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.
Thanks for reading Chatham County’s leading news source! Please consider supporting community journalism by subscribing to the News + Record – you can do so by clicking here.
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.