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HomeMy Public PortalAbout05-24-2018 Minutes WSAC Regular Meeting MEETING MINUTES WATER SEWER ADVISORY COMMITTEE Thursday, May 24, 2018 7:00 PM Town Barn 101 East Orange Street · P O Box 429 · Hillsborough, NC 27278 · 919 732 1270 MEMBERS PRESENT: Dan Barker, Jenn Sykes, Volker Mittendorf, Aaron Butner, Daniel Rawlins, Saru Salvi MEMBERS ABSENT/EXCUSED: Jim Parker, Arthur Sprinczeles STAFF MEMBERS PRESENT: Nathan Cates, Howard Hobson, Jeff Mahagan, Al Robertson, Joel Lashley, Julie Laws, Margaret Hauth, Jen Della Valle, Emily Bradford (via phone) GUEST(S) PRESENT: Mayor Tom Stevens 1.1 Call Meeting to Order 1.2 Dan Barker called meeting to order at 7:00 PM 2.1 Rate Increase Discussion Dan opened by saying several members had already had conversations on phone and by email, and decided to call a special meeting to discuss rates. He stated that to discuss in-town vs out-of-town would not be appropriate to discuss tonight, but should be saved for another meeting. The rate increase is the only topic for tonight. The last two budgets have had no increase, and we cannot avoid raising rates any longer. Any funds gained from an increase is needed to pay for things one year out, and waiting to increase next year would be too much for customers. Some questions that came from previous conversations are following. Should we start this year? Do we do just-in-time increases, or gradual increases every year? One option would be to increase 18% this year and not increase for the next few years. Volker asked what 7% each year would look like. Dan answered that this takes about 3 years of increases to start paying off the debt. Tom shared that we needed at least 5% increase over the next few years to keep the bank happy, and that previous discussions had led to increasing somewhere between 5-10%, with 7.5% being in the middle. Volker would rather have 5% for 5 years. Dan said that would have been doable if we had started at least one year ago, but now we must increase at least 7.5%. Compound interest over more years means more of an increase in the end. Aaron favors a one-time increase of 18%. Jenn says there are pockets of people who are deeply impacted by increases, and that we need to do more with outreach and non-profits to help these people. We would have to look at affordability and housing to determine who needs more help, and that can be discussed at another meeting. Jenn says there needs to be community involvement in addition to the governmental process. Emily wanted to note that the FY18 budget already had increases built in for FY19 and FY20. The number that the bond council had come up with was 7.5% due to the loan being larger than anticipated. Dan asked if we should have done a rate increase in FY18, and Emily couldn’t remember exactly, but agreed it should have been done before now. FY18 projected a 900K deficit in water fund, but this was offset by capital facility fees. Even with a 7.5% increase, we’ll need to borrow from savings to make budget for the next three years. Jenn asked how long it would take to cover deficit. By FY21, we will have the deficit down to only $300K. There were several reasons we didn’t increase for the past two budget years, which include dealing with the Fathom issue, the loan being more than originally projected, and necessary projects costing more. Aaron said that one con for having one large increase is that people moving in will see the large increase and already high rates, and may reconsider moving here. Dan asked Emily what % increase would be needed to deal with deficit this year, once and for all. Volker doesn’t think we should go for the minimum increase this year, but 101 East Orange Street • P. O. Box 429 • Hillsborough, NC 27278 • 919 732-1270 x85 have the largest increase now, then smaller increases over the next two years. Aaron suggested that if we increase too much at one time, people in Churton Grove, etc. will cut back on usage, which also lowers revenue, and there is a fine line here. Saru says her neighborhood feels they’ve been deceived. Most people have cut back because of already high rates. Saru asks if out-of-town rates are actually double the in-town rates. She feels that if some are annexed in, they’ll actually end up paying more in taxes than what can be saved on water bills. Dan stated that there must be 100% of the neighborhoods in agreement before asking for annexation. Aaron discussed the bond needing payment based on billing, not on taxes, etc. Saru stated that we just need to do it, and stop talking about it. Jenn suggested 7% year one, 10% in year two due to growth numbers maybe being wrong. Volker asked the chances of the reservoir costing more than expected. Aaron said we need to still promote the town to live in, because where else could you get Riverwalk, etc. Jenn suggested figuring out ways to help residents with their bills. In future meetings we will be looking at tiers for commercial users, etc. Dan said the other way to defer this increase is to defer improvements and this is not an option. Aaron encourages staff to save any way we can. Dan shared that staff has already decreased their budget 15% over last year. Nathan discussed the tractor that was put on the budget and how they are looking at used equipment instead of something new. One of the projects discussed is the 16” line under I-40. Volker suggested just going ahead with the increases. There is no way we can get out of this by cutting back on projects. Volker doesn’t want the infrastructure to continue to degrade just to keep rates down. Jen Della Valle stated they should keep in mind that the numbers could be adjusted if we didn’t need to increase every year, depending on how numbers looked each year. Saru said the bond on WFER should have been brought to the public before it was passed. Nathan spoke about 2007 drought and how the reservoir saved us. Durham had 32 days of water supply left; Raleigh had 72. We had 170+ days, and Tom shared that NCDENR wanted to come get our water! Nathan says we must have the expansion for planning for future growth. Jenn stated that rate increase must happen, but we have to communicate better. Dan decided to poll everyone. Saru suggested going with 10% year one. Jenn says higher than 7.5%. Aaron says 10- 12%. Daniel says at least 10+% as we don’t need to squeeze the utilities department further. Volker says at least 10%. He stated that no one would handle their own finances that way, and pull from savings for 3 years to cover expenses. Dan is more on the end of one big increase now, and smaller ones later. He feels 10% is not bad or good, and many people will be angry. Staff are to be trusted to keep system running and cannot be asked to operate with less. Saru says we’re more-or-less a non-profit but more customers don’t know that we’re operating in a deficit. Volker suggested informing the public about a larger increase the first year, and then letting customers know that the increase will be less over the next couple of years. Tom says the credibility of the Town Board is also on the line, and that asked that the WSAC be thoughtful about any increases, and doing our best to keep rates low and as fair as possible. We do need to let the public know that staff is trying to keep high standards and save money where possible. Tom stated that the Utilities staff only do the “must-haves”, not “wants” list. Daniel stated that staff is being asked to do more with less, and this cannot continue. Dan agrees that we must protect the system that we already have. Volker stated that we must pay the price to make it happen. Jenn stated that we must set rates on a margin to keep people from buying rain barrels and other water-saving devices. The magic number will be between 11-15%. She asked about growth projections, and Margaret stated they’re always really conservative. Tom said we should continue the conversation with the Town Board at the June 7 meeting. On the following Monday, June 14, the Board will make their decision on the percentages and number of years. Saru doesn’t want the town to be an exclusive town, but should include all kinds of people coming to live here. Jenn asked Emily what the budget looks like using different scenarios. Dan wants to know the break-even at 3rd year if equal increases each year. Volker asked about housing issues and instituting a buy-back program for old appliances to replace with energy efficient appliances. Dan suggested saving that for another meeting. Aaron asked Emily for different scenarios using 7.5, 10, 12.5, and 15% for break-even numbers. Margaret is not sure the model is robust enough to make sure usage won’t go down when rates increase, and doesn’t know where we could get this information. Saru and Jenn suggest using an educated guess. Jenn wants 101 East Orange Street • P. O. Box 429 • Hillsborough, NC 27278 • 919 732-1270 x85 margin analysis. Volker wants income data, but Margaret says it’s not relevant. We can’t ask, and it’s not relevant to rates. We must charge everyone the same. Rate models will be discussed at a later meeting, i.e. commercial accounts, etc. Margaret asked what information they should bring for the 7th. Affordability/housing will not be on the agenda that night. She asked for plenty of notice and time to plan for that topic when it appears on the WSAC agenda. Dan suggested that we may need to go back to monthly meetings as topics for discussion have increased. Tom stated that differential rates are a can of worms. Daniel says we really need to get billing system in place first before we start discussing this. Margaret stated that she is be willing to come to these meetings as needed. 3.1 Adjourn Volker moved to adjourn at 8:20 PM, seconded by Saru. Next Meeting: June 7, 2018