Robbins and Southern Pines are not usually mentioned in the same sentence in this paper. Now, however, we find both towns grappling with a similar issue and with the same possible solution.
In his proposed budget, Southern Pines Town Manager Reagan Parsons recommended an increase in utility rates. The rate increase is designed to fund a new crew that will focus on cleaning sewer lines, clearing brush from sewer easements, and in general improving utility system maintenance.
Lack of such maintenance causes big problems for customers and the environment. Without clean, root-free lines, backups occur, resulting in damage to customers’ homes as well as pollution of our streams when sewer overflows send wastewater downstream.
In the Robbins proposed budget, Town Manager David Lambert stated that a utility rate increase will be needed.
While he says, “I don’t like (raising the rate); no one likes it,” I would contend that they should like it very much. Too often, a reluctance to raise utility rates results in deterioration of water and sewer infrastructure, which is ultimately bad news for utility customers. In fact, Lambert specifically cites old water meters that do not give accurate readings as one of the problems facing the Robbins system.
This neglect of water meters is counterproductive. If they’re not replaced on a regular basis, the meters deteriorate and underrecord the actual amount of water used. When this happens, the town underbills some customers.
This underbilling causes two problems. One is an equity issue, where those customers with poorly recording meters pay less for water and sewer than those who have accurate meters. The other problem is that the town’s utility system suffers a loss of revenue that could have been used to fix these meters. By not replacing old meters, the town discriminates among its customers on their individual bills and causes a chronic underfunding of repair efforts.
Unfortunately, Robbins and Southern Pines are not alone in the need to increase maintenance of their utility systems. The American Society of Civil Engineers produces a national infrastructure report card. In the 2017 version, our nation’s utilities receive a “D”!
One challenge to improving this grade is the fixation in local government for comparing a local rate with rates paid by neighboring communities. However, there really is no logical basis for this type of comparison.
Utility systems in different localities have differing customer bases, which can have significant rate impacts. If one community has a couple of large industrial users, they can drive down the cost of water and sewer to residential customers. Conversely, if a community loses a major customer, the future rates of residential customers are going to go up to cover the system’s fixed costs that used to be paid by that lost user.
Likewise, utility systems have different costs of procuring their actual water supply. For example, well water generally is cheaper than river-derived water that requires expensive treatment.
Costs also vary among utilities based on how diligently they have budgeted for maintenance costs. Those utilities that have not kept up with these costs will generally have lower rates than those utilities that adequately fund repairs each year.
So the rate comparison really does a disservice by creating a false sense of comparability among utilities. A better comparison for an individual utility would be to compare what it is budgeting for repair with how much depreciation it is recording in its books for the utility system.
Depreciation, after all, is a financial representation of how much infrastructure has deteriorated every year. If the utility set this same amount of money aside in its repair budget every year, it should have more of what it needs to keep its system in good working order.
And by doing the maintenance work sooner instead of later, the long-term costs to the customers will be reduced. It is comparable to owning a car, where it is far cheaper to do regularly scheduled oil changes than never to change the oil and then have to do major repairs on the engine.
So as these towns look at increasing utility rates, their customers should like the fact that the managers recognize the need for adequate revenue to maintain the systems. Customers will all benefit from better-maintained systems, as those systems will then be able to meet their needs while reducing long-term maintenance costs.
That is a win now and a win in the future.