BUCKHANNON – The chair of the Elkins Road Public Service District Board of Directors told Buckhannon City Council on Thursday she felt there had been a “breakdown in communication” between city officials and the public service districts in the county.
Carey Wagner, chair of the Elkins PSD Board of Directors, and Roger Ward, a member of the Hodgesville Public Service District Board, attended a public hearing on the proposed water distribution rate increase held at the outset of council’s regular meeting Thursday, June 17.
Wagner and Ward told council they had been caught off guard by the 42 percent increase in the bulk water resale rate to county public service districts.
The rate increase – outlined in Ordinance 451 – calls for a 25 percent water rate increase for City of Buckhannon customers and a 42 percent increase in rates for bulk water resale customers, i.e. public service districts and water associations.
Although council approved the water rate increase, Wagner told council members she felt the public service districts hadn’t been prepared for such a large increase and didn’t understand the justification for it.
The conversation got underway when Todd Dingess, a CPA with Smith, Cochran and Hicks PLLC in Charleston, explained the details of an independent, third-party rate study his firm performed for the city.
Dingess said that for city customers – or water users who receive water directly from distribution lines maintained by the city – the minimum bill would increase by about $3.26, while the average customer, who utilizes about 3,400 gallons of water monthly, would see a jump in their bill from about $21.80 to $27.27 – just over a $5 increase.
However, bulk water resale customers – meaning public service districts that maintain water distribution systems throughout the county but buy treated water from Buckhannon’s Water Treatment Plant – would see a 42 percent hike in rates from $1.76 to $2.50, which amounts to a 74-cent increase.
“The PSD’s customers’ bills aren’t going up 42 percent,” Dingess explained. “What that means is the cost of bulk water purchased [by the PSDs] is going up 42 percent.”
Dingess said the rate increase was necessary to bring the city’s Water Board into compliance with a recently passed Senate Bill that requires utilities to generate 12.5 percent of their operating expenses on an annual basis and place that 12.5 percent in a cash working reserve account.
Secondly, Dingess said the Water Board, which operates as a financially independent entity that’s not part of the city’s general fund, is experiencing “negative cash flow.”
“The city is having negative cashflow in its water operations, so it’s important that the city just not utilize the money that it has in reserve,” Dingess explained via telephone. “It’s required by bond ordinances to maintain a positive cash flow and a certain debt coverage.”
Dingess said the PSD’s customers would likely see, on average, an approximate $3 increase on their monthly water bills due to the pass-through effect of the 42 percent increase in bulk resale rates.
“The city’s water rates are very low compared to other water utilities throughout the state,” Dingess said. “There are 367 utilities that provide water service and right now the City of Buckhannon has a rank that is 33rd out of 367, which means [the city is] in the bottom 10 percent in rates as far as what the customers pay.”
Even with the proposed increase, the municipality’s ranking would jump to 61 out of 367 water utilities, meaning over 300 water service providers charge more, Dingess said.
“The city operates a very efficient water system and provides quality water service to both its customers and the resale customers that the city sells to the bulk customers that are outside the city,” Dingess said.
Dingess said the new requirements laid out in Senate Bill 234 was a major factor in the rate increase.
“A large portion of this rate increase is meeting the requirements that the Legislature set down in Senate Bill 234 and basically what that requires is that utilities must generate through rates 12.5 percent of their operating expenses … and that needs to go in a cash working reserve account,” he said.
Councilman David Thomas said the fact that the city’s Water Treatment Plant is categorized as Class IV – and that Class IV water operators are in high demand – likely also played into the rate increase.
“Water plant operators that are Class IV … is an area that is extremely competitive,” Thomas said. “People are always looking to hire our people away to another district – to Weston or Bridgeport or wherever – and we have to be competitive with our salaries.”
Thomas noted that about a year-and-a-half or two years ago, the city had to increase hourly rates for water plant operators to avoid losing a majority of its plant operators.
Wagner, the chair of the Elkins Road PSD Board of Directors, said her customers were already worried about how much their rates will spike.
“It is going to drastically affect us at the Elkins Road Public Service District and our 1,262 customers,” Wagner said. “We also are dealing with our own going rate – project rate increases – and now we’re going to be faced with doing a pass-through for the rate increase here with the city.”
Wagner said she was bothered by what she viewed as a lack of communication on behalf of city officials to the county PSDs.
“I know that everything has been kind of crazy this past year with COVID … and I know that we could have called in to some of the Water Board meetings but … in March, it seemed like [one rate] and then in April, we saw something else,” Wagner said. “I don’t really know that we were fully made aware of the change from 25 percent to 42 percent.”
“I really think that was a little disappointing from you, that you didn’t make a personal contact really back to us,” she added. “I feel like there’s been a communication breakdown, and that makes it very difficult for us then to be able to discuss things with our customers as we start to go through the rate increase … I really think we failed here.”
Ward, the Hodgesville PSD board member, said the Hodgesville Public Service District was just catching up on what it owed to the city for treated water, and the bulk water rate increase loomed as another financial hurdle that would be difficult to clear.
“Our rates are going to go up, substantially – they have to,” he said.
Wagner said she’d reviewed the rate study but didn’t see any explanation for why the increase would be 17 percent more for PSDs than for individual city water customers.
Amberle Jenkins, city finance and administrative director, said the more sizable increase was due in large part to the PSDs not receiving as great of a rate increase as individual customers the last time water rates were upped six years ago in 2015.
Wagner said dialogue between the city and the PSDs had “gotten lost in emails” and several council members agree that communication could be improved upon. Mayor Robbie Skinner suggested the city Water Board and PSDs meet at least on an annual basis to work on improving communication.
On the third of three readings, Thomas made a motion to approve the water rate increase ordinance, which was seconded by councilman Jack Reger before passing unanimously. The new rates will go into effect Aug. 1, 2021.