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HomeMy Public PortalAbout05-05-22 Minutes Regular Meeting 101 E. Orange St., PO Box 429, Hillsborough, NC 27278 919-732-1270 | www.hillsboroughnc.gov | @HillsboroughGov WATER AND SEWER ADVISORY COMMITTEE MINUTES | 1 of 4 Minutes WATER AND SEWER ADVISORY COMMITTEE Regular meeting 7 p.m. May 5, 2022 Town Hall Annex Present: Chair Arthur Sprinczeles, Vice Chair Jenn Sykes, Members Paul Cough, Saru Salvi, Daniel Rawlins, Barry Weston, Barry Hupp, Steed Robinson Guests: Mayor Jenn Weaver, Commissioners Matt Hughes, Kathleen Ferguson, Mark Bell, Evelyn Lloyd, Robb English Staff: Town Manager Eric Peterson, Utilities Director Marie Strandwitz, Communications Manager Catherine Wright, Budget and Management Analyst Josh Fernandez 1. Call to order and welcome of guests Chair Arthur Sprinczeles called the meeting to order at 7:01 p.m. 2. Introduction of new member Steed Robinson All members, guests and staff made introductions. 3. Agenda changes and approval No changes were presented. Motion: Vice Chair Jenn Sykes moved to approve as presented. Member Saru Salvi seconded the motion. All in favor. Vote: 8-0. Ayes:8. Nays: 0. 4. Updates A. Sprinczeles highlighted the recent volunteer spotlight article featuring Sykes and kudos were given. B. Utilities Director Strandwitz asked if anyone had questions about the Utilities Status Report. She gave updates on funding opportunities. Sykes asked if we were in drought status. Strandwitz responded the reservoir is at the Phase 1 normal pool level which means about a year of supply at current demand. Member Daniel Rawlins asked about the volume of continued development inquiries. Strandwitz reported about every day someone is calling to ask about water and sewer availability. She gave a few examples. C. The budget will be presented at the May 9 board meeting. Numbers are still being massaged. Final rates are undetermined as several items are in limbo like the status of funding and the final financial report. 5. Joint Meeting with Board of Commissioners A. Sprinczeles explained the purpose of the joint meeting and went over the history of the Water and Sewer Advisory Committee and its purpose. WATER AND SEWER ADVISORY COMMITTEE MINUTES | 2 of 4 B. Sykes presented the challenges of the infrastructure with respect to funding improvements and relief for rate payers. A history of the rate structure analysis effort by the committee was given and why it is important to have everyone in the room to discuss philosophical and viable concepts. She noted first and foremost that the underlying presumption for any proposed options is to maintain financial solvency in the enterprise fund. Conservation, rate differential rebalancing (in-town vs. out-of-town rates), business friendly rate structures, and customer relief to lower overall rates were things the committee discussed with the UNC School of Government Environmental Finance Center staff. 1. The committee decided not to focus on conversation and environmental concerns because the town is already environmentally conscious and engaging in conservation simply due to the rates. The committee also eliminated targeted relief outside of in-town vs out-of-town due to statutory prohibitions. 2. The two priority topics selected by the committee for further discussion and focus are looking at the differential rates and business friendly rates. She recognized that addressing business friendly rate structures would also benefit more national outfits than local entrepreneurs. C. Block rates were mentioned as an option for the commercial class. Right now, the town has a base charge with minimum volume and then an incremental piece above the minimum volume per every 1,000 gallons. The block rate would be instead of every 1,000 gallons maybe something like every 4,000 gallons that the rate increases as example. The other side of changing rate structure is also increasing other revenues through growth related fees which the Utilities Director has proposed. D. The discussion between the board and the committee was opened. Sprinczeles thinks input from board members is critical to moving forward. Sykes asks how the board feels about the two priorities the committee identified vs their own priorities. She asked if the town board wants to reduce the water rates overall. Commissioner Ferguson said she certainly wants relief from customer cost burden, but recognizes the costs are mostly fixed. Commissioner English says it is important that we stay solvent. All agreed. Sykes took notes on agreement and disagreement. Commissioner Bell emphasized again that the board’s perspective on solvency is paramount. 1. On conservation – all agreed it is already built into the culture and not worth further focus. Water supply is adequate, and it is the system that limits growth. Bell added the number of potential development inquiries, if approved, would exceed available capacity. Conservation could be an issue in this case, but not right now. In principle member Cough supports conservation if there is unused capacity. English agrees with Cough. When supply exceeds demand, conservation can further cut revenues which would not help the enterprise fund today. Commissioner Hughes recognized that the town is doing its part to conserve as well. 2. On differential rate rebalancing – regardless of customer class. Bell says this is discussed every budget season. Absent of compelling evidence that the differential rate should be changed, there doesn’t seem to be any will to change the rate. Ferguson concurs. Salvi said if the balance were more equitable, in town rates would need to be raised. She says when the town grows, out-of-town residents still support the economy of the town of Hillsborough. She asked if new developments will become part of the town. Hughes says that is the plan but for whatever historical reasons, out-of- town developments in the past were not asked to annex. He also stated politically as a board they have an incentive to have higher out-of-town rates because one group votes for them and the other does not even though it is not a main driving factor. It is more expensive to serve out-of-town areas. WATER AND SEWER ADVISORY COMMITTEE MINUTES | 3 of 4 Member Weston says the compelling reason is almost impossible to determine due to intermingling of data. Teasing out in-town vs out-of-town costs of service is very difficult. Ferguson is not willing to raise rates for in-town in favor of out-of-town, but she is for overall cost reductions across the board if possible. Mayor Weaver made a point that even if a marginal change is made, it is not going to ever end the conversation as new people receive our services. She wants to consider the effort versus the relief. 3. On commercial relief – Sykes said instead of a linear upwards trend of every 1.000 gallons, make blocks to target big users. Other utilities do have structures like this, but this was not fully evaluated. What others do is not necessarily what is best for the town. Town Manager Peterson says in his experience rate structures are all over the place and there is no one industry standard. Bell recollected former member Dan Barker using the analogy of squeezing the balloon. Cough stated he did not think the town should offer discounts to businesses who don’t factor water costs into whether to take residence in town. Sykes thinks this is worth a continuing discussion in future meetings and to bring some experts together. Information to gather is frequency of blocks, class breakouts, percentages of water used by class. 4. On unilateral relief – agreement for overall relief was stated. Cough said relief is a broad term. He felt it will be more of a shifting around of costs amongst classes. 5. Sykes asked, “Should water rates be adjusted?” Mayor Weaver reiterates, yes, the town board is always interested in relieving the burden of utility costs on customers, but it does cost what it costs. It is recognized the rates are very high. The options are limited to make changes that truly provide positive impacts without jeopardizing financial solvency and for a lot of effort. What hangs over the town board is focusing on the identified needed upgrades that will be millions of dollars. She asks Peterson about past discussion about a study on the differential. Peterson says financial assistance to do that maybe was the discussion. Until clarity is given on funding it is hard to do any analysis in addition to not having existing data tracked on in-town vs out-of-town. He says years ago, our financial consultant said lots of money can certainly be paid to do a study, but in general, the costs can be up to 25% - 75% higher and average about 50% to serve out-of-town customers over in-town customers. Intangibles are not included even if the figures could be parsed out. The town decided to use the advice of the consultant generally without expending funds to do the intensive study. Ferguson adds when thinking about this matter, it is not an isolated result. Changes impact more than the enterprise fund. 6. Sykes mentions that outreach will help explain the costs of the utility. There is a communications outreach plan under development. This is critical. Salvi says she gets different answers every time she asks about out of town costs. She wants to justify the amount of costs to service out-of-town. Bell said Peterson just explained that we can pay a lot of money to figure it out but bottom line it is a higher cost. She wants a calculation of higher costs. She questions the 95% surcharge. Ferguson is comfortable with going on expert guidance as there is bigger fish to fry. Cough mentioned some industry guidance that goes about determining differential and consideration points. Bell thinks more communication regarding this could be posted. Hughes thinks as we communicate it is important that even if out-of-town customers use town parks or support local stores and restaurants, it is two separate revenue funds, and they cannot intermingle. Sykes mentioned the annexation spreadsheet planning developed as a what-if scenario often does not result in benefits for out-of-town residents to annex. Only a few subdivisions would benefit overall. English asks how the differential has changed over the years. Peterson said it was double (200%) several years ago when he started. Someone thought 200% was a legal cap. Peterson mentioned Cary is 300%. The town lowered the differential to 195% as recommended by the committee at some point in the past. WATER AND SEWER ADVISORY COMMITTEE MINUTES | 4 of 4 7. Action items for next meeting – discuss the communication plan status. Sykes also suggests that everyone engage with neighbors and even strangers in the checkout line. She thought rebalancing could possibly be considered but it sounds slim something would be done. 8. Feedback on the meeting format was that this was a good format. Ferguson talks about the wastewater treatment plant (WWTP) project that was budgeted at $30M and it was done with $19M and desires to be innovative and borrow less. Peterson says discussion at the budget overview meeting will cover some challenges. He noted that construction costs are doubling. If we get hit with these increases in our projects, it will cause a lot of consternation and budget upset. The WWTP was value engineered and we will continue to evaluate all options for projects. Ferguson is amazed at the creativity and innovation throughout the town departments. Salvi asks at what point does it become unaffordable? Peterson said the board needs to decide this and not expanding the treatment plants is one way. Peterson assumes a moratorium would be enacted instead of spending millions to expand the plants. Cough makes the point that we are indeed facing a wastewater conservation issue. Bell’s observations are to have the biggest possible issues facing us in the future discussed. Keep things simple and focus on the gigantic questions on infrastructure improvements and capacity. 9. The joint meeting was concluded, and the board members were excused. Motion: Salvi moved to end the joint meeting. Sykes seconded the motion. All were in favor. 6. Reports Sprinczeles said any reports could be discussed later if important. 7. Assignments for Meetings Sprinczeles confirmed meeting assignments for the following month with applicable members. 8. Adjournment There was no further discussion by the committee after the board members left and Sprinczeles said the committee meeting was adjourned around 8:46 p.m. No motion or vote was taken. Respectfully submitted, K. Marie Strandwitz, PE Utilities Director Approved: Aug. 4, 2022