MINUTES
STATE OF
The
Cane Creek Water & Sewer District Board met for a regular meeting at
Present
were: Chairman Bill Moyer, Vice-Chairman
Also
present were: Deputy Clerk Terry Wilson, Engineering and Facility Services
Director
CALL TO ORDER
Chairman
Moyer called the meeting to order.
Commissioner McGrady made the motion for
the Board to convene as Cane Creek Water & Sewer District Board. All voted in favor and the motion carried.
CANE CREEK WATER AND SEWER DISTRICT
(CCWSD) – Financial Issues
Marcus
Jones addressed the Board, reminding them that at the previous Board meeting
the Board did not approve the increase in the treatment portion of CCWSD’s rate
to cover the increase in MSD’s rate to treat the District’s wastewater. In
previous years this increase has been routine; therefore, staff did not present
details which highlight the significance of the increase to the District’s
Budget.
CCWSD
is an Enterprise Fund which means the revenue generated from the customers of
the sewer system offset the expenses incurred from providing the service. There
is no inflow or outflow from the General Fund currently. While CCWSD is a
healthy system at this time, it faces significant challenges in the future. It
is a small system with less than 3,000 customers which limits “economy of
scale” advantages of larger systems. The District is not a water provider;
traditionally, water is the “revenue generator” for utility systems. In addition
the District does not treat its
wastewater “in-house” which further limits the “economy of scale”. Lastly, the
Capital Improvement Plan (CIP) developed in FY08, determined that in FY08
$278,000 of Fund Balance was needed to offset operations and debt service. Fund
Balance should be expended as a “rainy day fund” and for Capital Projects to
expand the system, not for operations.
The
increase in treatment costs from MSD of 3.1% for this budget year equate to a
$40,000 expense to the District. The current revenue budgeted from User Fees is
$1,051,390 (Treatment revenue and expenses are passed through to MSD and not
shown in CCWSD’s budget). Therefore the increase in treatment is 4% of the
District revenues. If this increase in treatment costs is not reflected in
CCWSD’s current rate, the added expense will be offset by further reducing the
District’s fund balance.
The
CCWSD rates have not increased since 1998. While the increase in 1998 was
significant, the cost of operating the system has triggered the need to
increase rates. The 10-year cash flow analysis from the District’s FY08 CIP
identifies a rate increase to be in next year’s budget to avoid continued
depletion of the Fund Balance. If MSD’s current rate increase is not reflected
in this year’s rate as done in years past, next year’s rate will need to be
larger. The only other two options are to reduce expenditures or supplement the
District inflows from the General Fund.
The
District is currently and aggressively pursuing opportunities to reduce expenditures.
For example, the District office has relocated to a County building this year
to save $25,000 in lease expense and staff has discontinued “take home” vehicle
policy. Further reduction to account for the $40,000 is not feasible. Regarding
the option for inflows from the County’s General Fund, it would be difficult to
appropriate County property tax revenue to help pay for the sewer service of
3,000 citizens. This is what led to the 1998 rate increase. Prior to the
increase, the District was receiving inflows from the General Fund and the
increase made the District self sufficient.
The
District staff has done an excellent job in maintaining the sewer system for 10
years without an increase in rates. However, next year’s budget will require a
rate increase for the District’s User Fees. By not increasing the treatment
rate this year, the resulting increase next year will be greater. Rate
increases are an unfortunate reality of running a utility. Furthermore due to
the challenges mentioned earlier, CCSWD rates should be expected to be slightly
higher than the surrounding systems like Hendersonville Utilities and MSD.
These systems are significantly larger and treat their own wastewater which
significantly reduce their per customer operating costs.
The
following information was provided during the previous meeting:
The
wastewater collected by the Cane Creek Water and Sewer District (CCWSD) sewer
system is treated by the Metropolitan Sewerage District (MSD). Effective July
1, 2009, the amount that MSD charges the CCWSD for wastewater treatment will
increase from $4.57 per 1,000 gallons to $4.71 per 1,000 gallons (3.1%
increase).
Staff
recommended a corresponding rate increase for the CCWSD sewer customers. A
table comparing the current rates to the proposed rates is below:
|
|
Current Monthly Rates (FY08) |
Proposed Monthly Rates (FY09) |
|
A. Minimum
Charge/Month (up to the first 4,500 gallons per month) |
$16.42 |
$16.42 |
|
B. Treatment
Charge/Month (from 0 gallons up) |
$4.57
per 1,000 gallons |
$4.71
per 1,000 gallons |
|
C. Overage
Charge/Month (all over 4,500 gallons per month) |
$3.67
per 1,000 gallons |
$3.67
per 1,000 gallons |
Note:
For Total Monthly Charge add results of (B) and (C) to (A)
With
the proposed increase, the monthly sewer bill for the average homeowner will
increase by $ .63 (sixty three cents).
Staff
requested the Board discuss the Cane Creek Sewer District financial issues and
provide direction to staff.
Marcus
Jones explained this is a pass-through revenue. The treatment charge is not
reflecting on our budget as either a revenue or an expense. It is passed
through straight to MSD and if we do not pass along the rate increase it will
have to come out of CCWSD operating expenses and ultimately out of fund balance
because it is not currently budgeted in the recently passed budget for the Cane
Creek Sewer District. He stated we’re
looking at a 3.1% increase in this particular charge but it’s going to have a
4% increase on our revenue and that’s because the particular treatment revenue
is a pass through, the total dollar value of the treatment charge for the
district is about $1.2 - $1.3 million. The revenues from our user fees is about
$1 million.
Discussion
The
question was raised of why the people on that line pay more for sewer than
anyone else in the county (currently). Marcus Jones explained that Cane Creek
is a small system, less than 3,000 customers and it does not treat its own
wastewater. We rely on MSD to treat our wastewater for us. These two reasons
have a great effect on the possibilities of economy of scale. Steve Wyatt
stated that we are at the mercy of MSD because we don’t own our own treatment
facility so we have that pass through cost. He stated that with utilities you
look at per unit cost, the more units you have the more you’re able to spread
out your overhead. You’re going to have a certain amount of fixed costs. We
have approx. 3,000 accounts which is a very small utility system.
Following
discussion, it was decided to take this issue to the Cane Creek Advisory
Committee before the Board of Commissioners take any action. Commissioner
Messer will call a Cane Creek Advisory Committee meeting to discuss this issue.
The Board will wait until after consideration by the Advisory Committee to take
action.
Adjourn
Commissioner McGrady made the motion to
adjourn as the Cane Creek Water & Sewer District Board. All voted in favor and the motion carried.
Attest:
____________________________________
Elizabeth W. Corn, Clerk to the Board William L. Moyer, Chairman