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.
Sunday, November 28, 2010
Wednesday, November 10, 2010
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.
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.
Sunday, November 7, 2010
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.
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.
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