the 3rd tier rate of $ 4.50 for basic water needs.

County Commissioner and CFPUA board member Bobby Greer understood the inherent flaws in the rate structure and has attempted to change it virtually since it’s inception. A more recent addition to the board, City Councilman Charlie Rivenbark, has expressed concern as well. Unfortunately, Greer’s attempts to change the rate structure have been thwarted under the current leadership.

CFPUA Board Chairman Gene Renzaglia defends the tiered rate structure. Treasurer Burrows Smith does as well. While larger families pay a premium for their most basic water needs, they’ll find little compassion from Smith. “They’re the ones that have the family. It’s their choice.”, he said.

Many water utilities have refused to implement tired rates because of the inherent problems. AWWA figures show utilities actually moving away from that type of rate structure.

The problem for those that defend the status quo is that after 2 years there’s no evidence the Authority’s tiered rate structure has even been effective in encouraging conservation, or at least no more so than an appropriately set uniform rate would be. While usage is down since the CFPUA was created, reports from both CEO Matt Jordan and former CFO Brett McAbee credit the decrease specifically to increased rainfall and a downturn in the economy, not the tiered rate scheme

It is significant that the foremost authority on water, The American Water Works Association, classifies the CFPUA’s tiered rate structure as punitive to larger families. According to AWWA standards, the Authority’s tiered rate is inherently discriminatory and unfair, punishing families with higher prices for their most basic water needs

The CFPUA’s current tiered rate structure is bad policy and it remains a stain on the integrity of this board. The American Water Works Association agrees.

It’s time to bring this form of government sponsored discrimination to an end.

CFPUA Seeks Consultant for Rate Study

The Cape Fear Public Utility Authority issued a request for proposal November 1st looking for help with their rate structure. According to the proposal, ‘The overarching goal of the study is to adequately fund water and sewer operations, capital improvements costs and bond debt while at the same time keeping rates low.”

When the CFPUA was created just over two years ago rates were changed from a uniform water rate to a tiered rate structure. Since then families have complained about the punitive nature of the tiered rate structure with some board members agreeing. For this very reason County Commissioner and CFPUA board member Bobby Greer has attempted to change the rate structure since its inception. However, Commissioner Greer’s proposals and customer complaints have fallen on deaf ears of the current CFPUA leadership. It’s not likely another rate study would result in any meaningful change.

Former CFPUA board member Kathryn Johnston wanted to see the board move away from spending money on consultants for rate structure input. She saw it as a waste and believed staff was capable of handling rate issues. A review of CFPUA minutes would seem to agree with Ms. Johnston’s conclusions. Just one year ago in November of 2009, then CFO Brent McAbee gave an in depth rate presentation. CEO Matt Jordan did the same in July of 2010.

Skyrocketing rates are a growing concern as well. The study documents call for the consultant’s rate proposals to meet all the CFPUA spending demands while “keeping rates low.” How can consultants recommend ways to keep rates low when the CFPUA has already informed customers that rates will nearly double over the next decade?

With the decision to nearly double rates already in place, it seems as if the study will serve as either a high priced propaganda piece to support the status quo, or a scapegoat on which to blame the impending rate increases.

Much of the information requested in the proposal is freely available online through organizations like The North Carolina League of Municipalities and the American Water Works Association.

Municipal Services Financial Group performed the Authority’s initial rate studies and proposed the rate structure in place now. They’d likely be a front-runner to secure the study this time around as well.

Candidates Call for Shake-Up at CFPUA

Some see restructuring and a change in leadership as part of the fix 

They may come from different parties, but they all agree on one thing: There is a need for change at the Cape Fear Public Utility Authority. New Hanover County Commissioner candidates have discussed everything from sky rocketing rates and spending, to the complete reorganization of the struggling utility.

Each of the candidates is quick to explain they understand there are things that need to be fixed in the aging water and sewer infrastructure. They also agree the spending and rate increases have got to be brought under control. Three of the candidates, Berger, Butler, and Catlin have each stated they want seats on the Authority board if elected.

Brian Berger is one of the most outspoken candidates on the Authority. He warned citizens of potential problems with the authority in 2007, long before it was ever created. In hindsight, his insight now seems somewhat prophetic. Ultimately Berger would like to see the Authority dissolved but comments that may not be possible at this point.

This past week Deborah Butler called for the removal of CEO Matt Jordan during an interview on the a local radio show The Morning Beat with Chad Adams.  NHC Commissioner Chairman Jason Thompson has called for Jordans removal as well if the situation does not improve.

Butler is also an outspoken opponent to the Authority’s tiered rate water structure, which is punitive to families. Authority reports back up Butlers concerns. 

Butler’s website had the following statement on the CFPUA: “…the merger that created the CFPUA was not properly supervised by the County Commission resulting in delinquent billing, disruptive Landlord/Tenant policies, and unrecoverable accounts receivable. Further, the rates have dramatically increased while the CEO is receiving “incentive” monies. Meanwhile, parts of the County still don’t have the sewer service they were promised years and years ago and the infrastructure continues to fail contaminating our environment.”

Rick Catlin believes the CFPUA should be dissolved and completely restructured if possible. Catlin has also stated the current rate of spending and price increases is unsustainable.

Catlin’s website had the following comments on the CFPUA: “I do not believe the Authority is sustainable. They have no way to pay for decades of deferred maintenance except through higher and higher usage fees. The Authority exists outside the traditional concepts of accountability and will continue to struggle to maintain and expand basic public health services as a self-sufficient utility enterprise. I believe clean water and sanitation are basic responsibilities of local government. We need to make substantive changes to the Authority.”

Sid Causey is one of the more reserved candidates when it comes to the CFPUA. But even Causey expressed concerns over the utility rates running people out of the county.

Accountability of the CFPUA to the citizens, or lack there of, is a common concern. When the authority was created, control of water and sewer utilities were handed from officials who were elected to an appointed board. Citizens found themselves being governed by a government corporation, with little or no voice in its direction or decisions making.

The candidates concerns are well founded. The Cape Fear Public Utility Authority was created under NC General Statute 162A. Under that statute the Authority is given the unregulated ability to spend money and raise rates. It is also exempted from oversight by the North Carolina Utilities Commission.

Voters will decide on November 2nd who their new county commissioners will be. The face of the Cape Fear Public Utility Authority will change soon there after.

WATCHDOG Group Calls for Cape Fear Public Utility Authority to Televise its Meetings

In light of recent events, board should make transparency a priority

During the public comment portion of Wednesday’s Cape Fear Public Utility Authority board meeting a formal request was made for the CFPUA to televise its board meetings.

The presentation made three specific requests: That audio recordings of all past CFPUA board meeting be made available online, that CFPUA begin filming and broadcasting meetings, and that meeting videos with associated meeting documents be made available on line.

The presentation cited several reasons that the authority should film its meetings. The first reason was that the CFPUA written minutes were subjective and contained errors. The presentation went on to point out errors and omissions in existing CFPUA meeting records. It also highlighted cases where customer concerns expressed during the public speaking portion were relegated to one sentence, but appearing in the same minutes was a whole paragraph written about an award given to the board chair.

Secondly the presentation pointed out that the two bodies that created the CFPUA, the Wilmington city council and New Hanover County Commission, both film and broadcast their meetings, and that the CFPUA should be held to the same standard. It recommended using the Wilmington City Council website as a model for posting videos and meeting documents.

Finally the presentation explained that as a result of the creation of the CFPUA we find ourselves being ruled by a government corporation; an appointed board with the power of elected officials. With the creation of these authorities, the state legislature has essentially allowed for the birth of an unregulated spending monster, obligating citizens of New Hanover county to hundred of millions of dollars in debt.

Under the guise of “it’s broken and we have to fix it,” there is virtually no spending the CFPUA can’t justify. According to 2010 data from the North Carolina Association of County Commissioners, the Cape Fear Public Utility Authority spends more money than 70% of the counties in the state of North Carolina. Board member and County Commissioner Bobby Greer has stated in the past that the board has to quit spending so much money.

CFPUA minutes show that in February of 2010 there was some discussion regarding broadcasting authority meetings. Several members were in favor of the idea at that time. Former board member Kathryn Johnston stated that transparency and openness was a concern. Six months later it is evident that this is not a priority and there has been little progress toward that end.

Citizens can hold city council and the county commission accountable at the ballot box. They can not do the same with the appointed members of the CFPUA board, regardless of the public’s dissatisfaction with their direction. This authority is an unelected, unaccountable, government body. It represents a fundamental change in how we are governed and is truly taxation without representation.

The CFPUA should be held to the highest standard of openness and transparency and this board should willingly offer video recordings of their meetings, including meeting documents, available on line for the public’s review.

CFPUA oversteps authority threatening customers with police enforcement

As a result of a major water main break, the Cape Fear Public Utility Authority issued a number of emergency alerts on July 23rd. The 8pm alert threatened customers with police enforcement for violation of their mandatory water restrictions. The alert read “New Hanover County and Wilmington Police will be helping with enforcement.” Problem is, the CFPUA is claiming police powers they don’t have.

In conversations we had with law enforcement, they stated they’d not be enforcing any CFPUA codes, quite frankly, that it was not their job. Their job is dealing with crime, not whether or not someone was watering their yard or washing their car.

To be specific, law enforcement officials said they would not be responding to any to calls regarding enforcement of CFPUA codes. CFPUA Code enforcement was the responsibility of the CFPUA employees, not the Wilmington Police Department or the New Hanover County Sheriffs department.

When a local afternoon radio talk show broadcasted the CFPUA police enforcement threat it solicited a number of calls. Many callers questioned the CFPUA’s ability to use police to enforce its codes.

It’s clear the CFPUA overstepped its authority by using the threat of police enforcement to scare customers into compliance. It is problem when this Authority starts making claims and threatening customer with police action, something they have no authority to do.

Bottom line, this is a serious violation of public trust and someone at the Cape Fear Public Utility Authority should be held accountable.

(This is a link to a pdf copy of how the original notice appeared in case it disappears off the CFPUA website.)

Water bills to increase 500% as Cape Fear Public Utility Authority annexes Porters Neck

Some 700 Porters Neck households will soon be annexed by the Cape Fear Public Utility Authority. On Wednesday, the CFPUA held two meetings at the Porter Neck Clubhouse so residents could learn more about the expansion project. Residents were anything but receptive to the Authority’s takeover of their water supply, many leaving the meeting irate regarding the coming rate increases.

Porter Neck residents are currently supplied with water by the Porters Neck Company (PNC) at a rate of $1.25 per 1000 gallons. Based on the PNC’s rate schedule, if a household used 6000 their bill would be $7.50. Those 6000 gallons of water from the CFPUA will now cost residents $ 35.21, an increase of nearly 500% over current rates.

Porter Neck residents will suffer the same fate as many other New Hanover County families have before them. One day they are purchasing water from privately owned water utility. (Keep in mind, these private water utilities were not giving the water away, they were selling it at a profit. ) The next day, the Cape Fear Public Utility Authority takes over; rates go through the roof, and continue to climb. The 500% increase Porters Neck residents will see is just the beginning of the increases in their water costs.

The Authority’s tiered rate scheme only compounds the rate increase problem. Many residents will find the water that formerly cost them $1.25 per thousand gallons will now cost $ 4.50 per thousand gallons under the CFPUA’s tiered rate scheme.

Homeowners that attended the meeting felt helpless stating there was no one that represented them on the CFPUA board. “This is a textbook case of taxation without representation,” one resident said. He was right on target. While the CFPUA has many of the same powers as a city council or county commission, CFPUA board members are appointed rather than elected, leaving citizens with no recourse if they are not satisfied with the actions or performance of the board.

The bitter taste left in the mouths of Porters Neck residents will be the plight of other families as the CFPUA continues to raise rates and annex customers to expand its domain. We’ll have more on the unrestricted powers of the CFPUA in an upcoming article

CPFUA 2 year anniversary much more costly to some families than others

How the CFPUA targets families with rate increases

When the Cape Fear Public Utility Authority took control of our water and sewer utilities in 2008 the board implemented a tiered rate structure. Under the tiered rate structure, families pay a higher price per gallon as more water is used. Families with more members use more water and in turn pay a higher price per gallon. Since its inception larger families have argued they are unfairly discriminated against under the tiered rate structure. Two years of rate increases under CPFUA’s reign have proven them right.

Below is an illustration which shows how rate increases affect families based on size. Keep in mind that while each family below is using the exact same amount of water per person, there is a marked difference in the price increases they’ve seen.

The usage rates are calculated using the exact same amount of water per person. Based on given data in the CFPUA’s Water and Sewer Rates Briefing December 2008 for basic water needs.

Using the City of Wilmington’s former usage rate of $1.87 as a baseline, the typical family with 1 or 2 members have seen the rate they pay rise 19%, to $2.22. A family with 3-4 members have seen the price they can pay jump 80%, from $1.87 to $ 3.36. A family with as few as 5 members have seen the price they can pay skyrocket 141%, from $ 1.87 to $4.50.

Does the CFPUA target families with rate increases? Absolutely it does, and proudly so. Families claiming rate discrimination find no sympathy from the CFPUA leadership.

CEO Matt Jordan readily admits larger families, while using water at the exact same rate per person as smaller families, and who are even conserving water, will still pay a higher price per gallon under the tiered rate scheme. He has stated in the past that under the tiered rate scheme some families must pay more so that others can pay less. Jordan’s cohort, CFPUA Board Chairman Gene Renzaglia, is also an outspoken supporter of the tiered rate scheme.

With board members that are appointed rather than elected, citizens are left with virtually no voice for change. Fortunately for the families of New Hanover County, not all CFPUA board members are drinking the cool aid served up by leadership. There are rumblings among some board members which may lead to changes in the rate structure.

Until then, as water rates continue to spiral upward at staggering pace, discrimination against families in water rates will remain the gold standard for the Cape Fear Public Utility Authority.

Hello World!

Welcome to CFPUA Watchdog! Our goal is to educate the public providing news and information on the Cape Fear Public Utility Authority and it's tiered rate scheme not found elsewhere and not filtered by the CFPUA spin machine. This blog is an extension of wilmingtonwater.org.