Last night at a work session, the commissioners agreed in principle that they need to raise water rates to compensate for the current short fall. Alan Cilley estimated that the rates will eventually have to be doubled to make water profitable, but the commissioners said they are planning an incremental approach. They are close to a number for the first increment. Alan Cilley said 25% and Bob Boyle said 75 cents per cubic foot, both a which would amount to about $3.50 per cubic foot. Alan Cilley wants to determine an exact number for the shortfall before making a final decision on the increments and time frames.
One question is why don't the commissioners know what the short fall is? Alan Cilley said he thinks the number is around $100,000 per year. The Budget Committee figures are closer to $120,000. A good financial tracking system should provide exact numbers on a monthly basis as well as show trends. If the department does not have a tracking system, we recommend that they develop one.
Another question is how does the commission determine profit and losses? Is the profit or loss determined by taking the revenues and subtracting the operating costs. Or, are equipment replacement costs also figured in? If the estimates of the current short fall do not include anticipated replacement costs, then raising the rates will not actually cover the department's losses. Utility Partners has estimated that the department will have to replace $2.5 million dollars worth of equipment over the next 5 years. If $1 million of that is for replacing water equipment, then the department should be figuring approximately $200,000 per year into its rates in addition to its normal operating costs.
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