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HomeMy Public PortalAbout07-28-2003 Special Session . . . 336 Town of Hil1~ SPECIAL MEETING MINUTES IllLLSBOROUGH TOWN BOARD July 28, 2003 7:30 PM, Town Bam The Hillsborough Town Board held a Special Meeting Regarding Hillsborough's Out-of-Town Water/Sewer Rates on July 28, 2003 at 7:30 PM in the Hillsborough Town Bam. Present for the Special Meeting were Mayor Joe Phelps, and Commissioners Frances Dancy, Evelyn Lloyd, Michael Gering and Mark Sheridan. Absent was Commissioner Kenneth Chavious. Staff present were Town Manager Eric Peterson, Assistant Town Manager/Public Works Director Demetric Potts, Town Engineer Kenny Keel, Finance Director Sherry Carter, Planning Director Margaret Hauth, Police Chief Nathaniel Eubanks, and Management Intern Kent Wyatt. Water/Sewer Advisory Committee Members present were Scott Neal, Jeff Wright, Jim Singleton, and Chris Cole. gh 1. Open the Meeting Mayor Joe Phelps opened the meeting at approximately 7:30 PM. 2. Overview of the Meeting Format and Agenda Changes Mayor Phelps and the Board reviewed the meeting format and by consensus agreed there were no Agenda changes. 3. Responses to Key Questions Submitted by Out-of-Town Customers Town Manager Eric Peterson presented the following list which includes reasons often cited for charging out-of-town residents more than in-town residents for water/sewer service. This list is not specific to Hillsborough, rather it includes rationales provided in professional manuals that explain principles of water rate charges as well as discussions with a variety of officials (e.g., attorneys, educators, and utility professionals). Thus, some, all, or none of the rationales may apply to Hillsborough - that is up to the opinion of each interested person and ultimately the Town Board via the policy decision they make on this issue. The purpose of this list is not to justify Hillsborough's current rate structure, but rather to state reasons that municipalities (and sometimes the courts) have cited for charging higher rates to their out-of-town customers. By providing the list of rationales, hopefully this will make it easier for this issue to be deliberated amongst citizens, customers, and the elected officials of Hillsborough in a constructive manner. 1. The operations, maintenance, pumping of water/sewer, and reading of meters is more costly in areas outside of the city, primarily due to additional distance and travel time. 2. Outlying areas are generally less densely populated than the city itself, which involves a greater average expense in the maintenance of the system, reading meters, etc. (i.e., it costs more per lineal foot of pipe to serve customers outside the city). . . . 337 3. The citizens and taxpayers of the municipality own the system and thus assume additional risk when voter-approved General Obligation Bonds are used to finance large projects (such as the reservoir). When General Obligation Bonds are issued a municipality pledges its "full faith and credit" of it's taxing power as collateral to insure that the debt will be repaid. 4. Since the taxpayers/citizens of the Town own the system, they should derive some benefit from their investment and leadership in building the water/sewer system through lower rates. 5 . Water and sewer service is a way of attracting the type of development and tax base desired by the residents of a city. When the city provides water/sewer service to developments outside of its city limits (at the request of developers and customers), the city then loses some of it's capacity to attract the type of development that would improve it's tax base, help improve the economies of scale in providing services, and potentially ease the tax burden on existing citizens. Charging a premium to out-of-town customers, via a higher rate than is paid by in-town customers, is a method of recouping some of the potential lost tax revenue that a municipality sacrificed by allocating part of its water/sewer resources to outside customers. 6. Out-of-town customers often request service to make new developments, housing, or business possible to build (i.e., could not be built without municipal water/sewer service). This usually occurs where water/sewer service is unavailable, inadequate, or when well and septic systems are either cost prohibitive or not practical in an area. Access to municipal water/sewer then increases property values because it's more developable and can be developed at a greater density. Thus, developers and/or homeowners are willing to pay a premium over in-town rates to get the aforementioned benefits. 7. Higher out-of-town rates are an incentive for customers or future customers to request annexation. Out-of-town customers are often willing to pay higher rates to get connected to a municipal water system because it can lower their homeowner's insurance rates. For example, a home outside of the Town limits that is located within 1,000 feet of a fIre hydrant (that is part of Hillsborough's water system) and is served by Orange Rural Fire Department is rated as a Class 5 (the same as the Town's fire rating). That same home served by Hillsborough's system or more than 1,000 feet from a hydrant is rated as Class 9. A $175,000 frame house with a Class 5 rating is estimated to have annual insurance premiums of $736. That same house in a Class 9 without municipal water is $1,067, which is $331 or 45% greater. Customer questions are listed in italics. 1. Why is there such a huge cost difference in the water bill between in-town and out-of- town residents? 2. Why do we pay double what in-town residents pay? 2 . . . 338 3. "Is the justification for double rates for out of town customers political (i. e. because we can't vote for city council)? If not, then the city should be able to give a plausible explanation for the double rates--an ~xplanation that does not rely on attempted diversion to a history of mistakes that have everything to do with the fact that there is a large debt, but nothing to do with the fact that out of town customers pay a larger proportion of the debt than in town customers. " 4. Why can't the cost of water be evenly distributed between in-town and out-ol-town residents since the revenue will still be the same? 5. Why has the board not attempted to address the concerns of its own advisory board about the needfor a realjustificationfor double rates? 6. Why won't the town do a rate study? Does the board feel that they could not act on the results from the rate study? If the board believes the cost of the rate study is significant, which does not appear to be the case, the board should hold a public meeting, since the advisory board has recommend this and the out of town users would like to see it as well. 7. How long will it take before the Board lowers our water bill or attempts to make the distribution even? 8. What have other agencies around the country done when faced with similar water- related debt circumstances? What's the vision? What's the plan? What's the time frame? Town Manager's comments: The Town Board and staff have had discussions with officials from other systems. Ultimately, the Town has addressed the high-rate issue by controlling spending through 1) prioritizing expenses necessary to keep the daily operations running smoothly; 2) maintaining existing plants, systems, and infrastructure so these investments do not deteriorate, 3) Minimizing the hiring of new personnel unless it is either critical, provides an opportunity to save money, or is mandated by the state or federal government. Controlling operational expenditures while waiting for additional water customers/usage to be added is the most practical way to help create the revenue surpluses necessary to make rate reductions a possibility as early as it can be responsibly done. There is no specific timeframe for a rate reduction, though this issue is discussed in more detail under the Staff Questions section - under Customer Questions #5. If water sales clearly exceed projections, it is possible that a rate reduction could occur next fiscal year. If water sales do not clearly exceed projections then a rate decrease will likely not occur next fiscal year. 9. Why is Hillsborough the ONLY municipality state-wide to charge HALF their customers double rates? Other municipalities charge double rates, but 1.) the rates are low to begin with, so double rates are not burdensome 2.) The out of town customers amount to a small percentage of their total customer base. 3 . . . 339 10. Are in town rates kept artificially low (in relation to actual debt costs) to appease town voters. Isn't there a political advantage for elected officials to keep their comtituents happy with lower water rates, and at the same time, paying for years of mismanagement by sticking it to the out of town folks who have no vote! 11. I would like to know the rationale for an average of a 5.5% salary increase for the 31.5 staff members who work in the Water & Sewer Dept. It's a cost-ol-living adjustment of 1.5% and an average merit raise of 4.0%. That percentage increase seems difficult to justify to me given the "extremely high water and sewer rates" they impose. Town Manager's comments: The Town employees received no merit raises in FY02-03. The employees only netted a 1.0% cost-of-living-adjustment in FY02-03. The Town Manager recommended full funding for the merit program as well as a 1.5% COLA for FY03-04 for all employees. Some of the manager's justifications for the raises include: · No merit raises were given the previous year. · The employees only got a 1.0% effective COLA the previous year (2.0% at mid-year). · Like any business, retaining quality employees is one of the keys to running an efficient and effective operation. Losing good employees just to save a small percentage of money is a certain way to create new problems and make it even more difficult to manage the Water/Sewer Fund operations. · Finding a way to reward employees that do a good job is critical to morale and retention. · It is not fair to punish the employees due to the rate situation, they did not complain about the lack of merit pay in FY02-03 and do understand that there will be other times in the future that money will not be available for merit raises. · Even ifno raises were given to Water/Sewer employees in FY04, the savings would not have been significant enough to warrant a rate reduction this year. 12. Can the Board provide some advice on what other measures that out of town customers can pursue to make these water rates fairer? 13. Why is it legal (or is it illegal?) to "redline" a certain area and force them to pay twice as muchfor water? Town Attorney Comments: North Carolina General Statutes Section 160A-314 grants cities the authority to "establish and revise from time to time schedules of rents, rates, fees, charges and penalties for the use of or the services furnished by any public enterprise..." The term "public enterprise" is defmed as including public water and sanitary sewer systems. Subparagraph (a) of that same statute continues on as follows: Schedules of rents, rates, fees, charges and penalties may vary according to classes of service, and different schedules may be adopted for services provided outside the corporate limits of the city. 4 . . . 340 Therefore, there is clear and unequivocal statutory authority for charging different rates outside the Town limits than those charged inside the Town limits. And the North Carolina Supreme Court determined more than 50 years ago that it was NOT discriminatory to charge higher rates to customers outside a city than inside a city. The issue was so clearly settled long ago that there has been virtually no dispute about it in any reported case law in 50 years. 14. The key to lower cost for water is to increase demand for the existing capacity. I've read that the town lost a 500,000 gal per day industrial water user and the decreased demand lead to a large rate increase. I've also read that the town is restricting large residential development in its planning zone partly because of limited availability of water capacity. The increased usage from new development could lower rates. Please explain why there is limited capacity after the loss of a major user. Town Manager Comments: The Town clearly has more capacity to serve new customers now that Flynt Fabrics has closed. The most recent water capacity analysis was conducted in January 2003. The study indicates that the Town's current commitments to serve developments that are not yet built, but have signed water/sewer extension agreements will use approximately another 490,000 gallons per day (gpd). This means the Town has approximately 360,000 gpd of capacity remaining to serve new developments. Once this excess capacity is exhausted the Town will then have to expand both the water plant and reservoir. Rough cost estimates for these two projects are approximately $5.0 million total. Depending on what type of development and how fast Hillsborough decides to grow, the current capacity could be used up in anywhere from 5 - 12 years. 15. Now that interest rates are lower, can the town pre-refund the bonds used to expand the system and lower interest costs (and thus lower rates)? Town Manager's Comments: The Town staff is currently in the process of evaluating the possibility through contact with the Local Government Commission. The only two debt obligations that would likely qualify will be the General Obligation Bonds and Installment- Purchase Agreement that were used to finance the reservoir. 16. Another reason cited in the paper for limiting large scale residential development is that the residents would complain over the high out of town rates like the residents of Churton Grove. Well, a family of 3 having a $125 to $175 monthly water bill is certainly something to complain about. However, the issue is increasing usage so the rates can drop for everyone. Why is the town discouraging development which could actually ameliorate the situation? 17. How did the town spend so much money to improve the system without increasing capacity? 5 . . . 341 Town Manager's Comments: . The money spent and debt incurred to build the reservoir essentially expanded the Town's water supply by 1.8 mgd. The Town's water treatment plant can treat up to 3.0 MGD. During times of water restrictions, due to the Capacity Use Agreement, the Town can only draw the following maximum amounts of water from the Eno River during the various stages: . Stage 1 - 1.51 mgd . Stage 2 - 1.36 mgd . Stage 3 - 1.28 mgd . Stage 4 - 1.28 mgd . Stage 5 - 1.13 mgd . Stage 6 - 0.68 mgd The addition of the Reservoir to the water system provides the Town an additional 1.8 mgd of capacity, beyond what is allowed to be drafted from the Eno River (listed in the table above). During last year's drought the Town was in Stages 3 & 4 for long periods of time and only days away from reaching Stage 5. When the Town decides to expand the Reservoir to the 2nd and final phase, it will add an additional 1.2 mgd of capacity. Thus, when completed the Reservoir will have a 3.0 mgd capacity in addition to the withdrawals allowed from the Eno River. 18. What does the board view the purpose of the water/sewer advisory board? 19. Why has the board not used the water/sewer advisory board for questions on policy(s) and rates? 20. Why has the advisory board not attended the public meeting on discussing the water and sewer budget and then give public suggestion on the matters? Questions from Out-or-Town Customers to the Town Staff Customer questions are listed in italics. Customer Questions #1 How much did I pay (out of town user) through the purchase of my home (water/sewer hook-up) to the Town? The developers of Churton Grove paid the Town $1,200 each for water and sewer capital facility fees for a total of $2,400. The individual contractors purchased the meters at a cost of $200. Is that charge the same in town as well as out of town? The capital facility cost prior to June, 2002 was $1,650 each for water and sewer in town and $2,475 each for water and sewer out of town. The meter fee was $200 both in and out of town. Beginning July 1, 2002, the capital facility cost for water was $1,650 both in and out of town and $634.36 for sewer both in and out oftown. The meter fee is $300 both in and out of town. 6 . . . 342 Who paid for the infrastructure to supply water and sewer service out of town? The Churton Grove developers. What was the cost to the Town to hook us up? The meter was $200 but there were also labor costs for all employees that were involved in the project: Town Engineer, Distribution Supervisor, Meter Reading Supervisor, Billing and Collection Supervisor, Finance Director, etal. Finally, justify the additional costs for pumping water through these pipes to my home. (Esp. if the town incurred no additional costs except the cost of the water itself) Please refer to the section regarding justifications/rationales for higher out-of-town rates. Customer Ouestions #2 Why does the town have a policy whereby they sell Hillsborough water to other municipalities for far less than we have to pay as their own customers? During the drought water was sold to a small water company in Mebane? For pennies per gallon Water to outside municipalities should be sold at a rate equal to out of town rates at the least! Background Info: Customers who purchase water in bulk from the Water Plant or a hydrant (construction projects) pay the out-of-town rates. Other water systems pay less, due to existing contracts, and the fact that it is less expensive to provide large quantities of water to a single customer than it is to provide the same total amount to many customers (less maintenance on meters/services, less complaints to respond to, etc.). The following are the rates (per 1,000 gallons) for sales to and purchases from other water systems: Water System Orange-Alamance OWASA Durham Purchases from Hillsborough $ 5.3824 (75% of In-Town+$0.6124) $ 4.77 (75% of In-Town) $ 2.49 Sales to Hillsborough $ 4.33(1 st 3k), $4.00 $ 2.055+Labor $ 2.49 Sales to other water systems are traditionally done during a crisis or emergency situation. Since sales to other systems are not done on a regular basis, the Town does not project revenue from these types of sales since they are infrequent. If the neighboring systems were regularly purchasing water and/or were dependent on Hillsborough's water, then the Town could consider adjusting its contract to change the rates. Since the Town currently has a surplus of water it is in "all the Hillsborough customers" best interest to sell as much water as possible to other systems. If the Town was to do as the customer suggests in this question (i.e., sell water to other systems at the out-of-town rate), the Town would almost never sell any water to another. system and lose any chance to generate additional revenue. For example, it would be better to make $25,000 in sales to bolster the water fund (if the opportunity arises), than to make nothing and completely lose any chance to benefit from the Town's surplus capacity. Additional revenue is the long-term key to stabilizing and potentially lowering rates. The customer's suggestion would be a good one, if the "market" existed for other systems who were willing to purchase Hillsborough's water. As it is currently, Hillsborough rarely sells 7 . . . 343 water since the other systems either don't need it or other competing systems rates are still cheaper than Hillsborough's current rates. Thus, selling water to other systems, on the rare occasion that this occurs, is better done at the rates listed above than to charge a rate where no one will buy the water. Customer Ouestion #3 How much did legal wrangling costs factor into the large debt the town owes for the reservoir? What was the actual cost to build the reservoir and make it operational? How much additional expense to the project occurred because of law suits? I've heard the original cost for the reservoir was around 3 million, but with the legal costs and additional costfor the land, the price increased over 3 times to 10 million dol/ars. Is this true? In 1993 the voters of Hillsborough approved $5.8 million in General Obligation Bonds to construct the reservoir. The $5.8 million figure was the estimated cost used in 1993 and the same estimate used to proceed until the Town let construction bids in 1997. The project is now estimated at approximately $10.1 million. Of the $4.3 million in cost overruns the following three items make up approximately $3.94 million of the costs: · Land Acquisition - $2.6 million additional · Construction - $1.3 million additional · Legal Fees - $400,000 additional Is it accurate to say that the total Hillsborough Town budget is less than the budget for just the water and sewer company alone? The Town of Hillsborough budget is broken into two major funds: General Fund and the Water/Sewer Fund. The General Fund provides services such as fire, police, streets, sanitation, planning, recreation, etc. to Town citizens. The total FY04 General Fund budget is approximately $4.7 million. The total FY04 Water/Sewer Fund budget is approximately $5.4 million. Since these two funds provide completely different services to different sets of customers, there is no benefit in comparing the total operational costs of any municipality's General Fund against its utility operations. Customer Questions #4 How many users for water or water and sewer have been added to the Town system since the loss of Falk (Flynt) Fabrics as a water and sewer customer of the Town?" There have been a total of366 new customers added.since July 1,2000. "As a matter of revenue collected, how do the new users, since the loss of Falk (Flynt) Fabrics, add up dollar-wise to the amount of monthly collections as a total collection for the new customers?" "Do the new customers that have been added to the system begin to equal to the amount of revenue that was lost with Falk (Flynt) Fabrics?" At July 1, 2000 (one month prior to Flynt's closing), Flynt used approximately 195,160,000 gallons of water and sewer per year. At 50% of the combined rates for in-town water and sewer ($3.93 per 1,000 gallons), they generated annual revenue of nearly $767,000. Had they remained on our system during the three (3) rate increases - July 1,2000, October 8 . . . 344 1, 2000 and July 1, 2001 - their same usage would have generated $1,186,093 in revenue annually. In addition, they contributed. $33,400 to the Town annually for labor at the Wastewater Treatment Plant. The 366 new customers since July 1, 2000 has been a combination of in and out of town users. Based on an average of 5,000 gallons per month or 60,000 gallons per year for 366 customers at the current rate - 50% in town ($12.13 per 1,000 gallons) and 50% out of town ($24.26 per 1,000 gallons), the new customers would have generated. $399,562 in revenue annually. Therefore, the new customers added since Flynt's closing fall well short of making up the difference of the lost revenue. Plus, this does not factor in the additional cost of servicing an additional 366 connections to the system. "How has the capitalization fees collected from the new users figured into the make up of the loss of revenue contributed to Falk (Flynt) Fabrics?" Not at all. These revenues are not used for operating expenses. They are set aside for future improvements to the plants or the water and sewer systems. Capital facility fees are used to pay for the capacity a new customer will use by adding onto the system. These fees are used to pay for future expansions or existing debt on water supply (reservoirs) systems, water treatment plants, and wastewater treatment plants. Hillsborough places these funds in a capital reserve fund dedicated for future projects. Using these funds to limit the amount of debt needed to complete a future project and/or to make debt service payments on future projects will minimize the financial impact (through rates) on current customers. In short, having new customers pay capital facility fees helps protect current customers. . "Have cost attributed to sewer for Falk (Flynt) Fabrics been analyzed as a comparison to the new users to see if the sewer treatment cost have been reduced or increased?" Yes. Compared to Flynt's last full year of operations in FYOO, the wastewater treatment plant's operational expenditures were 8% or approximately $20,000 less in FY03. Flynt used a water recycling system that lessened the amount of sewage being sent to the wastewater treatment plant, hence part of the limited operational/financial impact on the sewer plant. "As the new users have been added to the system at the now current rates, has the Town actually been collecting more revenue at a lower cost of service than when Falk (Flynt) Fabrics was a user?" In comparing the fiscal year ending 6/30/00 (with Flynt) to the fiscal year 6/30/02 (without Flynt) the revenues have increased while the cost of services has decreased slightly. This is due primarily to the 3 rate increases mentioned previously. Revenues Expenditures 1999-2000 fiscal yr. $3,945,879 4.474.906 $ (529,027) 2001-2002 fiscal yr. $5,130,967 4.276.591 $ 854,376* 9 . . . 345 *Of the $854,376 surplus in FY02, $395,511 had to be used to start the Water Plant improvement project. Thus, the actual surplus for FY02 is $458,865. The projected surplus for FY03 is only $83,252. And, there is a projected deficit of $178,525 for FY04. The Water/Sewer Fund) currently has a savings level equal to 3.6 months of operating expenditures or 30%. Customer Ouestions #5 What percentage of the monies paid to the Mayor and Town Commissioners as their annual remuneration are charged against the Water and Sewer Fund? 50% Was the last increase in the their annual remuneration charge completely against the Water and Sewer Fund as an administrative cost and if it was can that cost be justified as an acceptable cost to be paid by the users? All the increases have always been 50%/rom the General Fund and 50%/rom the Water/Sewer Fund. Is the Water and Sewer Fund making a profit each month and if so how much of a reserve of access collections has to be obtained before rate relief can be expected? Is the Town encouraging a path of solution to the dilemma of extremely high water and sewer rates being charged the users of the system? The average annual surplus from FY98 through the projection for FY04 is approximately $122,000 per year. Based on the current year's budget of approximately $5.4 million this average surplus represents 2.3% of the budget. Each of the departments in the Water/Sewer Fund have .traditionally done an excellent job in keeping their spending below budgeted expenditures. The current fund balance (i.e., savings or reserve level) is 30% or 3.6 months of expenditures. The Town's policy is to keep the fund balance at levels no lower than 20% in a worst-case scenario and no higher than 60%. The fund balance acts as the primary gauge of the fund's fiscal health. This is a critical point. In order to use fund balance or lower the reserve to aid in reducing rates several key things must take place: 1. Major operational and capital needs must be addressed. 2. The fund balance must reach a healthy level (Le., large enough to provide sufficient cash flow, buffer to absorb unexpected expenses, emergencies/disasters, and/or revenue shortfalls). The Town Manager feels that a healthy and reasonable level for a system of Hillsborough's size is approximately 33% or the equivalent of four (4) months of expenses. 3. The financial forecast must project that the fund balance will stabilize at a "healthy level" for the next two years. 4. Once the aforementioned three criteria have been satisfied, then any budgeted/projectedhrevenue surpluses over projected expenditures could be translated into a rate reduction. For example, if during the budget process projected revenues exceed projected expenditures by $100,000, then the Town Board could decide to make a rate reduction 10 . . . 346 (i.e., reduce revenue) by the same amount so as to provide relief to customers. Also, if the fund balance projections appear to exceed the "healthy" level, the Board has three choices: 1) Let the fund balance continue to build, using those funds to pay for a capital item in the future, thus avoiding future debt obligations and providing relief in the future to the operating budget; 2) Applying the fund balance surplus towards rate relief; or 3) A combination or #2 and #3. The Town Manager believes the Water/Sewer Fund is close, but not quite there, when it comes towards being able to provide a rate reduction (as opposed to the "revenue neutral" adjustment of changing the in-town v. out-of-town multiplier, which can occur at any time). If the revenue from water/sewer sales comes in several hundred thousand dollars greater than expected in FY04, then a rate reduction could clearly be an option proposed to the Board when they review the budget in May of 2004. Due to the difficult nature of trying to forecast water use, due to the unpredictability of the weather/rainfalVdrought conditions it is not possible to predict with certainty just when water/sewer sales will increase enough to allow for a reduction. Regardless, the staff plans to re-evaluate the status of the fund's [mandal condition (mid-year) when the FY03 Audit is completed in November or December. Ultimately, this is the "path of solution" the Town is following. In recent years the Town has worked to improve the quality of the system/infrastructure to make a long-term investment so as to ensure that neglect does not become a factor again. Now, the Town is continuing to be reasonable with its expenditures and waiting for either water usage to increase and/or for additional growth to provide the additional income necessary to create additional rate reduction scenarios. Customer Questions #6 How long will it take to reduce the debt so that water prices can be lowered? 1 year? 10 years? There must be some estimates. CURRENT DEBT OBLIGATIONS IN THE W A TERlSEWER FUND Project FY04 Debt Service Fiscal Year Retired Payment Durham Water Line (12/91) $ 15,870 FY04 Water System Upgrades $ 157,150 FY09 (11/93 ) Sewer Plant Upgrades (1102) $ 125,435 FY09 Water Tanks/Line (9/96) $ 217,114 FY12 Sewer Plant (5/75) $ 48,550 FY13 Reservoir Bonds(2/98) $ 441,125 FY18 2ntJ Reservoir Loan ci 0/99) $251,666 FY20 Water Plant Upgrades (5/0n $ 109,462 FY23 TOTAL $1,366,372 N/A 11 . .. . 347 As outlined in the chart above, the next significant debt retirement will not take place for at least six years (during fiscal year 2009) when two projects will be retired. Customer Questions #7 Does it actually cost the town more money to deliver water to out of town developments like Churton Grove or Hardscrabble? If so, please explain in detail how much more it costs vs in town delivery of water. The Town does not provide water/sewer service to Hardscrabble. It is a commonly accepted fact that it often costs more to provide service to customers who live outside the corporate limits. While not legally required to do so, some municipalities choose to have studies conducted that determines the approximate cost difference between in-town and out-of-town service. These cities can then choose whether to implement the rate difference, use the rate difference plus a premium for intangible benefits, or not follow the study results. During a public meeting approximately two years ago, a rate analysis expert discussed the possibility and cost associated with such a study. During this discussion, the rate analysis expert stated out-of-town rates are typically between 25% - 75% greater than in-town rates. And, the average "cost justified" difference is usually 40% - 50% higher than in-town rates. There are many factors that determine these cost differences (e.g., topography, development density, distance from the incorporated areas, etc.). 4. Presentation/Statements By the Town's Water & Sewer Advisory Board No presentation was given. 5. Question and Answer Session with the Citizens Citizens who had signed up on the speaker sheet were given an opportunity to ask questions. 6. Other There was no other business discussed. 7. Adjourn By consensus, the Board adjourned the meeting at approximately 9:45 PM. 'CtfullY submitted, Donna F. Armbrister, MMC Town Clerk 12