I am writing this letter in response to the recent article printed in the Mount Airy News regarding Pilot Mountain’s water rates. In that article, one of our recently hired employees was quoted as saying that high end water users were “getting a free ride”. The quote was accurate…but unfortunately, what he said was not. I believe his misstatements were due to his short tenure on the job and the inherent complexity of our town water system.
So let me set the record straight: Nobod is getting a free ride. What is true is that everybody is not paying enough to cover the costs of water production. That is why we are projected to have an operating loss of about $81,000 this fiscal year.
You do not need a degree in Mathematics or Economics to understand why - here is the simple explanation:
• We did not start to have financial problems with the water/sewer systems until the businesses that used high amounts of water closed up shop and/or left town.
• That means we were making money on high end users, because if we were losing money on them, we would have been better off financially when they left.
Here are some other points that are slightly harder to understand, but help explain things a bit more:
• When many of the high end users left town (Armtex, rope factory etc.), the Town was still saddled with the fixed cost of a water/sewer plant (the debt service on the construction loan) that is now operating at 15-20 percent capacity. This is like paying monthly for a new Cadillac to ride to church only on Sunday.
• Adams-Heath Engineering, Inc. reviewed a study I performed for the Town in March 2008….they confirmed that the cost , after producing and treating the first 2,000 gallons for each customer, was less than $5.29 per 1,000 gallons.
• As you can see from the rate table below, the least amount we ever charge ($5.62) for high end usage is more than it costs us to produce it ($5.29)…so we make money off of high end users. They pay the same rates as everyone else for the first 10,000 gallons, and get a volume discount for amounts over 10,000 gallons….but they are never sold water below what it costs to produce it.
Please note that I restructured this table from the published rates to combine water and sewer charges. For example, in order to determine the total bill for using 11,000 gallons, you would add $39.08 (for the first 2,000 gallons), plus $30.38 (for the next 5,000 gallons) plus $7.36 x 3 (for the next 3,000 gallons), plus $6.16 x 1 (for the next 1,000 gallons)….for a total 2 month water and sewer bill of $97.70.
Water Usage (per 2 months) Water and Sewer Fixed Fees Water and Sewer Number of Customers
Usage Fee
(per 1,000 Gallons)
Less than 2,000 Gallons $39.08 - see Note 1 $0.00 324
2000 - 6,999 Gallons $30.38 - see Note 2 $0.00 489
7,000 - 9,999 Gallons $0.00 $7.36 159
10,000 - 49,999 Gallons $0.00 $6.16 146
50,000 - 99,999 Gallons $0.00 $5.82 12
100,000 or More Gallons $0.00 $5.62 6
Note 1 - Water Charge of $16.80 plus Sewer Charge of $13.58 plus Meter Charge of $8.70
Note 2 -Additional Water Charge of $16.80 plus additional Sewer Charge of $13.58
• It is true that the rates decrease as the usage goes up - but it is also true that (1) the more water we produce, the cheaper it is to make it and (2) the more we sell, the more money we make (operating profit).
Personally, I do not have a problem with charging lower rates for higher end users any more than I have a problem being able to pay $6 for a 12 pack of Pepsi at CVS (50 cents a can) rather than $1 for one bottle. But the truth is that even if we charged the same rate for any water in excess of 10,000 gallons ($7.36) we would still be losing more than $40,000 per year. And guess what else is true - only 36 of the 164 users over 10,000 gallons are businesses….the rest are families like you and me, so it is not like raising rates on high end users would be “sticking it to the Man”…. like the Geico commercial says…we are “the Man.”
The bottom line is that we lost money on the first 7,000 gallons used for every single customer and we make money on any water sold in excess of 7,000 gallons. Even though the rates are higher for the first 7,000 gallons, the revenue is not enough to pay for the debt service and the cost of producing and treating that amount of water.
The next time I run into a restaurant owner, or a car wash owner, or the guy watering his lawn, or a family that has to bathe 13 children, I am going to thank them for doing more than their fair share of supporting our water system. (A special thank you right now to Mrs. Butner of Cousin Gary’s restaurant - our 6th highest water user - always pays her bill on time and has the best fried chicken in town). And if that guy or gal also owns property in town, I am going to thank them for that part of their town taxes we have been using for the last 5 years to plug the deficit until we raise rates to cover the costs. These people are not getting a free ride, they are paying a toll.
The more important issue is the fact that we are losing money and need to raise rates. The reason rates are going up is because:
• we lost the profits we were making on the high end users that left town,
• we are still saddled with the debt service to build the high capacity plant,
• we have not had a rate increase since 2004 - so six years worth of inflation, and
• the system is getting older, so line maintenance costs are increasing.
What we have decided to do is to retain the current rate structure, with an across the board increase of 10 percent for users above 2,000 gallons. This increase will only cut our operating losses in half. The shortfall will continue to be made up with property tax revenue. The reason we are doing it this way is because we recognize the economic strain that we are all under, particularly for the lower end users who tend to be on fixed incomes, and we did not raise property taxes this year. During the next 6 months and once the audit is completed for this fiscal year, we will revisit the rates and figure out what it will take to balance the water/sewer budget. In the meantime, it is important for us to recognize that we are all in the same boat…..we will fix this not by pointing fingers, but only by working together. We appreciate your patience and understanding while we figure out a fair, responsible and reasonable rate structure.
Andrew French
Pilot Mountain Commissioner
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