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County to turn off water rate hike

POSTED: July 17, 2014 8:05 p.m.

Water and sewer rates for Effingham County’s customers are going back down.

County commissioners, faced with the ire of hundreds of the county’s water and sewer customers, rescinded the rate increase that went into effect May 6 and began to show up on bills in June and July. By a 3-2 vote, commissioners opted to roll the rates back to the previous level plus 16 cents to account for the additional charge from water provider Savannah Industrial and Domestic.

“If we were going up on rates, notice should have been given,” said Chairman Wendall Kessler. “The citizens should never have gotten a bill for something they had no notice was coming down the pike.”

The rates approved Tuesday night will be made retroactive to May 6, and customers will be credited for the difference in their bills for the last two months. No late charges and no disconnects have been issued since the higher bills went out, county finance director Joanna Wright said.

“We realized very quickly a mistake was made,” said Commissioner Forrest Floyd.

Said Commissioner Vera Jones: “We overreached much more than we anticipated and meant to do.”

Commissioners Steve Mason and Reggie Loper voted against the measure, supporting a second option that would have returned rates to the old structure plus 35 cents.

“When we voted for this, we knew something needed to be done,” Mason said of the rates put into effect May 6. “I don’t think it needed to get to the point it did. But we did it for a reason. Just reverting back to what we had puts us back in the same boat.”

Mason also was astounded the commissioners didn’t foresee how much higher water and sewer bills were going to be under the rates adopted May 6.

“I don’t know how we didn’t catch this,” he said.

County staff researched alternative rates, community relations director Adam Kobek said. It was based on market analysis to see how the new and alternative rate structures would compare with what other water and sewer customers are paying.

Comparing market rates is beneficial to see what the market will bear, in terms of rates, he added. However, this type of analysis does not consider all facets of the service, such as the age of the system, its capacity and capital cost recover.

“Effingham County’s water system is large and operating well below maximum capacity,” Kobek said. “As more users come on board, its self-sufficiency should improve. Current rates do not cover the costs of maintenance, operations and debt service. The funding gap is subsidized by the special tax district, and our water system has a debt service of approximately $2.2 million per year. It is completely unreasonable to charge our current users a rate large enough to cover the county’s operation and debt service.”

Rates nearly doubled
Before the rate increase, a customer paid $29.90 for 1,000 gallons of water and sewer service. Once the new and controversial rates went into place, the bill was $57 for 1,000 gallons used, an increase of almost 91 percent.

The average residential customer uses about 7,000 gallons per month. Under the old rates, the bill was $60.30 for water and sewer combined. With the rates that were put into effect, the bill was $103, an increase of 71 percent. Averages vary with the season, Kobek said.

Base rates had jumped from $15 for 1,000-5,000 gallons of sewer and $10 for up to 5,000 gallons of water used to $30 and $20 for the same amounts. The bill for 12,000 gallons of water and sewer went from $88.30 to $152.

At $103 per 7,000 gallons used, Effingham County’s rate was the highest, according to rates compiled through a University of North Carolina study. The old rate of $60.30 was just below the average of systems sampled and below the average of all systems operating within the county.

“I take responsibility for my part in what I consider to be an error in how we handled it,” said Commissioner Vera Jones, whose district has approximately 75 percent of the county system’s customers. “I did not intend and understand, and I should have, the significance of the adjustment we were making, which turned out to be greater than what I understood. I believe we have learned some lessons from miscommunication we have had in the past.”

County hasn’t been passing on increases from provider
Jones said the county needed to cover the gap from what it was getting charged from Savannah Industrial and Domestic for its water and what it charged its customers. The county had been absorbing the rate increases over the years without passing them to the users.

“There is no way we could ever charge enough to cover our costs,” Kessler said. “What we were trying to do is recover some of our costs. For the people who are using the service and paying lower than what it needs to be, then the rest of the taxpayers are having to supplement it in same way, shape, fashion or form. The question is what do you charge in order to be equitable for all citizens? If we simply charge the 16-cent rate increase, that would not be fair to the residents of county.”

Floyd, in whose district reside many of the county system’s users, didn’t want to put place the onus of the system’s costs on its current users.

“I can’t put the burden on these people for something decided 10 years ago,” he said.

Another option
County staff prepared two possible rate structures to consider, both based on the old rates. The first option, which ultimately was adopted, added 16 cents to each water tier rate. Sewer fees are unchanged, and at 7,000 gallons of water and sewer used, the monthly bill will be $61.42.

The second option also used the old base rates and added 35 cents per tier. At 7,000 gallons of water used per month, the total water and sewer charge would be $65.20, a hike of $4.90. Both Mason and Loper backed using the second option.

Kobek also presented a comparison for large volume residential use, from 10,000-30,000 gallons per month. Under the old rate, the water and sewer bill for someone using 30,000 gallons of water was $194.50. The rate structure approved Tuesday night puts that bill at $199.30 and the monthly bill would be $215.50 per month under the other option.

“There are others that could be tried,” Kobek said of the rate options. “Rates vary by water and sewer suppliers, and water and sewer consumption varies by user and by season.”

Deposits also will be reverted to their former level. Commissioners voted May 6 for the rates that have been abandoned and also approved water service deposits going from $225 for a homeowner and $275 for a renter. The deposits are going back to $125 and $150 for owners and renters, respectively. The total includes a $25 administrative fee.

“I don’t know we needed to increase those as much as we did,” Wright said.

The county has about 1,000 residential water customers and approximately 30 commercial water customers. Commercial rates also were re-adjusted to reflect the changes made to the residential rates.

A 10 percent hike in rates, county public works engineer Steve Liotta explained earlier this year, leads to a 3 percent decrease in water usage. At current rates, the county’s water system likely won’t break even until 2028.

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