By Sean Tubbs

Charlottesville Tomorrow

Tuesday, May 4, 2010

Charlottesville finance officials are proposing a slight cost increase in the next fiscal year for both water and sewer services provided by the city. The rate hike for both utilities comes despite a slight reduction of the wholesale rate for water charged by the Rivanna Water and Sewer Authority (RWSA).




Download rate study on which FY2011 rates are based

Even though the city projects it will purchase less water from the RWSA next year, officials are requesting an increase in the retail rate charged to customers. If adopted by City Council in early June, the composite rate for water will increase from $42.51 per 1,000 cubic feet (MCF) to $43.56 MCF, a 2.47% increase, beginning on July 1, 2010.

For sewer service, the city will increase rates from $40.30 per MCF to $42.16 per MCF. That’s a 4.6% increase despite a relatively stable cost for treating wastewater.  The increase is mainly due to a RWSA proposal to increase the wholesale rate it charges the city by 3.38%.


Reasons for the water rate increase






Chart demonstrating factors that result in the city’s retail rate for water

According to the analysis used to calculate rates, the average single-family household uses 516 cubic feet of water per month and would see their bill rise by about 2.08%.  The average residential household uses 724 cubic feet and their average bill would increase by 2.19%.

The rates for both water and sewer are calculated in such a way as to ensure the city breaks even.  The major component in that calculation is the wholesale rate the City pays to the RWSA.

For FY2011, the operating budget for the city’s water operations is actually projected to decrease. As a result, the RWSA is proposing charging a lower rate for water to the city.

However, the city also spends money on its own capital improvement projects. These projects are largely funded through the issuance of bonds, which is then covered by debt service. The City is proposing to spend $1.06 million on debt service for rehabilitation projects this year, a 18.57% increase over the current year.

Major water projects in the city include increasing the size of water mains, as well service lines which connect individual homes and businesses to the mains.  The city has spent $7.7 million on water projects between July 2005 and April 2010, according to utilities director Lauren Hildebrand.

Another factor in calculating the city’s rate is how much the

University of Virginia

contributes. According to a 1981 agreement, the city bills UVA 100% of the wholesale rate it pays to the RWSA, plus 25% of the city’s administrative, assessment and collection costs. The city is budgeting for the University to be charged $1,399,734 for water used on central grounds in FY2011, a 3.69% decrease from the current fiscal year’s budget.

To lower rates, the city has a policy of transferring money from a reserve fund to help stabilize rates. This year, the city is spending $200,000 from that fund to reduce the rate, a 100% increase from the amount it spent in the current year.

Connection fees for new development will remain the same, as will a $4 monthly service charge levied on both water and sewer service. Revenue from fees generates the stabilization fund, as well as money for system expansion.


Reasons for the sewer increase


The average single-family customer in Charlottesville sends 516 cubic feet of flows per month into the wastewater system and would see an average monthly increase of 3.96%. The average residential customer uses 724 cubic feet and will see a 4.16% increase.

The main reason for the increase is a proposed 3.38% increase in the amount charged by the RWSA for treating the city’s wastewater.

A component of the RWSA wholesale rate is devoted for that agency’s capital improvement projects. Notable RWSA wastewater capital projects include the

Moores Creek Wastewater Treatment Plant

, where upgrades will remove high levels nitrogen and phosphorous from effluent, and the replacement of the

Meadowcreek Interceptor

.

Another large component of the increase is due to an additional amount the city proposes to spend on its own capital projects. This year the city budgeted $775,000 for debt service, but will increase that figure to $1.15 million, an increase of 48.39%. In all, the city spent $7.6 million on sewer replacement and rehabilitation between July 2005 and April 2010.

City sewer projects include the replacement of old terracotta sewers with larger ones made of either PVC or ductile materials. Over the past eight years, about 15% of the original system has been replaced.  Last year, the city signed a contract with a firm to seal manholes and rehabilitate existing sewers to prevent stormwater from infiltrating the system.

The city is proposing to triple the amount allocated from the stabilization fund in order to lower the rates. In all, $300,000 will be spent to reduce the rate by a total of $1.30 per MCF.

The city will charge the University 4.54% more than the current year for sewer service. For the current year, the city charged UVA $1.85 million, and proposes to increase that number to $1.94 million. As with water, this charge is governed by a 1981 agreement.


Next steps:

The city’s rates will be officially presented to Council for a first reading on May 17, 2010 with adoption scheduled for June 7, 2010. Citizens will have the ability to comment during public hearings to be held on both evenings.

In Albemarle County, the RWSA’s other wholesale customer,

the Albemarle County Service Authority is proposing lowering its retail rates

because the RWSA is proposing to lower its wholesale rates for both water and sewer.

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