A proposed rate hike for customers of the Cape Fear Public Utility Authority drew some opposition to a hearing Wednesday morning.
Two residents spoke against the proposal to raise rates by as much as 7 percent for the coming fiscal year. A recommended hike of 4.4 percent will be among three scenarios considered at the authority board’s regular meeting next month.
In the hearing today, speakers questioned why rates should continue to go up when water consumption has gone down. Staff has cited that decline as a reason for the rate hike, to make up for revenue that was less than amounts budgeted while also paying for costs of operations.
But the residents who spoke questioned that logic.
“The reason consumption is down is simple supply and demand,” said Hank Thomas. The higher rates go, the more customers try to cut back water use in hopes of saving money, Thomas told the board.
While he said he does not oppose putting money toward improving the authority’s water and sewer system, Thomas said increasing rates won’t afford them.
“Another rate increase is not going to help with these improvements,” he said. “Think about the management, how you run the business, where you can cut costs, not just the old answer of where can we raise rates.”
Paul Czesak shared that view, contending the correlation does not reflect business basics.
“As consumption goes down, rates go up. How does that relate to Business 101?” he asked.
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In a staff presentation that preceded the hearing, Executive Director Jim Flechtner and Chief Financial Officer Cheryl Spivey touched on those topics, reiterating previous reports that the decline in water usage was due in part to a wet 2013. With more rain last year, customers used less water for irrigation, for example.
“We sold a lot less water in 2013 than we expected to sell,” Spivey said, noting residential water use declined 9.6 percent and overall water sales declined 7.3 percent. Sewage demand also declined, down 5 percent from the previous year.
Spivey said the average residential customer used 800 gallons less water per pay period, a decrease from 9,200 to 8,400 gallons bimonthly. As a result of such declines, Spivey said revenues are expected to be short budgeted projections by $2.3 million.
Flechtner said the softening demand is not unique to the authority; other utilities are seeing similar trends, he said. Spivey added those utilities with the largest declines are also in this region.
Spivey noted that even though water usage is variable, affecting the authority’s source of revenue, about three-fourths of the authority’s operational costs—which the rates are meant to cover—are fixed through a given fiscal year. Such costs include debt payments and the bulk of employee salaries.
Wilmington City Councilman Kevin O’Grady, who joined the authority board earlier this year, questioned that fixed-versus-variable terminology, contending that adjustments should be able to be made for the sake of cutting costs and balancing revenue. Flechtner clarified that costs considered “fixed” can in fact be adjusted, by reducing flow or making other adjustments in service; they’re just not variable through a given year like water consumption or costs for electricity.
Flechtner added that staff has worked hard to reduce and reprioritize projects included in the authority’s capital improvement plan, to further balance out the trend of decreasing revenue.
“We’re looking at proposed expenditures,” he said, “but we’re also taking care not to compromise the integrity of our system.”
The board will consider the proposed rate hikes at its regular meeting April 9.
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Jonathan Spiers is a reporter for Port City Daily. He can be reached at (910) 772-6313 or [email protected]. On Twitter: @jrspiers
