ABSTRACT
This Study contains a description of OWASA's customer
payments and fees which constitute the current rate
structure. Costs associated with individual charges are
compared with corresponding revenues to assess the adequacy
of current rates. The method of cost allocation developed
for current rates is used to determine projected costs
associated with three rate level change alternatives.
Revenue/cost comparisons for projected rates are used with
LIST OF FIGURES ... iv
LIST OF TABLES... vi
ACKNOWLEDGEMENTS... vii
I. INTRODUCTION... . . . . 1
II. OWASA'S RATE STRUCTURE ... 5
Fund's Flow ... 5
Description of Payments and Fees... 8
III. ALLOCATION OF COSTS TO RATES... 13
Method of Determining Cost Components ... 13
Revenue and Cost Data... 31
IV. PROPOSED CHANGES IN RATE LEVELS... 50
Rates Projection Program ... 50
Description of Sensitivity Analysis ... 53
V. DISCUSSION AND CONCLUSIONS ... 76
Current Rate Levels... 76
- Assumptions in Cost Allocations ... 76
- Comparison of Revenue and Cost... 78
Proposed Rates Levels ... 80
- Results of Sensitivity Analysis ... 80
Rate Structure... 85
VI. RECOMMENDATION... 91
BIBLIOGRAPHY ... 94
APPENDIX A: 1981 Rate Update... 95
APPENDIX B: Historical Cost Data for Payments and
Fees... 119
APPENDIX C: Percentage Contributions of Cost
Components ... 125
APPENDIX D: OWASA Summary of Operations, November,
1983 ... 127
APPENDIX E: Documentation for Rates Projection
Program... 133
Figure Page
1-1 OWASA's Service Area... 2
2-1 Orange Water and Sewer Authority Funds Flow ... 6
3-1 Revenue and Cost for the Water Monthly
Service Charge ... 35
3-2 Revenue and Cost for the Water Commodity
Charge... 36
3-3 Revenue and Cost for the Private Fire
Protection Charge ... 37
3-4 Revenue and Cost for the Hydrant Rental Fee ... 38
3-5 Revenue and Cost for the Water Availability
Charge... 39
3-6 Revenue and Cost for the Water Front-Footage
Fee... 40
3-7 Revenue and Cost for the Water Service and
Meter Installation Fee... 41
3-8 Revenue and Cost for the Sewer Monthly
Service Charge ... 42
3-9 Revenue and Cost for the Sewer Commodity
Charge... 43
3-10 Revenue and Cost for the Sewer Availability
Charge... 44
3-11 Revenue and Cost for the Sewer Front-Footage
Fee... 45
3-12 Revenue and Cost for the Sewer Tap Fee ... 46
3-13 Revenue and Cost for the Service Initiation
Fee... 47
3-14 Revenue and Cost for the Lake User Charges .... 48
LIST OF TABLES
Table Page
3-1 Determination of Costs Attributable to the
Water Availability Charge, Based on a
Reservoir Life of 40 Years... 16
3-2 Determination of Costs Attributable to the
Water Availability Charge, Based on a
Reservoir Life of 20 Years... 16
3-3 Summary of Revenue vs. Cost by Water and Sewer
Categories... 33
3-4 Summary of Revenue vs. Cost by Fund Category .. 34
3-5 Revenue and Cost for the Water Monthly
Service Charge ... 35
3-6 Revenue and Cost for the water Commodity
Charge... 36
3-7 Revenue and Cost for the Private Fire
Protection Charge ... 37
•»
3-8 Revenue and Cost for the Hydrant Rental Fee ... 38
3-9 Revenue and Cost for the Water Availability
Charge... 39
3-10 Revenue and Cost for the Water Front-Footage
Fee... 40
3-11 Revenue and Cost for the Water Service and
Meter Installation Fee... 41
3-12 Revenue and Cost for the Sewer Monthly
Service Charge ... 42
3-13 Revenue and Cost for the Sewer Commodity
Charge... 43
3-14 Revenue and Cost for the Sewer Availability
Charge... 44
Fee... 45
3-16 Revenue and Cost for the Sewer Tap Fee ... 46
3-17 Revenue and Cost for the Service Initiation
Fee... 47
3-18 Revenue and Cost for the Lake Dser Charges .... 48
3-19 Revenue and Cost for the Returned Check Fee ... 49
4-1 Parameters Varied for the Sensitivity
Analysis ... 54
4-2 Debt Coverage and General Fund Balance for
Each of the Alternatives... 58
4-3a Revenue/Cost Comparisons for Rate Level Change
#1 in Table 4-1 ... 68
4-3b Revenue/Cost Comparisons for Rate Level Change
#2 in Table 4-1 ... 70
4-3c Revenue/Cost Comparisons for Rate Level Change
#3 in Table 4-1 ... 72
4-4 Comparison of Revenues and Costs for 1989 ... 74
5-1 Water Availability Charge: Analysis of
Charging Only a Density Fee (No Acreage
Portion) ... 88
5-2 Sewer Availability Charge: Analysis of
Charging Only a Density Fee (No Acreage
Portion) ... 89
E-1 Revenue Calculations for Customer Payments .... 144
E-2 Revenue Calculations for Customer Fees... 148
E-3 Unit Cost Allocation for Payments and Fees .... 155
ACKNOWLEDG EMENTS
I would like to thank my advisor. Dr. Don Lauria, for
his commitment to my success in this project. His continual
advice and our many discussions, along with his
thoughtfulness, have been important to me.
At OWASA, special thanks go to Pat Davis, for his wit,
humor, but most of all advice and patience from the very
beginning of the study. I would also like to thank Lake
Harris, Everett Billingsley, Jean Collier, and Linda Vaughn
at OWASA.
I would like to thank Dr. Phil Singer for his general
advice and discussion throughout my stay in Chapel Hill. I
appreciate his commitment to being a good lecturer and in
making the WRE program at DNC-CH meet the needs of the
students.
Thanks also go to Dr. John Briscoe and Dr. Al Turner for
being on my committee, and to Donna Simmons for typing this
report. This study was supported by a grant from OWASA.
In 1977/ the newly formed Orange Water and Sewer
Authority (OWASA) purchased the water and sewer systems in
southeastern Orange County, North Carolina. These systems
had previously been owned and operated by the University of
North Carolina, the Town of Chapel Hill, and the Town of
Carrboro. Figure 1 shows a map of CWASA's service area and
includes the current and future water supplies. In addition
to acquiring capital facilities, OWASA assumed outstanding
debt from the towns of Chapel Hill and Carrboro.
In 1978, a rate study was conducted for OWASA by Camp,
Dresser and McKee (CDM), an environmental engineering
consulting firm. This study provided the basis for the rate
structure that was first implemented in 1979. Prior to
1979, OWASA simply used the rates that were in effect before
its purchase of the system. In 1981, OWASA*s Rate Committee
revised the rates to reflect inflation and other changes.
However, the rate structure remained essentially the same as
the one recommended by CDM in 1979. The current rate
structure, including its underlying design, is described in
a memo by the OWASA Finance Officer to the Board of
Directors dated September, 1981. This memo is known as the
Wildlife Mitigation Ltndi
CANE CREEK
RESERVOIR
sRtooe
Morgan Crcsfc
Chapel Hill "W
Quarry
Rejcrvoir
NC54 Cane Creek
Carrboro
Phil'i Creek
Haw River
University Lake
Morgan Creek'
Figure 1-1. OWASA's Service Area. Existing water supplies are University Lake and the Quarry Reservoir.
Cane Creek Reservoir is the new water supply.
^k OWASA is managing well with the current rate structure
and has a strong financial position. However, the Authority
is undertaking an intensive Capital Improvements Program
(CIP) to upgrade and expand the water and sewer facilities
during the next five years. To finance this CIP, OWASA is
using cash reserves, income from customer payments and fees,
bonds issued in March, 1985, and bonds scheduled for issue
in January, 1987. Because of these major capital
expenditures and because OWASA has not changed its rates in
more than three years, the customer payments and fees will
need to be revised in the near future. It is now timely,
therefore, to examine the current rate structure and
evaluate the need for revisions.
The goal of this study is to develop an appropriate rate
structure for CWASA. Three objectives have been set to
achieve this goal. The first is to acquire a thorough
understanding of OWASA's rate structure. The second is to
assess the adequacy of the existing rate levels. The third
is to propose changes in existing rate levels for the
future.
After understanding the original intent of each of the
customer payments and fees (the first objective),
recommendations for revisions to the rate structure can be
made. Several factors are taken into consideration in
recommending changes. These include unanticipated events
The second objective of this study is to determine
whether existing rate levels are generating sufficient
revenue and covering associated costs for the Authority,
especially with respect to individual charges. In this
study, the rate levels are reviewed by comparing the
revenues from each of the customer payments and fees with
the corresponding costs associated with each charge. A
period of two and one-half years, January 1982 through June
1984, was chosen for evaluation, divided into six-month
intervals so that it would be possible to see trends. Since
the costs associated with the various components of the rate
structure involve substantial judgement, a description of
how these costs were estimated is included in this report.
OWASA currently needs to determine how to adjust the
rate structure and rate levels to meet future financial
obligations. The third objective, proposing changes for the
future, addresses this need. For this study, an IBM PC
microcomputer is programmed using Lotus 1-2-3 spreadsheet
software to determine how different rate levels will affect
OWASA's future cash flow. By varying such param.eters as the
rate of population growth and the percent increase in
operating expense per year, the impact on cash flow can be
determined for different changes in the payments and fees.
The results of this sensitivity analysis are used to make
FUNDS FLOW
This introduction to OWASA's cash flow is intended to
show how the customer payments and fees fit into OWASA's
overall financial picture. After a general explanation of
the funds flow, the individual payments and fees are
described. This chapter addresses the first objective of
this study.
OWASA's budget is organized into two primary funds: the
Revenue Fund and General Fund. The Revenue Fund accounts
for all cash flow pertaining to the operations and
maintenance and indebtedness of OWASA. On the other hand,
monies in the General Fund are used only for capital
improvements. Cash in the Revenue Fund flows to the General
Fund as depicted in Figure 2-1.
As Figure 2-1 shows, revenue for the Revenue Fund comes
from customer payments as well as interest earned on the
Revenue and General Funds. Customer payments are primarily
monthly fees and charges. Monies in the Revenue Fund are
transferred to five different accounts including Operations
and Maintenance, Debt Service, Debt Service Reserve,
Maintenance Reserve, and the General Fund.
REVENUE
FUND
CUSTOMER PAYMENTS:
INTEREST EARNED
DEBT
SERVICE
RESERVE
MAINTENANCE \
RESERVE
OPERATIONS &
MAINTENANCE
Water Monthly Service Charge
Water Commodity Charge
Private Fire Protection Charge
Hydrant Rental Fee
Sewer Monthly Service Charge
Sewer Commodity Charge
Miscellaneous Charges
^
DEBT
SERVICE
PAYMENTS
General Fund Ending Balance
from last year
Balance Net Operating Revenue
CUSTOMER FEES:
Water Availability Charge
Water Front-Footage Fee
Water Service and Meter Inst.
Sewer Availability Charge
Sewer Front-Footage Fee
Sewer Tap Fee
CONSTRUCTION
ACCOUNT
(BOND ISSUE
PROCEEDS)
GENERAL
FUND
PROJECT
ORDINANCES
CAPITAL
EQUIPMENT
PAYABLE
NOTES
CURRENT YEAR
CAPITAL
PROJECTS
GENERAL FUND
ENDING BALANCE
01and treatment. Debt Service Payments are made on outstanding
indebtedness associated with the assumed debt from the Towns
of Chapel Hill and Carrboro in 1977 and from the sale of
bonds to finance new capital improvement projects. The Debt
Service Reserve is a fund that CWASA is required, under the
terms of its bond order, to maintain equal to either 1) the
maximum debt service for any single current or future fiscal
year, or 2) 125% of the average debt service for applicable
fiscal years. The balance from the Revenue Fund is
transferred to the General Fund.
Revenue for the General Fund is obtained from customer
fees, the General Fund ending balance from the previous
year, and the balance in the Revenue Fund. Customer fees are
one-time charges that new customers pay when they are
connecting to the water and/or sewer systems. These charges
are intended to pay only for capital improvements to the
Authority. Monies from the General Fund are used for Project
Ordinances, Current Year Capital Projects, and Notes
Payable.
Project Ordinances are projects that are included in the
Capital Improvements Program (CIP) . They are major projects
requiring more than one year for construction. Current Year
Capital Projects are capital improvement projects lasting
less than one year. The Notes Payable are a form of
short-term indebtedness incurred by CWASA to pay for the Quarry
DESCRIPTION OP PAYMENTS AND PV.V.fi
There are two types of charges that CWASA customers pay:
payments and fees. The three categories of customer payments
include monthly service and commodity charges, fire
protection charges, and miscellaneous charges. The monthly
service and commodity charges constitute by far the major
source of revenue for the Authority. Fire protection charges
include the Private Fire Protection Charge for service lines
and Hydrant Rental Fees for hydrants. Both of the fire
protection charges are paid only by private users.
Miscellaneous charges include the Service Initiation Fee,
Lake User Charges, and Returned Check Fees. As shown in
Figure 2-1, customer fees are deposited to the General Fund
and are used only for capital improvements to the water and
sewer systems.
CUSTOMER PAYMENTS
Water Monthly Sprvice Charge - This is a monthly charge that
is designed to recover fixed costs. The charge is currently
composed of four components: meter maintenance, service line
maintenance, general and administrative, and customer
relations. This charge varies according to meter size.
relations.
Water Commodity Charge - The costs attributable to the Water
Commodity Charge include operations and maintenance of the
water system, debt service (water portion), and capital
outlays for the water operation that are not recovered by
other payments and fees. The Water Commodity Charge is paid
monthly by customers based on the quantity of water
consumed.
Sewer Commodity Charge - The costs attributable to the Sewer
Commodity Charge include operations and maintenance of the
sewer system, debt service (sewer portion), and capital
outlays for sewer operation that are not recovered by other
payments and fees. The Sewer Commodity Charge is paid
monthly by customers based on the quantity of water
consumed.
Private Fire Protection Charge - This is a fixed monthly
service charge that covers the servicing of private fire
protection water lines and associated general and
administrative and customer relations costs. This service
charge is based on line size.
Hydrant Rental Fee - This fee is also a fixed monthly
service charge, but it is on a per hydrant basis
(irrespective of line size). The fee covers hydrant related
costs, line replacements and line maintenance in the
general and administrative and customer relations costs. The
Hydrant Rental Fee is currently being paid only by private
renters. The towns of Chapel Hill and Carrboro and Orange
County stopped paying this fee in July 1984.
Service Initiation feg - This fee covers the cost of labor,
truck fuel, and overhead associated with turning a
customer's water on or off, although the customer is billed
only when the water is turned on.
I^ake User Charges - These are nominal fees charged to the
public for use of CWASA's rowboats on University Lake. The
fees are designed to recover only a portion of the cost of
operations at the lake.
Rpturned Check Fee - This fee is designed to cover the cost
incurred by OWASA when a customer writes a bad check.
CUSTOMER FEES
Water Availability Charge - This charge is designed to
recover part of the costs of water supply facilities. The
charge is split into two components: a Density Fee and
Acreage Fee. Both are one-time fees that are incurred by
new customers at the time they connect to the system. The
intention of this charge is for both the "user" and the
"property" to pay for the availability of water. The
Density Fee is based on meter size because the "user" is
expected to benefit in proportion to the amount of flow
he/she has access to. The Acreage Fee is based on the size
(increase in value) with water availability; the larger the
property, in many cases, the longer the trunk mains will be
to service it. The remaining facility costs not recovered
through this charge are recovered through the Commodity
Charge.
Sewer Availability Charge - This charge is intended to
recover all of the costs of sewage treatment, trunk sewers,
pumping stations and similar facilities that generally
benefit the entire community. Like the Water Availability
Charge, this charge has two components, an Acreage Fee and a
Density Fee.
Water Front-Fnntage Fee - This fee is collected from new
customers to recover the costs of installing water
distribution line upgrades, replacements, or extensions
which serve their property. The fee is based on the length
of the property boundary parallel to where the water main
will be installed. If the customer* is served by a line that
was installed by a developer, the fee does not apply.
Sewer Front-Footage Fee - This fee is analogous to the Water
Front-Footage Fee.
Watf>r Sprvice and Meter Installation Fee - .This charge is
intended to recover the cost of extending service from the
distribution system to property boundaries. Customers have
three options. The first is to have the Authority install a
meter and service connection from the water main to the curb
or property line (complete service). The second, commonly
12
Lastly, customers may have a service connection installation
only.
Sewer Tap Fee - This fee is analogous to the Water Service
The second objective of this study is to assess the
adequacy of OWASA's current payments and fees. The selected
criterion for this assessment is a comparison of the
revenues and costs associated with individual charges.
The revenues for the customer payments and fees were
obtained from OWASA's financial records. Collection of these
revenue data was straightforward. Costs, on the other hand,
were more difficult to determine. In this chapter, the
method used to determine the costs attributable to the
customer payments and fees is described. The revenue and
cost data are then presented.
METHOD OF DETERMINING COST COMPONENTS
Most costs attributable to rate components were
determined by compiling data from several different sources.
In some cases the costs attributable to a particular payment
or fee were based on the judgement of OWASA personnel.
Sample calculations of the cost components for the customer
payments and fees are provided in this chapter. For
illustration, the calculations are for the six-month period
corresponding to the second half of the 1984 fiscal year
14
Appendix B contains sources of cost information and a more
detailed description of these calculations. Appendix C
contains the percentage contributions of cost components
(such as meter maintenance and customer relations) for
individual charges.
Availability Charges
The intent of the Water and Sewer Availability Charges
is to pay for part or even all of the water and wastewater
facilities that serve all customers (e.g. water supply
reservoirs, treatment plants, trunk mains,etc.). Several
factors were considered when these fees were updated in
1981: the Availability Charges that were in effect prior to
1981, the cost of a private well and septic tank, and
similar charges in neighboring communities.
It was decided in 1981 that the entire cost of Cane
Creek Reservoir could not be recovered exclusively from the
Water Availability Charge. Therefore, customers were
expected to pay for only a portion of the projected costs
associated with the reservoir.
The costs attributable to the Water Availability Charge
during the two and one-half year period of this study
(January, 1982 through June, 1984) were determined as
column (2) of Table 3-1. Then the actual costs were
annualized, assuming a 10% interest rate and a life of 40
years. This "annualized, actual cost" is shown in column
(3) of Table 3-1. A back calculation showed that estimated
revenue from the Water Availability Charge adopted in 1981
would cover 16% of the 1981 projected cost of Cane Creek
Reservoir, annualized over 40 years at 10% interest. Hence,
it appeared that OWASA implicitly decided in 1981 that the
Water Availability Charge should recover 16% of the
annualized cost of Cane Creek facilities.
1981 Projected Cost of Cane Creek Reservoir
(financed portion) = $9,005,000
Annual Payments (10%, 40 years) = $ 920,846
Projected Annual Water Availability Charge
Revenue = $ 147,994
Projected Annual Revenue ^ ^qq ^ $147,994 ^ ^qq ^ ^^^
Annual Payments $920,846
Hence, 16% of the annualized cost of Cane Creek
Reservoir was assumed to be attributable to the Water
Availability Charge for this study (see column (4) , Table
3-1). Since the costs of the reservoir are assumed to be
spread over 40 years, the costs attributable to the Water
Availability Charge accumulate with successive periods as
shown in column (5) of Table 3-1. For comparison, a similar
calculation was made using an interest rate of 10% and a
Table 3-1 Determination of Costs Attributable to the Water
Availability Charge, Based on a Reservoir Life of
40 Years
(1)
2nd Half
of FY82
1st Half
of FY83
2nd Half
of FY83
1st Half
of Fy84
2nd Half
of FY84
(2) (3) (4) (5)
Annualized 16% of
Actual Cost Annualized Cumulative
Actual_i;ost il.0%.L40yxsi Act.ual_iIost Cost___
$ 971,047
$ 666,688
$ 858,538
$2,230,071
$2,837,635
$ 99,299
$ 68,175
$ 87,794
$228,046
$298,175
$15,888
$10,908
$14,047
$36,487
$46,428
$ 15,888
$ 26,796
$ 40,843
$ 77,330
$123,758
$284,615
Table 3-2 Determination of Costs Attributable to the Water
Availability Charge, Based on a Reservoir Life of
20 Years
(1)
2nd Half
of FY82
1st Half
of FY83
2nd Half
of FY83
1st Half
of FY84
2nd Half
of FY84
(2) (3) (4) (5)
Annualized 16% of
Actual Cost Annualized Cumulative
Act.ual_^ost il0%.t4Px?.sl Actual Cost _ Cost__
$ 971,047 $114,059 $18,249
$ 666,688 $ 78,308 $12,529
$ 858,538 $100,844 $16,135
$2,23,071 $261,943 $41,911
$2,837,635 $333,308 $53,329
Table 3-2. The costs associated with a 20-year life are
about 15% higher than those based on a 40 year life, and
OWASA would be recovering 14% of the Cane Creek costs
through the Water Availability Charge.
The Sewer Availability Charge was intended in 1981 to
recover 100% of the projected cost of the Mason Farm
Wastewater Treatment Plant capacity expansion, annualized at
10% for 20 years. A strategy similar to the Water
Availability Charge was used to determine the costs
attributable to the Sewer Availability Charge for this
study. The Mason Farm Wastewater Treatment Plant was
essentially complete in January, 1982. The total cost was
determined from OWASA's records. No other wastewater
collection or treatment projects serving the entire
community were assumed to be attributable to the Sewer
Availability Charge, so the costs are the same for each
six-month period (there is no need for accumulating costs from
year to year as with the Water Availability Charge):
Total Cost - State and Federal Grants = Cost to OWASA
$9,780,948 - $9,100,000 = $680,948
On an annual basis (10%,20 years) this is $79,984. For each
6 month period we have
Monthly Sprvice Charges
The Water Monthly Service Charge has four components:
meter maintenance, service maintenance, customer relations,
and general and administration. Total meter maintenance
costs are recorded by CWASA. The meter maintenance crew
performs some service initiations in addition to meter
maintenance, the cost of which must be subtracted from the
total. The costs associated with initiation are small
compared to the meter maintenance. For the first half of
FY84
Total Meter Service Initiation Meter Maintenance Cost
Maintenance - Costs Incurred by = Attributable to the
Costs Meter Maintenance Water Monthly Service
Crew Charge
$62,630 - $199 = $62,431.
Total service maintenance costs are also recorded by CWASA,
but these include maintenance of private fire protection
service lines in addition to regular water service lines.
Hence, the percentage of total service maintenance costs
attributable to the Water Monthly Service Charge were
determined after converting the number of fire protection
services and regular services to an "equivalent number" of
services for each case. The service maintenance is found
Total Service No. of equivalent regular services
Maintenance x
—;;;---:----:---:---P . No. of equiv. regular services
+ No. of equiv. fire protection
services
ss Service Maintenance Cost Attributable
to the Water Monthly Service Charge
$26,661 X ^^^^^^ = $22,372.
77,848 + 14,924
The equivalent number of services was found by multiplying
the number of services of a particular size by its demand
factor (see Appendix B, note h for an example). For the
first half of FY84, there were 14,924 equivalent 3/4"
Private Fire Protection services and 77,848 equivalent 3/4"
regular services.
The third cost component of the Water Monthly Service
Charge is customer relations. Total customer relations
costs for water-related activities appear on page 2 of
CWASA's Summary of Operations (see Appendix D for an example
of a 1983 edition of this document). The Customer Relations
Department handles private fire protection bills and hydrant
rental bills as well as regular water bills, so the water,
customer relations costs are allocated to the respective
charges (Water Monthly Service Charge, Private Fire
Total
Water =
Bills
61,429
Regular
Water +
Bills
60,735 +
Private
Fire Protection
Bills
343
Hydrant
Bills
351
water
Customer
No. Regular Bills
Relations ^ No. Total Bills
Costs
$66,043
60,735
6r,T29
Customer Relations Costs
Attributable to the Water
Monthly Service Charge
= $65,297
The Customer Relations Department performs service
initiations in addition to handling bills, so these service
initiation costs must be subtracted from total water
customer relations costs in determining the costs
attributable to the Water Monthly Service Charge, Private
Fire Protection Charge, and Hydrant Rental Fee. In
particular, two groups of people handle service initiations,
in the Customer Relations Department: Meter Readers and
Customer Service Representatives. These service initiation
costs were estimated by the Customer Service Department.
Approximately 20 % of the meter reading operation is for
Total Water Customer Relations Costs
/MlMeter Meter Reader Meter
(0.20) X[ Reader + Operating + Reader
\ Labor Expense School
No. Regular Water
.No. Total Water B
Billsj
ills /
Serv. Initiation
- by Customer Service Reps
Customer Relations Costs Attributable
to the Water Monthly Service Charge
[$81,025 (0.20) X ($3,527 + $33,300 + $100) - $7,596]
/60735^
""[-stub)
= $65,297$66,043
60,735
61,425 $65,297
The fourth cost component, general and administration,
is also recorded monthly by OWASA in the Summary of
Operations. Once again, the percentage of general and
administrative costs that are attributable to the Water
Monthly Service Charge is equal to the percentage of total
water bills that are regular water bills:
Total Water
General and
Administration
Cost
$147,981
No. of Regular Bills
No. of Total Bills
60,735
617429
General and
_ Administrative
= Costs Attribu¬
table to the
Water Monthly
Service Charge
In summary, the total costs attributable to Water
Monthly Service Charge for the first half of FY84 are
(igter Service Customer General and
Maintenance + Maintenance + Relations + Administration
Costs Costs Costs Costs
Total Cost Attributable to the Water Monthly
Service Charge
$62,431
+ $22,372 + $65,297 + $146,309
$296,410The Sewer Monthly Service Charge is similar to the Water
Monthly Service Charge except that there are only three
components instead of four. There is no meter maintenance
portion since OWASA does not have sewage meters. The sewer
service maintenance costs are recorded by CWASA. For the
first half of FY84 this totals $2,200. The second cost
component, customer relations, is found from the Summary of
Operations to be $64,968. Also from the Summary of
Operations, the general and administrative costs are found
to be $136,851. The total costs attributable to the Sewer
Monthly Service Charge are
Service Customer General and
Maintenance + Relations + Administration
Costs Costs Costs
$2,200 + $64,968 + $136,851
Total Cost Attributable
to the Sewer Montly
Service Charge
Private Fire Protection Charge
The Private Fire Protection Charge has three components:
service maintenance, customer relations, and general and
administration. As described above, private fire protection
service maintenance is included in the total water service
maintenance. The private fire protection portion of total
water service maintenance is the fraction of total
equivalent 3/4" services that are private fire protection
services. For the first half of Fy84 we have
Total Water Service Maintenance
No. of equivalent 3/4" private fire
______protection services__________
No. of equivalent regular water
services + No. of equivalent private
fire protection services
Service Maintenance Costs Attributable to the Private Fire
Protection Charge
$26,661
14,924
77,848 + 14,924 = $4,289
The second component, customer relations, is found
analogously to the customer relations for the Water Monthly
Service Charge above. We have
Total
Water
Customer
Relations
$81,025 X
No. of private fire
protection bills
No~~"of~total'~biil~s~
343
6T74"29'
Customer Relations
Costs Attributable
to the Private
Fire Protection
Charge
The third component, general and administration, is
similar
Total Water General and Administration Costs
$147,981
No. of private fire protection bills
No. of total bills
343
61,429
General and.
Administration Costs
Attributable to the Private Fire
Protection Charge
$826
In summary, for the first half of FY84, we have
Service Customer General and
Maintenance + Relations + Administration
Costs Costs Costs
$4,289
$452
$826
Total Cost
Attributable to
the Fire Protec¬
tion Charge
$5,567
Hydrant Rental Fee
The Hydrant Rental Fee has five cost components:
hydrant-related maintenance, line maintenance, line replacement,
customer relations, and general and administration. Hydrant
related maintenance is recorded by CWASA. In the 1981 rate
update (see Appendix A), it was decided that 7.05% of the
total line maintenance costs were attributable to the
Hydrant Rental Fee. In other words, 7.05% of the line
system for fire flow. Similarly, in the 1981 rate update, it
was decided that line replacement attributable to the
Hydrant Rental Fee was 41,91% of the total water line
replacement. Customer relations and general and
administrative costs are found analogously as with the
Monthly Service Charges and Private Fire Protection Charge.
The Hydrant Rental Fee for the first half of FY84 is
calculated as follows.
„ , ^ Total Cost
"yf^^"^ Line Line Customer Customer Attributable to
Related ^ Maintenance + Replacement + Relations + Administration = ^^^ Hydrant
Maintenance f,^^^ ^ost Costs Costs Rental Fee
Costs
$51,506 X ^ $24,395 x ^ $81,025 x ^ $147,891 x = $20,610
$5,446 + 0.0705 0.4191
(61,429) (61,429/
Front-Footage Fees
The Water (Sewer) Front-Footage Fees are designed to
recover distribution (collection) line upgrades,
replacements, and extensions. To determine the costs
attributable to the Front-Footage Fees, the average cost per
foot of pipe was multiplied by the footage of pipe paid for
by the Front-Footage Fee. The average cost per foot of pipe
was determined by dividing the total cost of line upgrades,
replacements, and extensions by the total footage installed.
Front-Footage Fees apply only to lines along the property of new
customers. Like the Water Availability Charge, new
customers pay for only a portion of the total cost of line
upgrades, replacements and extensions; existing customers
pay the balance through the Commodity Charges (discussed
below). For the water Front-Footage Fee, the average cost
per foot of pipe for the first half of Fy84 was $13.73. The
length of pipe paid for by the Water Front-Footage Fee
totaled 863 feet. For the first half of FY84 we have
Average cost
per foot of
pipe
$13.73
Total cost attributable
Ft of Pipe = to the Water
Front-Footage Fee
$863
$11,849
The costs attributable to the Sewer Front-Footage Fee
are calculated similarly.
Average cost
per foot of
pipe
$28.24
Ft of Pipe
$637
Total Cost Attributable
= to the Sewer
Front-Footage Fee
$17,989
WaJ^er_SArYic^_and_Jlet^__Ins^
These costs are recorded by OWASA and therefore do not
Cpnunodi_ty_Cha.L9§s
The Water and Sewer Commodity Charges have three cost
components: operating expense, debt service, and capital
outlays. Since the Water and Sewer Commodity Charges are so
different from each other they are described separately.
The operating expense attributable to the Water
Commodity Charge equals the total water-related operating
expense minus the operating expense recovered by all the
other payments and fees. The total operating expense for
water is found on page four of the Summary of Operations.
For the first half of Fy84, it was $592,398. The operating
expense recovered by all the other water-related payments
and fees were
total meter maintenance $ 62,630
total water service maintenance 26,661
hydrant related maintenance 5,446
line maintenance attributable to
Hydrant Rental Fee 3,631
labor at University Lake boathouse 21,192
electricity at University Lake
boathouse 449
1/2 of costs attributable to the
Returned Check Fee 393
$120,402
The debt service is found from OWASA's Debt Service
Schedule; for the first half of FY84, it was $145,429.
The cost of capital outlays attributable to the
commodity charges include all cash-financed capital
28
Other charges that recover capital improvement costs are the
Availability Charges, front-footage fees. Water Service and
Meter Installation Charge, Sewer Tap Fee, and Hydrant Rental
Fee. The total cost associated with the capital outlays is
the sum of costs associated with Current Year Capital
Projects and Project Ordinances not covered by the Water
Availability Charge. For the first half of FY84 this was
$111,600. The capital outlays recovered by other payments
and fees are
costs attributable to the
Front-Footage Fee $11,849
costs attributable to the Water Service
and Meter Installation Fee 20,053
line replacement costs attributable to
the Hydrant Rental Fee 10,224
capital outlays for University Lake
public use 0
$42,126
In summary, for the Water Commodity Charge, we have
Water
Operations Total Capital Outlays Total Cost
Total Expense Water Water for Water Attributable to
J?^'^®'^ . - Recovered by + Debt + Capital - recovered by = the Water
Operations other Payments Service Outlays Other Payments Commodity
Expense ^^^ pggg anji Pees Charge
The operating expense attributable to the Sewer
Commodity Charge was estimated as follows
Total Sewer
Operations
Expense
Sewer Service Maintenance Costs
Costs Attributable
to 1/2 of the
Returned Check Fee
Operations Expense
Attributable to the
Sewer Conunodity Charge
$450,207 $2,200 - $393 $448,007
Capital outlays attributable to the Sewer Commodity
Charge were determined as for the Water Commodity Charge:
Sewer Current Year
Capital Projects
Project Ordinances Not Covered by the Sewer Availability Charge
Costs Attributable to the Sewer
Front-Footage Fee
Costs Attributable to the Sewer
Tap Fee
Cost of
Capital Outlays
= Attributable to the Sewer
Conunodity Charge
$103,083 + $582,517 $17,989 $9 26 = $666,685
In summary, for the Sewer Commodity Charge, we have
Operations Debt Cost of Total Cost Attributable
Expense + Service + Capital = to the Sewer
Outlays Commodity Charge
$448,007 + $191,164 + $666,685 = $1,305,856.
Sexvice__Iniiiatip_n_Fee
The Service Initiation Fee has three cost components:
service initiation provided by meter readers, and service
initiation performed by customer service representatives.
These components were previously mentioned in the
description of costs attributable to the Water Monthly
Service Charge. Summing these components for the first half
of FY84 yields
Service Initiation Service Initiation Service Initiation Attributable
Provided by Meter + Provided by Meter + Performed by ^ to the Service
Maintenance Crew Readers Customer Service initiation P^^
Representatives iniciacion tee
5199 + §7,385 + $7,596 + $15,180
Lake User Charges
The Lake User Charges have three cost components: labor
at University Lake boathouse, electricity at University Lake
boathouse, and capital outlays for University Lake public
use. Labor at the boathouse was determined from personnel
records and for the sample period was $21,192. Electricity
at the boathouse was found from Duke Power bills to be $449.
Capital outlays for University Lake public use, usually
Cost of Total Cost
Labor + Electricity + Capital = Attributable
Costs Costs Outlays to the Lake
User Charges
$21,192 + $449 + $0 = $21,641
Rpturned Check Fpe
The Returned Check Fee has two cost components: labor by
the Accounting Department and labor and fuel by the Customer
Relations Department. The amount of labor required by the
Accounting Department was estimated in that department and
wages were determined from personnel records. Labor and fuel
by the Customer Relations Department was estimated by that
department. We have
Cost of Labor Cost of Labor and Total Cost Attributable
by Accounting + Fuel By Customer = to the Returned
Relations Check Fee
$216 + $570 = $786
REVENUE AND COST DATA
A summary of revenue vs. cost by fund categories for the
period January 1982 through June 1984 is shown in Table 3-3.
A summary of revenue vs. cost by water and sewer categories
is shown in Table 3-4. Following these summaries, in Tables
3-5 through 3-19 and Figures 3-1 through 3-15, revenues and
costs for each individual payment and fee are provided in
six-month increments. It is important to note that while
32
in these tables, the magnitude of entries varies over three
orders of magnitude. These results are discussed in Chapter
Figures are totals for the period 1/82 - 6/84
____Hatfet_____
XQfiiL
Monthly Service Charge
Commodity Charge
Private Fire Protection
Hydrant Rental Fee
Availability Charge
Front-Footage Fee
Water Service & Meter Installation
Total
$1,383,879
3,380,156
24,727
200,344
284,615
34,286
72,883
$5,380,890
—Rfiitenufi___
$1,178,697
5,409,164
64,989
249,057
678,340
39,420
101,292
($205,182)
$2,029,008
40,262
48,713
393,725
5,134
28,409
I Diff
-14.8
60.0
162.8
24.3
138.3
15.0
39.0
$7,720,959 $2,340,069 43.5
_aetf£X_
Monthly Service Charge
Commodity Charge
Availability Charge
Front-Footage Fee
Sewer Tap Fee
Total
894,341
5,142,069
199,960
47,475
9,323
$6,293,168
459,012
4,428,913
459,551
44,504
14,880
$5,406,860
($435,329)
($713,156)
259,591
($2,971)
5,557
($886,308)
-48.7
-13.9
129.8
-6.3
59.6
-14.1
JJificellanaQUfi-Service Initiation Fee
Lake User Charges
Returned Check Fee
Total
68,317
122,260
3,948
$194,525
64,757
40,421
3,030
$108,208
($3,560)
($81,839)
($918)
($86,317)
-5.2
-66.9
-23.3
-44.4
Table 3-4 Summary of Revenue vs. Cost by Fund Category
Figures are totals for the period 1/82 - 6/84
____Eey£n.ae_£und.
Water Monthly Service Charges
Water Commodity Charge
Sewer Monthly Service Charges
Sewer Commodity Charge
PRivate Fire Protection
Hydrant Rental Fee
Service Initiation Fee
Lake User Charge
Returned Check Fee
Total
COBt
Revenue
pifference
i-Jlifl
$1,383,879
$1,178,697
($205,182)
-14.8
3,380,156
5,409,164
$2,029,008
60.0
894,341
459,012
($435,329)
-48.7
5,142,069
4,428,913
($713,156)
-13.9
24,727
64,989
40,262
162.8
200,344
249,057
48,713
24.3
68,317
64,757
($3,560)
-5.2122,260
40,421
($81,839)
-66.9
3,948
3,030
($918)
-23.3
$11,220,041
$11,898,040
$677,999
6.0iOfiLiAi-FJimi.
Water Availability Charge
Sewer Availability Charge
Water Front-Footage Fee
Sewer Front-Footage Fee
Water Serv. and Meter Installation
Sewer Tap Fee
Total
GRAND TOTAL
284,615
678,340
393,725
138.3
199,960
459,551
259,591
129.8
34,286
39,420
5,134
15.0
47,475
44,504
($2,971)
-6.372,883
101,292
28,409
39.0
9,323
14,880
5,557
59.6
$648,542
$1
,337,987
$689,445
106.3
$11,868,583
$13 ,236,027
$1,367,444
11.5
WATER MONTHLY SERVICE CHARGE
34.0
n
no
310
-220
2nd/FYS2
1 sBt/prsa
Cost
^nd/nrsa
Ttme
+ Revenue
1 st/FY'a4.
2nd/FrB4.
Figure 3-1. Revenue and Cost for the Water Monthly Service Charge
Table 3-5. Revenue and Cbst for the Water Monthly Service Charge
2nd Half of FY82
1st Half of FY83
2nd Half of FY83
1st Half of FY84
2nd Half of FY84
Cost
$227,170
239,537
287,807
296,410
332,955
Revenue
$230,607
232,209
234,624
238,810
242,447
Difference % Diff.
$3,437
(7,328)
(53,183)
(57,600)
(90,508)
1.5
-3.1
-18.5
36
WATER COMMODITY CHARGE
2nd/FYa4.
1 st/Fra4.
Znd/FYQZ
1 st/FYa3
2nd/FYB2
TTmc
4 Revenue
Figure 3-2. Revenue and Cost for the Water Commodity Charge
Table 3-6. Revenue and Cost for the Water Commodity Charge
Cost Revenue Difference
% Diff.
2nd Half of FY82
1st Half of FY83
2nd Half of FY83
1st Half of FY84
2nd Half of FY84
$751,869
662,243
639,131
686,899
640,014
$989,071
1,118,661
1,019,457
1,171,194
1.110,781
$237,202
456,418
380,326
484,295
_470,767
31.5
68.9
59.5
70.5
73.6
PRIVATE FIRE PROTECTION CHARGE
n
° 9
1 st/nra^.
1 st/FrS3
2nd/FYS3
2nd/FYS2
2nd/FYS4.
Figure 3-3. Revenue and Cost for the Private Fire Protection Charge
Table 3-7. Revenue and Cost for the Private Fire Protection Charge
Cost
Revenue
$24,727
$64,989
Difference % Diff.
2nd Half of FY82
$3,242
$12,310
$9,068
279.7
1st Half of FY83
4,464
12,608
8,144
182.4
2nd Half of FY83
5,336
12,624
7,288
136.6
1st Half of FY84
5,568
13,149
7,581
136.2
2nd Half of FY84
6,117
14,298
8,181
133.7
^1
2nd/FYS2
HYDRANT RENTAL FEE
1st/FYS3
a Cost
Znd/rfB3
1 =t/FYa4.
2nd/Fra4.
Ttme
4 Revchub
Figure 3-4. Revenue and Cost for the Hydrant Rental Fee
Table 3-8. Revenue and Cost for the Hydrant Rental Fee
2nd Half of FY82
1st Half of FY83
2nd Half of FY83
1st Half of FY84
2nd Half of FY84
Cost
Revenue
Difference
% Diff.
$61,154
51,630
45,281
20,610
21,669
$47,675
48,721
49,269
50,360
53,032
($13,479)
(2,909)
3,988
29,750
31,363
-22.0
-5.6
8.8
OR
WATER AVAILABILITY CHARGE
2BO
2nd/FrS2
1 si/FY33
U Cost
2nd/FYS3
Ttme
1 5t/F'r'84.
2nd/FYa4.
Revehue
Figure 3-5. Revenue and Cost for the Water Availability Charge
Table 3-9. Revenue and Cost for the Water Availability Charge
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$15,888
$25,952
$10,064
63.3
1st Half of FY83
. 26,796
98,864
72,068
269.0
2nd Half of FY83
40,843
107,133
66,290
162.3
1st Half of FY84
77,330
249,607
172,277
222.8
2nd Half of FY84
123,758
196,784
73,026
59.0
40
WATER FRONT FOOTAGE FEE
n
\
2nd/FrS2
1 st/rraa
a Cost
2.nd/Fra3
TinnB
+ Revenue
1 si/rYB4.
2nd/FYB4.
Figure 3-6. Revenue and Cost for the Water Front-Footage Fee
Table 3-10. Revenue and Cost for the Water Front-Footage Fee
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$2,474
$3,160
$686
27.7
1st Half of FY83
9,673
12,340
2,667
27.6
2nd Half of FY83
3,213
3,699
486
15.1
1st Half of FY84
11,849
13,609
1,760
14.9
2nd Half of FY84
7,077
6,612
(465)
-6.6
WATER SERVICE &c METER INSTALLATION
34.
°0
/
2nd/FYB2
1 si/FYB2
2nd/FYS3
1 st/FYS4.
2nd/FYS4.
a Cost
limis
4 RevEnui
Figure 3-7. Revenue and Cost for the Water Service and Meter
Installation Fee
Table 3-11. Revenue and Cost for the Water Service and Meter
Installation Fee
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$6,415
$4,490
($1,925)
-30.0
SEWER MONTHLY SERVICE CHARGI
210
200
130
iao
170
-ISO
150
14.0
130
120
-110
100
so
ao
2nd/Fra2
ist/rra3
---1---2nd/Fr83
Ttme
1 st/Fra4.
2nd/FYB4.
Cast Revenue
Figure 3-8. Revenue and Cost for the Sewer Monthly Service Charge
Table 3-12. Revenue and Cost for the Sewer Monthly Service Charge
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$156,525
$89,181
($67,344)
-43.0
1st Half of FY83
175,721
90,380
(85,341)
-48.6
2nd Half of FY83
170,719
91,289
(79,430)
-46.5
1st Half of FY84
204,019
93,598
(110,421)
-54.1
2nd Half of FY84
187,357
94,564
1.4.
O
2nd/FY82
EWER COMMODiPf CHARGE
No-t Ineludmg Depreciation
1 st/rya3
a Cost
2nd/FY83
TtrriE
+ Revenue
1 si/FYB4.
2nd/Fra4.
Figure 3-9. Revenue and Cost for the Sewer Commodity Charge
Table 3-13. Revenue and Cost for the Sewer Commodity Charge
2nd Half of FY82
1st Half of FY83
2nd Half of FY83
1st Half of FY84
2nd Half of FY84
Cost
$744,400
1,141,285
1,070,175
1,305,463
880,746
Revenue
$805,561
911,801
837,894
935,201
938,456
Difference % Diff.
$61,161
(229,484)
(232,281)
(370,262)
57,710
8.2
-20.1
-21.7
-28.4
6.6
44
SEWER AVAILABILITY CHARGE
20
Znd/FYBZ
---1---1 st/FYBZ
n Cost
2nd/FrS3
Time
+ Revbhub
1 st/rY'a4.
2nd/FYB4.
Figure 3-10. Revenue and Cost for the Sewer Availability Charge
Table 3-14. Revenue and Cost for the Sewer Availability Charge
2nd Half of FY82
1st Half of FY83
2nd Half of FY83
1st Half of FY84
2nd Half of FY84
Cost
Revenue
Difference
% Diff.
$39,992
$29,652
($10,340)
-25.9
39,992
60,060
20,068
50.2
39.992
71,186
31,194
78.0
39,992
156,753
116,761
292.0
39,992
141,900
101,908
254.8
SEWER FRONT FOOTAGE FEE
P c
2nd/FYS2
1 si/FYBZ
2.nd/FYS3
1 st/FY'S4.
Ind/FYBA
Time
Cost Revenue
Figure 3-11. Revenue and Cost for the Sewer Front-Footage Fee
Table 3-15. Revenue and Cost for the Sewer Front-Footage Fee
2nd Half of FY82
1st Half of FY83
2nd Half of Fr83
1st Half of FY84
2nd Half of FY84
Cost
$6,158
8,190
8,528
17,989
6,610
$47,475
Revenue
$5,200
6,903
7,852
16,551
7,998
$44,504
Difference % Diff.
($958)
(1,287)
(676)
(1,438)
1,388
($2,971)
-15.6
-15.7
-7.9
-8.0
21.0
ͣ
SEWER TAP FEE
46
1 st/FT'S3
2nd/FYS3
2nd/Pt'a2
1 st/i=YS4.
2nd/rY'S4.
Rbvehue
Figure 3-12. Revenue and Cost for the Sewer Tap Fee
Table 3-16. Revenue and Cost for the Sewer Tap Fee
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$3,262
$1,320
($1,942)
-59.5
1st Half of FY83
2,235
2,880
645
28.9
2nd Half of FY83
1,640
2,880
1,240
75.6
1st Half of FY84
926
3,960
3,034
327.6
2nd Half of FY84
1,260
3,840
2,580
204.8
SERVICE INITIATION FEE
19
•
n
1st/Fr53
2nd/Fr83
1st/Fre4.
2nd/FYB2
and/Frsj.
Ttme
4 Revenue
Figure 3-13. Revenue and Cost for the Service Initiation Fee
Table 3-17. Revenue and Cost for the Service Initiation Fee
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$13,708
$10,546
($3,162)
-23.1
1st Half of FY83
15,647
15,232
(415)
-2.7
2nd Half of FY83
11,700
9,730
(1,970)
-16.8
1st Half of FY84
15,180
18,214
3,034
20.0
2nd Half of FY84
12,082
11,035
(1,047)
-8.7
LAKE USER CHARGES
1 si/FYSZ
2nd/FY-53
1»t/Fr84.Znd/FYBZ
2nd/FY"84.
Figure 3-14. Revenue and Cost for the Lake User Charges
Table 3-18. Revenue and Cost for the Lake User Charges
Cost
Revenue
Difference
% Diff.
2nd Half of FY82
$22,493
$9,108
($13,385)
-59.5
1st Half of FY83
25,940
7,638
(18,302)
-70.6
2nd Half of FY83
26,472
9,215
(17,257)
-65.2
1st Half of FY84
21,641
6,131
(15,510)
-71.7
2nd Half of FY84
25,714
8,329
(17,385)
-67.6
RETURNED CHECK FEE
1.1
1 st/Frea
2nd/rr33
1s+./Fr84.
2nd/FYB2
2.nd/rYB4.
Revenue
