MOUNTAIRE TO DOUBLE TOWN’S WATER USE

Siler City approves bulk water rates for industry

BY CASEY MANN, News + Record Staff
Posted 1/17/19

For the first time, the Town of Siler City is instituting new water rates for bulk users. The new rates were approved at last week’s board of commissioners meeting. Officials say they were implemented to ensure that users who tax the town’s water and wastewater infrastructure are paying enough to support the upgrades and maintenance  required to supply the water needs of those large users while remaining competitive to  large industries that may consider locating to the area.

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MOUNTAIRE TO DOUBLE TOWN’S WATER USE

Siler City approves bulk water rates for industry

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Posted

SILER CITY – For the first time, the Town of Siler City is instituting new water rates for bulk users. The new rates were approved at last week’s board of commissioners meeting. 

Officials say they were implemented to ensure that users who tax the town’s water and wastewater infrastructure are paying enough to support the upgrades and maintenance  required to supply the water needs of those large users while remaining competitive to  large industries that may consider locating to the area.

Until about four years ago, the town had only one rate for water use. This meant that  residential, industrial, and bulk users each paid the same rate. When the town expanded  to two reservoirs to support industry, the water and wastewater utility funds were  stretched to a point that the state threatened to take over the town’s water services.

To  stave off the state, the town undertook what it described at the time as an aggressive  approach to slowly increase water rates for residential users and enacted a rate for  non-residential or industrial users.

When Mountaire, the poultry processing company based in Delaware, announced its  intention to redevelop a plant in town coupled with the needs of a potential end-user  that could locate to the Chatham Siler City Advanced Manufacturing (CAM) Site, the  town engaged McGill Associates to determine how best to support the growing needs of  industry in the town without taxing the local residents further.

According to Siler City town manager Bryan Thompson, the new rate structure would  need to accomplish two goals. The first would be to be competitive to “enhance the  town’s economic development edge.” At the same time, the town wanted to ensure fiscal  responsibility and sustainability.

As Mountaire was anticipated as being the first bulk rate user, the town involved representatives of the company in its discussions as well. Dale Schepers, McGill Associates management services analyst, explained the process by which the new rates were developed. The process is guided by the American Water Works, an industry standard in  the U.S. and abroad.

The first step is to determine the revenue required to serve existing customers and the  new bulk rate customer, according to Schepers. Mountaire will more the double the  amount of water and wastewater currently treated at Siler City’s facilities.

“We don’t  want to over collect, nor we want to under collect,” Schepers said.

The second  step is to determine how much revenue is required to update and maintain  components that will be needed to service the increased use based on the bulk user’s  needs.

And finally, the process looks at how both these things relate to the customer’s needs. Typically, municipal utilities will use a declining block rate which means that the  more water a company uses, the less the cost is per unit.

Industrial bulk users are defined as users with above 500,000 gallons per day of water  and sewer usage. A user consuming more than this amount will use the rate structure  and if the user falls below that for six months, they would revert to using the town’s  commercial rate.

The industrial bulk rate per unit is less than both the town’s residential and commercial  rates. Schepers noted that prevents an industry from using water as negotiating  leverage.

“This approach protects the town,” Schepers said. “If we’re going to build to a capacity  based on volume, we don’t want to reduce the revenue stream.”

Mountaire has a permit  with Siler City’s water and wastewater treatment plants for up  to 1.25 million gallons of water per day. Based on the new bulk rate, Schepers believes  the town will recover 77 percent of its investment in the facilities when the plant is  operating at half that amount.

If Mountaire uses the minimum amount required to qualify for the bulk rates, 500,000  gallons per day, the company would pay a base rate of $83,000 per month for water and  $125,000 per month for sewer. That would result in about $2,496,000 of annual  revenue for the town.

As that usage increases, the rate per 1,000 gallons reduces, but the bulk rate remains the  ame. If Mountaire builds to and reaches the full capacity of its permit, the town  would likely see about $3,392,436 in annual water revenue. Usage fees for Mountaire alone would increase the estimated revenue for the town’s water and wastewater  facilities by about 60 percent, which now averages about $5 million in a fiscal year.

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