CFPUA Rates: Cheaper To Water The Grass Than Take A Bath

Under the CFPUA's newest inclining rate scheme it will be cheaper for some families to water their grass than give their child a bath.

When the new rates go into affect in May it will be cheaper for some Cape Fear Public Utility Authority customers to give their child a bath in the front yard than inside their home. How can that be? Under the new rate structure, families that have a separate irrigation meter will pay a mere $2.64 per thousand gallons to water their grass. Those same families can pay rates of $3.96 to $5.28 for the water they use inside their home.

The lower irrigation meter rate was implemented as a last ditch effort to provide relief for families and homeowners under the pressure of skyrocketing water cost. Some board members also saw it as a way to encourage consumption, sell more water, and increase revenue. If the CFPUA can increase revenue, it could lead to lower rates for all customers.

In the end, this change will offer little relief, as most residential customers do not have separate irrigation meters. It may seem like a good deal now, but customers may want to think twice before running out and having a separate meter installed. While the irrigation meter rate will be $2.64 in May, it could easily be changed to $10.64 or more, if the board so desired. A gamble most customers are not be willing to take.

The question many people are asking is how can the CFPUA allow for the unlimited use of water for irrigation at the first tier price of $ 2.64 while punishing families with second and third tier pricing of up to $5.28 for essential household use? The answer is simple: There is no explanation.

The CFPUA’s inclining rate billing structure is inexplicable and sends a confusing message to customers. The irrigation meter rate is a just one symptom of a problem plagued rate scheme that few can justify. Fortunately for CFPUA customers, some board members continue to advocate for a uniform rate which would bring an end to a failed and unnecessary inclining rate structure that does more harm than good.

CFPUA Retains Controversial Inclining Rate Structure in Spite of Public Outcry

Consultants and Board Members Warn of Adverse Consequences

This is the first in a series of articles explaining the adverse environmental and economic consequences of the Cape Fear Public Utility Authority’s newest inclining block rate billing structure.

The newly adopted Cape Fear Public Utility Authority rate structure is a giant step backwards. A tough pill for customers to swallow after spending $40,000 on consultants, which in the end resulted in little meaningful change for New Hanover County families. For some board members it seems the decision to do nothing was already made before consultants were ever hired.

In March the CFPUA held a public hearing specifically to address the rate issue and take public comment. CFPUA Board members noted at the time that a vast majority of public comments were in favor of changing to a uniform rate. Just one month later, at April’s CFPUA board meeting, a handful of board members chose to ignore public sentiment in favor of the status quo.

CFPUA Finance Committee members Gene Renzaglia, Burrows Smith, and City Councilman Ron Sparks strategically brought only one rate structure recommendation before the board. The three have been the most outspoken advocates of the current inclining block rate structure, defending it at every turn. To the dismay of some board members and even CFPUA staff, they recommended the same inclining block rate structure, with only slight adjustments to the tiers.

To counter the move, County Commissioner and CFPUA board member Rick Catlin put forth a motion to change back to a Uniform Rate. Board member Mike Brown quickly seconded. After much discussion, the motion nearly past with 5 members voting for it and 6 voting against.

When the Uniform Rate proposal failed, Catlin put forth a motion to raise the first tier to 18000 gallons, seeking some equity for larger families, acknowledging the proposed 12000 gallon tier was to low. City Councilman Ron Sparks was successful in persuading Catlin to withdraw his motion.

In the end, Renzaglia and Smith successfully defended the inclining block rate structure they helped put in place, in spite of public sentiment.

The rate structure that was finally approved adjusted the existing first tier from 9000 gallons bimonthly to 12000 gallons. According to the CFPUA consultants Utility Advisors' Network Inc., the 12000 gallon tier is the typical usage of a family with about 3 members, based on national averages. That leaves the average family of four or more that would typically use more than 12000 gallons paying the higher second tier rates.

Opponents point out that a first tier set at 12000 gallons represents the CFPUA’s continued endorsement of a policy of discrimination, knowingly punishing larger families with higher prices for their basic water needs. As with most inclining rate structures, it is fundamentally unfair and leaves the CFPUA board picking winners and losers, arbitrarily granting some customers a lower rate while charging others a premium.

Another concern was that the third tier price was raised to $5.29. Consultants warned the CFPUA Board Members that tier pricing set too high would lead to a decrease in revenue. Customers simply aren’t going to gouged where they have discretionary use, such as irrigation. They’ll turn it off or seek water from other sources such as wells. As irrigation revenue is lost, prices elsewhere would have to be raised to meet budgetary requirements. Ultimately lost revenue will lead to higher prices for all customers.

Wells are not something the CFPUA wants to see encouraged. Environmentalist and concerned board members alike have warned that more wells will only worsen the aquifer saltwater intrusion problem.

While the rate structure issue is far from settled, the five CFPUA board members that voted for the Uniform rate should be commended for putting politics and rhetoric aside. They were County Commissioner Brian Berger, Mike Brown, County Commissioner Rick Catlin, City Councilman Charlie Rivenbark and Cindee Wolf. They attempted to do what was in the best interest of new Hanover County Families and the long-term financial health of the Cape fear Public Utility Authority.

Changing Tide at the CFPUA

The CFPUA’s public hearing tonight on it’s rate structure revealed a couple of things. The first was that a majority of board members realize the current rate structure has some serious problems. Secondly, the fix, whatever it may be, is not going to be pretty.

A long line of people spoke letting board members know their opinion. At one point board member Michael Brown polled the crowd in attendance asking them which structure they preferred an inclining block rate which is what we have now, or a uniform rate, the rate structure that was in place before the CFPUA was created. Only one person raised their hand for the inclining block rate. The balance that voted approved of the uniform rate.

The problems with inclining rates are numerous. Randomly set tiers benefit some families and penalize other. Over and over people with larger families spoke saying that regardless of how much they attempted to conserve they were punished with second and third tier rates simply because of the number of people in their household. The consensus was that the first tier of the current rate structure is set entirely to low.

National organizations such as the American Water Works Association suggest that if inclining block rates are used, the first tier should be set where families are not punished for essential water needs. That means the first tier would need to be 30,000 gallons. By contrast, the CFPUA's first tier is currently set at 9000 gallons.

Speakers pointed out that water supply and treatment capacity are not an issue. In fact the CFPUA has so much excess capacity that they are actively seeking to expand their customer base to increase revenue.

A vast majority of speakers advocated for the uniform rate, where all usage is charge at the same rate. The consultants noted that a move back to uniform rates was possible, but suggested it may have to be achieved through steps, rather than all at once.

Rate discussions will be ongoing through March and board members asked the consultants to present additional rate scenarios for consideration.

It’s notable that for over two years the public has petitioned CFPUA board to change the rate structure. Persistence pays off. With a number of new board members asking tough questions and pointing out the some of the fatal flaws in inclining block rate structure, the opportunity for equity for all customers by changing back to a uniform rate is greater now than ever before.

Misinformation from CFPUA Leadership Taints Upcoming Rate Hearings

In the February 5th Star News Article ”Utility urged to change rate structure” CFPUA treasurer Burrows Smith is quoted with saying “that Cape Fear Public Utility's rate structure is common practice for most utilities.” It's an apparent attempt to convince the public the CFPUA's tiered rate structure was the norm for water utilities in the state. Problem is, that’s not true at all.

Above is the slide presented to the CFPUA board.

More disturbing is that just before Smith’s interview with the Star News he had seen a presentation based on the August 2010 "Water and Wastewater Rates and Rate Structures in North Carolina" study written by the North Carolina League of Municipalities and the UNC Environmental. That study showed only 26% of utilities in North Carolina have the same rate as the CFPUA, not even close to being “the common practice for most utilities” that he claimed.

In a previous email Renzaglia stated “the State passed legislation that effectively cuts off funding to those utilities/muncipalities that did not have a tiered rate structure.” A review of North Carolina state law shows that’s not true either.

Smith and Renzaglia are the only two original board members left and defend the tiered rate structure they help put in place every turn. However, with five new board members in the past year, there is hope for meaningful change in the rate structure for families in New Hanover County.

Can these board members just say whatever they want regardless? Yes. So where is the accountability? Unfortunately, there is none. It seems to be a common strategy that’s being implemented. That is, if you say something enough times, people will believe it to be true, whether it is or not. A great way to manipulate public opinion and convince the newest CFPUA board members to blindly fall in line and support the status quo.

The bottom line is the CFPUA’s tiered rate structure punishes families for essential water needs and that’s wrong. That should be unacceptable to all board members. The current rate structure should be changed radically, if not done away with all together. For all the things the CFPUA is doing right, the rate structure is not one of them. It is government at it’s worst.

CFPUA Board Member Claims County Impact Fees Unfair

Text of an email sent to CFPUA Treasurer Burrows Smith on 2.7.11....

Burrows,

I read the February 4th Star News article “Builders Challenge New Hanover County on Impact Fees” and your complaints about the impact fees your development company was being forced to pay for schools. You didn’t like being charged premium when your retirement development was going to have little impact on the school system.

Likewise, under the CFPUA’s current tiered rate structure New Hanover County Families are punished with higher prices for essential water needs when they are no more a burden on the system per person than smaller families.

As a CFPUA Board Member I would hope you would make the same argument for the families of New Hanover County that you make on behalf of your personal business. You’re right, overbearing government fees are not fair. The CFPUA tiered water rate structure is simply bad policy and it’s time for change.

After reading that article, it seems you understand my point of view now and I look forward to seeing you lead the charge for change.

Best regards,

Chad O’Shields

CFPUA Calls for Public Hearing Before Next Round of Rate Increases

The Cape Fear Public Utility Authority has scheduled a public hearing before the next round of rate increases. The hearing will be March 9th at 6:00 pm in the Commissioners Chambers in the Historic Courthouse downtown. The hearing will allow the public to address concerns directly to the CFPUA board  regarding pending rate hikes.

One of the topics of discussion will be the results of a nearly $50,000 rate study. Many New Hanover County families hope discussions will result in meaningful change to the current rate structure. Under the current rate structure some families have seen the price they pay for essential water needs increase over 140% per thousand gallons.

For over two years families have complained to the eleven member CFPUA board they were being unfairly punished with higher rates. According to the American Water Works Association standards, the Cape Fear Public Utility Authority’s tiered water rates are unfairly punitive to larger families.

A rates workshop is also scheduled for February 23. It will be at 6:00 pm Commissioners Chambers in the Historic Courthouse downtown.

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