[0:00] [Music] citizens of havlock thanks for watching

[0:13] this video I want to take a second or two and just kind of let you know what

[0:16] you're about to watch and why we've got this video up on our website for you to

[0:20] check out so this video is actual footage from a workshop that we just

[0:25] recently had where a third party which was the the UNCC School of government

[0:30] environmental Finance group came in took our data looked at the health of our

[0:35] water and sewer systems and our finances associated with those and then put

[0:40] together a bunch of data points for us so that the board can start using that

[0:44] data to look at the future and review our system and maybe what the future

[0:48] path might be for rate structure uh deferred maintenance uh things like that

[0:54] so what we decided before that meeting started was man this is going to be

[0:57] really good information for our citizens especially those you who have been

[1:01] obviously uh very interested in your utility bill and this is two components

[1:05] of that both the water and the sewer so we recorded the actual meeting so what

[1:08] you will you're about to see is this group from the UNCC School of government

[1:12] giving us their objective information on the data that we provided them and so

[1:18] you'll see things in there like quick ratios and cash on hand and depreciation

[1:23] versus income and things like that and that data was meant to give the Board of

[1:27] Commissioners as clear a picture of possible on what the current rate

[1:30] structure will do based on the future health of our system and how we'll stay

[1:34] at the ratios that we really need to stay at for both the health of the

[1:37] system and to stay within the parameters of the local government commission and

[1:42] the state of North Carolina for our financial health for those Enterprise

[1:45] systems it's a lot of information and I understand that after you watch this

[1:49] video if you've got more questions we'd love to answer them feel free to contact

[1:53] us through our email on the website call us up at City Hall set a meeting up to

[1:57] sit down with me we'd be happy to go over the information with you

[2:00] also there'll be a lot more to follow on this over the next year so um please

[2:05] join us at Future workshops or board meetings where we're talking about water

[2:08] and sewer rates and trying to figure out what that looks like for the future and

[2:11] how we're taking care of our system enjoy your video and thank you for

[2:14] taking the time to learn a little bit more about your

[2:24] city appreciate it so I'm going to speak tonight um about the utility needs in

[2:30] general um uh I I think what I share is going to shock too many of is here

[2:37] tonight we just I think it's a good summary before we get the other folks up

[2:42] to talk about funding and whatnot so a couple of key topics that I'm going to

[2:47] hit on is your treatment capacity it's your waste water and your water plant a

[2:50] little bit about what that picture looks like and maybe uh when you need to be

[2:54] thinking about something there uh I'm going to headit on the criticality being

[2:58] sure that the facilities that we do do have continue to run at their intended

[3:02] service level um going to talk a little bit about prioritizing The wasteboard

[3:06] Collection needs that'll be a little bit of a a couple of refresher slides from

[3:11] earlier this year but I think an important message to remind us of here

[3:15] um I will hit briefly on water distribution considerations because

[3:19] quite frankly other than extensions that's not too media of a topic and then

[3:23] I'll talk a little bit about extensions and and water and waste waterer system

[3:28] expansions all right let's start with the plant stuff uh I am not going to

[3:33] read this to you the only thing you need to conclude from this is that the

[3:37] administrative code in our state provides some guidance on when you need

[3:41] to expand your waste water plant based on um flows okay and so that's what this

[3:48] says you can go back and read the Gory details but I'm going to summarize it

[3:52] here and even better in a graph in just a second so your current Wastewater

[3:57] Plant capacity is 2.25 MGD so that is the average on any month you can't

[4:03] you're not supposed to exceed that what the state says is that if you if if your

[4:09] annual average gets to be 80% of that which which is 1.8 MGD then they can

[4:15] halt growth until you get a plan uh underway uh they go on to say that if

[4:23] you're annual average gets to be 90% of your permanent capacity they can ha

[4:28] growth until you get Construction permits and what not done and so um

[4:32] those are that's the meat and the requirements that the state has in place

[4:36] so we know when we have to be uh investing in expanded Wastewater

[4:43] capacity so this graph is a graph of your Wastewater flow and a few more

[4:50] things for the last 10 years this goes through counter gear

[4:55] 23 and what you see in the the dark line there is that's the annual

[5:03] average waste waterer flow going to your Wastewater Plant

[5:08] okay the top orange line is what your plant is permitted to

[5:13] treat and then you got your 90% line and your 80% line which we just talked

[5:20] about the points on this greenish line light blue whatever this is those are

[5:26] your Maxim month flows and so basically it if you were to have one of those

[5:31] Peaks go up and exceed or approach 2.25 MGD then you're at your permanent

[5:36] capacity for that month and so what we see from this graph and we don't need to

[5:41] you know get too lost in all the lines here is that you know so far we've been

[5:48] operating well under the 80% Mark for your annual averages we had a couple of

[5:53] couple of events a years a few years ago that approached it and certainly below

[5:58] 90% the other thing that I would point out

[6:01] here is that for the last couple of years your flows have been relatively

[6:05] low and one of the things that we're watching closely here is is that real or

[6:11] is that a function of some drier weather or just getting lucky on a few storms so

[6:18] I mean because if this is becoming sort of the new norm and these things are

[6:22] behind us then you got more you got some growing room which would be fantastic

[6:26] news because I will tell you that when we think about funding and expenditures

[6:31] Wastewater capacity is super expensive and it would be by far the thing that

[6:37] shows up shines the brightest in your uh future Capital expenditures when the

[6:44] time comes so I mean the good news here is that even in the absence of this

[6:50] little these couple of years here you're you're certainly not in a bad bad place

[6:55] from your waste water capacity perspective um and and quite frankly um

[7:01] you know as you add houses here there I mean things things are are not likely to

[7:05] change uh very quickly if we and we'll talk more about this later but when we

[7:10] start thinking about future expansion or future growth you start thinking about

[7:14] the West End or or out on Lake Road and and inducing some growth that's when we

[7:20] got to start asking okay how much do we really have and do we have room and when

[7:25] do we need to do something about it all right so not a bad picture here here um

[7:31] again we'll keep an eye on and then see what happens but um it looks like you

[7:34] might have a little bit of Runway here before you really have to go do

[7:37] something significant uh we'll see that's good news any questions about

[7:43] Wastewater Plant capacity before I move all

[7:50] right switching the water don't need to read this either the same message is

[7:56] that um the state gives us some guidelines on when you need more water

[8:00] plant um capacity and so I don't have the same cool chart for that but I'll

[8:06] just review the numbers to with you so over at your water plant you've got uh a

[8:13] capacity of 2.8 million gallons a day all right um you still got a very

[8:19] similar 8090 rule for that so if you approach 2.24 or 2.52 it starts to

[8:27] trigger that you need to do some things uh what we see here for recent uh

[8:32] demands everything's under 2 MGD uh and your annual average is like

[8:37] one and a qu MGD so a symol restory on the water side which is you got some

[8:43] capacity there now I would say this this is true for the waste quarter plan as

[8:49] well um you your your permitted capacity is adequate okay but this second bullet

[8:56] is important that the facilities that you do have it's important that they

[8:59] continue to perform at their rated capacities right and so we build it and

[9:05] if certain things decline in their capacity or we have a few things that

[9:10] aren't working like they used to then all of a sudden it may be rated for 2.8

[9:14] or in the case of waste were 2.25 but if we don't take care of it and keep it

[9:19] working then then then maybe we can't realize that so it's Absolut imperative

[9:24] that our our RNR our rehab and rehabilitation program keep up with the

[9:29] facilities that we have and then the last bullet which is true again for both

[9:34] plants is that the timing of growth is going to really dictate your expansion

[9:40] needs and again we saw think about that waste water chart if the West End uh

[9:45] happens tomorrow afternoon and Lake Road happens Friday afternoon we have a lot

[9:50] of growth we're going to have to deal with if those things don't happen for 12

[9:53] 15 years then the story is different right so that I mean it's the timing of

[9:58] those types of things is going to be a big factor in how

[10:02] quickly you have a real need for expansion all right

[10:08] um I'm going to switch gears off of the plants for a second but before I do uh

[10:14] I'm going to go back to the RNR and some of the other things that we need to be

[10:20] thinking about uh for the facilities and I I know this might be a little bit of a

[10:25] maybe a sore spot for some folks but like on the waste waterer side like skaa

[10:32] and control and some automation I mean those are the kind of things that in

[10:35] spite of the fact thankfully we don't looks like we don't need to Russ into an

[10:38] expansion tomorrow with a Wastewater Plant those are the kind of things we

[10:42] need to be thinking about investing in though so that we can be sure that that

[10:46] thing continues to run like it needs to run and we can monitor and it can be

[10:49] reliable so there are um I I don't want to paint the picture that there's not

[10:54] some needs of these facilities that are that are not insignificant there are

[10:58] needs um and we need to be thinking about those and prioritizing those and

[11:02] we've talked some about how to how to do that uh but jumping out there with an

[11:07] expansion is not the same a similar thing on the water plant are some wells

[11:10] I understand that there's some wells that maybe aren't performing like they

[11:13] once did we need to think through that and see what we need to do so there's

[11:17] stuff to do there to take care of these things and be sure they're reliable uh

[11:21] but not necessarily the expansion right now any questions about water or waste P

[11:26] plant capacity stuff before us move on to

[11:36] collection you all saw uh this slide um earlier this year when we were in for

[11:43] the retreat John st came in talk about asset management and some of the tiered

[11:48] approaches to help deal with um with the waste B collection and I just put two of

[11:53] those flies up here tonight just to remind us um kind of a teered approach

[11:58] this this high level box you may remember the dashboard we talked about

[12:02] uh that that work is underway that is going to be really just

[12:07] facilitate us understanding how the system is performing and so that's not a

[12:11] huge lift and that work uh is is underway there's a flow metering uh uh

[12:19] item that we suggested so we can start to understand where the flow's coming

[12:23] from when we do have wet weather flows is it coming from over here or over

[12:27] there and and and what is it magnitude that is something that we do um uh

[12:35] recommend and will be very important here in the

[12:39] coming really six months or so to try to get our arms around I I will say that

[12:46] you know we admittedly really didn't want to do much of that work until we

[12:50] got the current ongoing project in in service because we wanted to capture

[12:57] that flow metering quite frankly uh with the with the new system

[13:01] components and so we're there now actually within the last few days I

[13:05] think had the piece tied in there so um we're teed up to do uh get that going

[13:11] here hopefully um before too many months we get into targeted inspections okay

[13:19] this is CCTV stuff this is uh you all have your CCTV truck you go out you

[13:23] inspect sewers you you find problems and and and that is the nature of this but

[13:29] what this really is is a more routine systematic a larger scale program that

[13:35] that that that um that will insect larger chunks of the system than you

[13:40] than you can do with your own staff but again we get on our program we get ahead

[13:45] of the game and then we start making some inroads and then you have a data

[13:49] review and it ends up being sort of a a a cycle this slide right here is another

[13:55] slide that you saw earlier in the year and the just here is that we're sitting

[14:00] back here at 2024 right and and we're still playing a little bit of catchup

[14:06] here on our asset management but if we'll continue to implement those things

[14:10] that we talked about doing then we can start the learn the system we can

[14:14] identify some urgent repairs we can start to be a little bit more more

[14:18] proactive and then when you get out here in years really uh 3 four five and six

[14:24] you know the idea is that we're being a lot more proactive a lot less reactive

[14:30] now back to the funding piece um when we start looking for problems we will find

[14:36] them right and so we just got to be prepared for that and and and funed um I

[14:43] I will say though that um I the the area of the sewer that over

[14:52] the last couple of years has been replaced over there um in that um sort

[14:58] of parallel to 7 everybody Jo branch is in a pretty undesirable spot from a from

[15:03] a wet condition so I I'm really cautiously optimistic that that low

[15:09] lower flow that we saw in the um in that first graph is something that'll ring

[15:15] crew here for time to come we're going to see but um I'm I'm cautiously

[15:20] optimistic that we're going to see some some nice data um there again uh there's

[15:26] there's plenty to do and invest in to to maintain the system for sure and we're

[15:31] trying to get our arms on that I do not have a slide for the water system

[15:35] because quite frankly the water system is a slightly different animal um there

[15:40] are certainly needs and you get in the line breaks and stuff like that but it's

[15:44] it the RN our needs on the water system at least so far don't appear to be

[15:48] anywhere close to what we have on the sewer system and so for right now

[15:52] fortunately that's not something that we're having to spend too much time

[15:55] trying to identify uh needs for

[16:01] all right and then the last two slides I got and then we'll hand it over uh to

[16:06] others um this is a a a master planning map that you can see of the entire city

[16:14] um that we did some years ago uh this is the waste waterer system and the water

[16:20] system map right behind it doesn't look terribly different the bottom line is I

[16:24] alluded to this is that you know we've got some infill opportunities and some

[16:28] great and stuff here but your your real expansion of of

[16:34] service is out to the west and out to to Lake Road and so I mean I've already

[16:40] said it this is just a picture of it the same is true for the water side the uh

[16:46] the little the little bulbs run out on there as well but you know what happens

[16:51] here and what happens here by and large are going to drive the timing for when

[16:57] you have to spend big money on expansion

[17:03] right and we' got some ideas based on information we've heard from each of

[17:07] these folks in years past but you know we've also been talking about this for

[17:13] years and traing 38 has been uh different sizes over the years and so

[17:18] when the rubber hits Roo and folks ready to do something we'll we'll size up what

[17:22] the needs are and what they what what they plan to bring to us and we can

[17:27] start to see what that's going to do to us

[17:31] all right any questions about that before I head off to the I was look

[17:36] forward to the West End being first but now with i42 and the fly over there that

[17:42] puts them the farthest away from us CU they can't they can't develop that

[17:47] property until do finishes their curly cues going across the highway

[17:52] there rounds yeah no the no the other stately Pines so I I would say

[18:00] that Craven 38 probably going to come quicker because the bypass of that is

[18:04] 90% done yeah yeah and

[18:09] Engineers um need to stay in engineering and not in like preferences or opinions

[18:14] for the most part but that is a that's a that's certainly a more favorable spot

[18:20] to try to serve by the city um than the West End U so if they're coming first I

[18:28] that wouldn't break my heart T so you say that some you already

[18:34] have some flow meters actually installed we do we do not have flow

[18:39] meters installed we do not have flow that's right we we will now that this

[18:44] the line project is done okay when we get to a good wet season this got some

[18:48] reliable wet weather we would be advocating to put some flow metors in so

[18:52] we can see what's cing okay all right and that is the plan yeah all right so

[18:56] Tom we've done flow meters before yes and you have all that data is is that

[19:01] scrap data now or will you compare that to what you gather with the new pipe

[19:06] yeah that's a good question we'll put some meters back in some of the same

[19:09] locations that we've had them in the past and compare before and after uh so

[19:13] we can see kind of what the bottom line flows are uh that will be of interest

[19:18] but I mean that's probably a couple of three but there's some other flow meters

[19:22] Upstream that we would want to put in uh back up closer to Pine VI maybe up

[19:27] towards Brown to see kind of what's going on there but I would say that yeah

[19:33] so this is pretty interesting and we have um the dashboard we talked about

[19:38] earlier the dashboard is going to take your Pump Station onetime data and it'll

[19:44] it'll help us to understand how those pump stations react to wet weather I

[19:48] mean it's very revealing in in in most of your systems most of this system is

[19:55] served by pump stations and so while they don't have meter on them it's

[20:00] really pretty revealing what happens in Rain by just looking at the response

[20:05] okay just just a relative response very very helpful this part of your system is

[20:11] is the gravity part of the system that we don't have that pump station

[20:16] signature for and so this down in here uh is where we would scatter out the

[20:21] meters to try to understand within that gravity system where do we have some bad

[20:26] actors so good thought on that all right other

[20:31] questions for

[20:34] Tom no all right Tom all right secured for

[20:39] now thank you [Applause]

[20:46] Tom hey everybody I'm Justin Nolan um The Project Director over at the UNC

[20:51] environmental Finance Center um come out to talk to you a little bit about the

[20:54] finances that we've seen going on in havlock I want to let you guys know we

[20:58] talk to towns all over North Carolina uh this is a conversation we are having

[21:03] with dozens and dozens of towns at any given time so a lot of what you guys are

[21:07] seeing is pretty Universal which you may already know but I thought it was worth

[21:10] verbalizing uh so we're going to look at six different pieces first the current

[21:14] hurdles I just want to talk to you guys I mean

[21:17] reemphasize uh the unique position that havlock finds itself in as a Coastal

[21:20] Community uh from a financial perspective grunning water utility uh

[21:24] we're walk through the Financial Health assessment which is kind of an overview

[21:28] of where H block utilities Finance water

[21:31] utilities finances are right now uh and what we kind of are projecting based on

[21:35] the current Year's budget uh Alicia is going to talk a little bit about the

[21:39] rates analysis um kind of looking at you the changes you've made to rates where

[21:42] we think that the Deb that's going to make talk a little bit about Community

[21:46] Trust building uh some future funding opportunities and just the significance

[21:51] of this conversation overall so um start out with talking

[21:55] about the situation uh havlock is in a unique position because like I said it's

[21:59] a Coastal Community uh Coastal communities across North Carolina facing

[22:03] uh more intense weather um increase rainfall uh we blessedly this year has

[22:08] been a low hurricane year uh but it's a uniquely low

[22:13] hurricane uh I know it might not feel like it um but you know we're seeing

[22:19] increased number of hurricanes basic take away from that is you know water

[22:22] utilities are always going to feel the direct impact of significant rain events

[22:25] and Hurricanes produce significant rain events um

[22:29] so you have a water utility that has over half and when I say reached the end

[22:35] of its useful life I'm saying you know from a financial perspective so over

[22:38] half of havock water and wastewater infrastructure has reached the end of

[22:41] its useful life as determined by it it's depreciation as an asset um the

[22:47] infrastructure that does exist wasn't built in a

[22:51] context uh that you are experiencing in other words the infrastructure that is

[22:54] in the ground right now was most of it was built in a context where you weren

[22:58] getting this many hurricanes every year and you weren't experiencing this many

[23:01] significant rainfall eventss and like I said there's an increased precipitation

[23:05] so what that means is you're running a business and that business the cost of

[23:09] running that business has escalated dramatically um and and you guys are

[23:13] kind of having to adapt to that reality and very little of that is under your

[23:17] control because you don't control the weather uh but it's it's not not it's

[23:20] not unique to you guys we've seen the state and the federal government roll

[23:23] out several programs acknowledging that all of these things are realities and

[23:27] we'll talk a little bit more about that so I just want to go through where this

[23:31] where this Le has left you financially from a perspective of the utility uh

[23:35] we're going to start with the water utility then we're going to talk about

[23:37] the Wastewater utility we're keeping their finances separate because arguably

[23:41] the water utility is in a better place financially than those is um so we're

[23:47] going to break this down by uh in key performance indicators in this case

[23:50] we're going to start with operating ratio and the big idea here is just you

[23:54] know on a very basic level are we making enough money at the water utility to key

[23:58] the Li on now this graph is showing you from 2019 to

[24:02] 2023 that's based on the audited financials that we've received so this

[24:06] is you know verified the experiences and overall from this period from 2019

[24:11] 2023 uh you guys were doing fantastic um St above board we look for a 1.0 we'd

[24:16] like to see 1.2 and you guys are we're even nailing that unfortunately when we

[24:21] bounce over to the projected operating ratio of the water utility based on the

[24:25] the current budget uh you're going to fall below that line of 1.0 so

[24:30] historically havlock has had a really good operating ratio uh but operating

[24:35] expenses are expected to increase significantly in this current fiscal

[24:37] year which is going to result in you know a situation where you guys are in

[24:42] the absence of significant changes and I think you've already started making

[24:44] those changes um and have a situation where you're not making enough making as

[24:49] much money as you're spending on a very basic level again when you see that word

[24:53] projected at the upper right that's that's me talking about budget not

[24:56] audited financials uh from a Debt Service ratio let me

[25:01] pause anybody have any questions on operting

[25:03] ratio all right uh our second indicator is The Debt Service ratio we're looking

[25:08] at you know can we cover the debts that we have again historically havlock has

[25:13] been extraordinarily good the highl water utility has been extra

[25:16] extraordinarily good in this department um you guys well Above The Debt Service

[25:21] cover ratio but again we find ourselves in a situation where uh projected debt

[25:25] service coverage ratio drops precipitously um um a lot of this just

[25:29] has to do with that expenses again if you're spending if you're having to

[25:32] spend more money the ratio of how much you're having to spend versus how much

[25:35] debt you have is going to change that's what you're going to be seeing here um

[25:40] so the rate recent rate rate increases are going to definitely amarate this to

[25:44] a certain extent but we also have to think about exactly what he was just

[25:47] talking about is any Capital project that you guys want to engage in going

[25:50] forward is going to push it the opposite direction so rates increases are going

[25:54] to help but when you start trying to fix the fact that a lot of your water

[25:58] utility is getting really really really old that's going to make it worse so

[26:02] that's going to shift in the opposite direction any questions about de service

[26:06] C ratio okay um the quick ratio is can we

[26:11] play our pay bills with the money we have on hand that's a really just

[26:14] looking at the the money that the utility has built up in case of Crisis

[26:18] situations again healthy and in a pretty good position so this is even taking

[26:24] into account the projections going into 2024 the quick ratio looks pretty good

[26:29] I want to ship this over though the days cash on hand which is how many days can

[26:33] we operate with the money we have right now that one is going to decline a you

[26:38] know you guys have been in an extremely healthy place with your days cash on

[26:42] hand I can't tell you across North Carolina there are very few water

[26:45] utilities that are in this position but you guys have had to spend a lot of

[26:49] unexpected money on dealing with sanitary sewer overflows and various

[26:53] other crisis obviously that's not going to affect the water side as much but uh

[26:57] you are dealing with a lot of unexpected expenses because of these high rainfall

[27:00] events because of other things that are going on with your utility which is

[27:03] diminishing the day's cash on hand if that Trend continues and you hit that

[27:08] point uh at 200 that's where you're you're looking at you know we can't keep

[27:12] our lights on for 200 days if we're in a particularly bad situation so uh that's

[27:17] something to keep an eye on um all right this is the last big

[27:21] indicator and this is the capital assets depreciated this is what I was talking

[27:25] about earlier when I said the end of their useful life so expect to useful at

[27:29] any piece of your infrastructure any piece of the water infrastructure is

[27:34] going to have a cost value associated with it obviously when is brand new the

[27:38] cost value is just the thing but just like a car loses its value as soon as it

[27:42] drives off a lot your utilities pieces are going to depreciate over time and on

[27:47] a very basic level that can be used as a measurement of how old the stuff that's

[27:51] in the ground is how old is the utility itself we like to see water utilities

[27:57] stay around 30% 35% depreciated assets meaning just over a third of all of

[28:03] their stuff has reached the end of it its useful life in the case of havlock

[28:08] water that is closer to 50% and obviously the projection isn't nearly as

[28:12] dire in that situation because what that just is going to equate to is just

[28:15] another year of age you don't have a bunch of stuff that's suddenly way older

[28:20] um but it is moving in the wrong direction so again what that means is

[28:24] you're going to need to spend money to replace that stuff which affects all the

[28:28] other things we're talking about and this isn't because you know there's any

[28:32] mistake that's been made it's just literally these things are are old and

[28:35] have to be repl after turn about of time um so just considering that you know

[28:43] anything above 30% is considered suboptimal and you guys are pushing 60%

[28:47] for 2024 where 2third of the stuff that you guys got going on is going to be

[28:52] appreciated switching over well before I go any further any questions on the

[28:56] Water Utility and finances I'm sure you guys Fair familiar with these

[28:59] numbers all right waste utility um kind of similar um although operating ratio

[29:06] for the SE utility which has had a little bit more struggle than the water

[29:10] utility has been on the was on was on the correct Trend was on the upward

[29:14] Trend uh but recent projections are going to put it um deeply underneath

[29:18] that line of making that money to stay open again this is correlated with

[29:22] Rising expenses for the sewer um again current rate changes should should help

[29:30] um but this is where you're this is where you headed without you know

[29:33] without any changes made this is just based on the

[29:35] budget um debt service coverage ratio you guys obviously paid off some debt on

[29:40] the Wastewater side from9 2020 you got pretty much to the point where you are

[29:44] in a pretty comfortable position uh however the debt service

[29:48] coverage ratio again is is likely to decline and that goes back to again the

[29:52] same factors that affect the water utility just expenses um quick rati IO

[29:59] still staying pretty fluid it's healthy but the fluidity is reducing uh they're

[30:03] having they have less less money to play with right now than they have before uh

[30:08] D's cat on hand you guys are seeing a trend right now so again um the recent

[30:15] projections put you guys at a position where you know if if you weren't taking

[30:19] in any money more any more money the sewer utility would only have about 100

[30:23] days of Runway which is super unsustainable in the long run

[30:29] uh and then the percent C Capital assets depreciated uh this one's even more

[30:34] significant than the other side of things we have um 50% 2019 by 2024 I

[30:40] apologize for the the graph flipping upside down but again it's approaching

[30:44] 60% it's probably a little bit older than the water utility um which will

[30:50] again require Capital Improvement projects to fix so uh I know I've said a

[30:55] whole lot of stuff here uh but the big takeway that I really want you to get

[30:59] from all these just Financial numbers is the last year or so has significantly

[31:05] derailed the financial position of both the water and wastewater utility um

[31:10] havlock is existing in a geographic space that has become a more extensive

[31:16] Geographic space to want run a water utility and is dealing with unique

[31:20] pressures that other parts of the state and other part of the country just don't

[31:22] have to deal with um you know pick your hazard hurricanes increase rainfall

[31:28] saltwater intrusion across the board all those things cost money and we we'll

[31:32] require you guys to be proactive exactly as the engineering team has talked about

[31:36] um and rates will likely need to be steadily increased over the next 10

[31:41] years to combat you guys are are fighting both inflation and depreciation

[31:46] so just the general cost of things being more expensive and also the fact that

[31:51] the water utilities getting older and falling apart both those things have to

[31:54] be dealt with you also have severely dented your utility fluidity in other

[31:59] words you spend a lot of your cash on hand to deal with urgent crisis moments

[32:04] and you would like to get back to a position where you can deal with other

[32:07] crisis moments if you're going to have to deal with them yeah and you need to

[32:10] update your infrastructure and it might not be as big as you know a whole

[32:13] wastewater treatment facility kind of upate your infrastructure but certainly

[32:17] getting ahead of the problems instead of constantly Happ on a general rule of

[32:22] thumb reactivity is a lot more expensive than proactivity it doesn't always feel

[32:28] like it but you end up spending much more money on the back end so before we

[32:33] get to the race analysis any questions about just the general state of water

[32:38] and wastewater finances you board any questions all right I have I had a few

[32:44] For You Justin before we jump on yeah so on the just for context purposes since

[32:50] you guys look at this stuff in multiple places the the capital assets

[32:55] depreciation that you see in water and sewer I guess one question for both of

[32:59] them is is being off that threshold pretty common I mean I feel like most

[33:04] systems around us are at 50 60 or better not that we like no a great question so

[33:10] yes uh across North Carolina very few systems we're kind of

[33:16] had a reckoning point right now we're like I said we work with dozens of

[33:21] programs does the systems many of them are desperately

[33:25] trying to deal with the consequences of having to the point where they're at 50

[33:28] or 60% yeah that's very common uh it's but in every situation the reason

[33:33] they've called us in is because having gotten to that point uh they have really

[33:39] bad problems you know they have increased flooding they have you know

[33:43] unsustainable levels of ey and ey they have which pick your poison uh and it

[33:48] all comes back to we didn't want to raise rates for 15 or 16 years so now we

[33:53] either have to jump this huge rates increase or we have to scramble to find

[33:57] funding or whatever please help us find funding which is luckily I mean that's

[34:01] what we do but the point is like that is a yes it's common but it's common in

[34:07] like the worst possible way and it's part of the reason why the bipartisan

[34:10] infrastructure law was put in place was because America's infrastructure is

[34:14] getting old I was going to say it's not just North Carolina either no no

[34:17] absolutely not we work with the entire Southeast so this is this is everywhere

[34:21] and I would so to the board I just I asked that question as context not as an

[34:25] excuse to say oh we're like everyone else we can let that go cuz I think you

[34:29] guys still have to set a standard for what you want or what your priority is

[34:32] your level of service so staff can can Implement to that level U but I I did

[34:37] want to put that in context because as you guys know at every listening session

[34:40] for the last two years I have told all the public that we are no different than

[34:45] every else boards in the past have kicked this can down the road because

[34:49] believe it or not contrary to popular belief among our citizens we toil a lot

[34:52] over what to charge for water and sewer and we're consistently undercharging in

[34:56] order not to affect your citizens and then this is where you end up it's easy

[35:00] cuz the infrastructure is hidden you don't have to look at it right and so

[35:03] you can say out of out of mind it still works we can ignore it the other

[35:06] question so I understand yes please one thing I just

[35:10] want to also add to that is that you guys like I kind of alluded to

[35:15] you guys more than everybody else also deal with unique weather hazards

[35:21] that make kicking it down the road like even more of a potential issue and can

[35:25] make when things start to get really old they can make those glaring issues like

[35:29] very obvious very abruptly right like I mean I and I is a great example right I

[35:34] and I if you're in a dry area of the state not a big deal I and I if you get

[35:38] it here um you know one one hurricane event that shows up like

[35:43] a water getting your pipes the other thing that I just want to add too is

[35:47] that so when I look at this so your days cash on hand you guys are s like for the

[35:53] Last 5 Years right 19 to 23 you guys are super high and some some cases I

[35:58] actually look at that I'm like you actually have too much cash I want to

[36:01] see you guys spending that cash on your infrastructure because of this very

[36:04] thing right that your assets are depreciated but because you're having to

[36:08] spend this money in a reactive way as thisa cash on hand is going down your

[36:14] assets aren't going down right like you're not actually able to do those

[36:18] improvements so if if I had seen the cash go down but this jump up because

[36:23] you've replaced some of those things that need replacing I'd be like yep A++

[36:27] right youve used that cash in a productive way to get those assets back

[36:30] to kind of less depreciated because you'd be replacing things but since I'm

[36:34] not seeing that that's what causes the the bigger flag right is that you're

[36:38] having to react and spend more money on the reactivity than the productivity but

[36:42] you're right this isn't uncommon we see this all over the place unfortunately

[36:46] I'm tracking on that the last I think my last question right now is so on the

[36:51] Wastewater one I completely understand the comment of operating expenses or

[36:57] expected to increase significantly over the next year and as a result you know

[37:00] we're going to see those quick ratios and operating R ratios change on the

[37:05] Water System though we haven't I mean while our numbers have changed in a

[37:10] downward Trend minor over the last few years what is driving like on that I

[37:15] think it's the it might be your first slide where it's operating expenses are

[37:19] expected to increase significantly during this fiscal year which is showing

[37:22] our operating ratio projected to drop below that that one threshold what

[37:28] what's driving that was that something we gave them or was that something you

[37:30] guys saw that we did because a water system that hasn't been something that's

[37:33] been raising alarm that was the only thing that caught my

[37:35] attention all right so our numbers are purely the result of looking at the the

[37:39] projected expenses on the budget so you mean like cost of chemicals even or you

[37:44] talking about Rising inflation costs or this would just be so the the 19 to 23

[37:50] are using your audited financials so these like accountants have already gone

[37:55] through versus 24 this projected year is using kind of estimated numbers so it

[38:01] could be that those numbers are going to shift a little bit once the auditor

[38:04] finishes the audit okay so I'm making sure that we take those numbers BR to

[38:08] Sal that's kind of what I was getting at can I take them I mean and I I wouldn't

[38:12] say totally take them with the great Sal but they they definitely might not be as

[38:16] severe as we want to give you the worst case scenario okay well that that's what

[38:20] we're used to and that's why I asked that because I mean that is kind of what

[38:23] we expect of our of our staff when they we talking about the financial things is

[38:28] our revenue is is always underestimated and our expenses we always try to look

[38:32] at the worst case scenario so understood say when we were getting

[38:37] those numbers when we were in that budg of time we were anticipating the

[38:40] department spending the amount that they had because they still had so much year

[38:44] left to go and we didn't know exactly where we were going to end up okay

[38:47] understood that was the only thing that jumped out at me as a little bit like I

[38:51] wasn't expected so no we but we definitely want to put I mean this first

[38:54] indicator is the first indicator for a reason right like operting ratio is

[38:58] and that's every if you're running a lemonade stand and you're not making as

[39:00] much money as you're spending you're not going to stay open for long so we

[39:03] definitely put it out front and worst case scenario we're wrong and you guys

[39:06] are in better shape that would be great okay other any other questions y'all

[39:10] follow up while we were running through those and as soon as the audit is done

[39:14] we can update these numbers too so you have a better sense of fiscal year 24

[39:18] okay and if you don't know we do our audit really really fast we might have

[39:22] those numbers in like very soon right oh yeah we're we're early Auditors

[39:27] man we don't we don't mess around that's great all right so I'm just going to

[39:31] touch touch space on um the race analysis that we did um all right so

[39:36] just as some background knowledge just putting up the number of customers you

[39:39] guys have that were included in the rat analysis um you guys do track your

[39:43] residential commercial and institutional users but you're not charging based on

[39:47] that you're charging based on the PPE size um so just highlighting your inside

[39:52] 3 and a/4 that's your biggest um group of folks there with about 5,000 those

[39:57] other there are there if you want to reference them at any point um so you

[40:02] guys did do some rate increases isn't 2025 which I know can be hard on the

[40:06] public side and we can talk through some of those challenges and how we can do

[40:11] communication with the the public and community so that there's some um better

[40:15] understanding um but you did do the 10% increases on both base and volum metric

[40:21] and that was under the water and it was 25% on the sewer I didn't put that in

[40:25] there sorry um and then your current steps you guys have an allowance of th

[40:30] um no we decided that was not the case I'm so sorry um I need to change that

[40:35] and get that back to you guys um but then you have these other other steps at

[40:38] 3,000 6,000 9,000 gallons um so those are just how the the race structure is

[40:43] changing you guys have increased um volumetric charges at those greater

[40:49] Downs um and so for everybody up here if you don't remember the average house is

[40:54] in that 3,000 to1 to 6,000 range yeah you're single your people that live by

[41:00] themselves or maybe just a couple um might be under that 3,000 more

[41:05] constantly but our average is 5,000 so most people with the family are in the 3

[41:09] to 6,000 that second year great thank you for that that helpful um okay so I

[41:14] did pull up some cons consumption histograms so what this is just showing

[41:19] is is this the green the the little any that's the one that blows it all up yeah

[41:26] yeah um okay so the consumption histograms is basically showing um like

[41:30] you were just indicating right like maybe I'm a household of four I'm

[41:34] consuming 4,000 and so I'm actually in this like four to 5,000 so this is the

[41:38] number of customers that are falling within each of these buckets of

[41:41] consumption per month so you see here on this 3/4 inch which is most likely to be

[41:46] residential you've got kind of this 0 to 1,000 a good chunk of folks here the

[41:50] biggest chunk is you know the 1,000 to 3,000 um and then kind of gradually

[41:55] dropping off right you don't have as many folks folks that are using more

[41:58] than 12,000 gallons a month in that User Group um on the 1 to 6 in rate which is

[42:03] going to be more likely to be your commercial institutional folks you still

[42:07] have some here at this lower level but you're you've got a lot more users that

[42:10] are coming in at that 12,000 a month um and then your sewer only I

[42:15] popped up here cuz you do have 100 folks in there um and you can see this is

[42:20] pretty similar here with the the 3/4 inch r that you've got most folks are

[42:25] using at that lower level not the reason I wanted to throw this in here is

[42:28] because if at any point one of the things that we do is we come in and show

[42:32] you like this is what you're doing but if you want to make any changes if

[42:35] you're trying to focus on affordability or business friendly practices or

[42:40] conservation right there's different ways that you can structure your rates

[42:43] right you just did a 10% increase and 25% I'm not going to tell you to change

[42:47] them right now CU but if you if there are other things you guys want to focus

[42:51] on want to prioritize we can run through all these different scenarios and the

[42:54] tools that we have to show you other options right so if we're concerned

[42:58] about your um bringing in some additional money to be able to pay for

[43:03] some of these infrastructure challenges it might make sense for you guys to

[43:06] switch because you guys have are tracking residential commercial

[43:10] institutional it might make sense to switch and instead of charging by the

[43:14] pipe size to instead charge by the user type so you can see here residential is

[43:18] falling very much in that 3/4 inch that same kind of display right where we've

[43:23] got one of 3,000 is most common and very few here above 12,000 but if you jump

[43:28] over to the commercial and the institutional which is just 18 folks so

[43:31] just making sure you realize the sample size is much smaller here but you have

[43:35] much greater usage at these high categories right so if you're concerned

[43:39] about conservation at all um if you're concerned about trying to bring in some

[43:43] more money it could be that you're changing your rate structure to try to

[43:47] get you know some additional funds from this high bracket um maybe from the

[43:51] commercial institutional side that can afford it um rather than some of the

[43:54] residential folks or folks that are on limited income so just just throwing

[43:58] that out there as things to be thinking about as you're looking at rates not

[44:02] saying you should do this it's really up to you guys but just just something that

[44:05] I observe when I was looking at I don't think we've ever done it that way before

[44:08] have we no not as long as I've ever I'm interesting which is interesting because

[44:13] most I would say most folks that we work with split it on like the type of user

[44:18] so resal commercial instead of the tiered rate for just gallons and size of

[44:23] pipe you would have a different price set for your commercial a different

[44:26] price set for your institutional based on gallon yeah I would even just like

[44:30] remove the pipe size completely just drop all that just do like residential

[44:35] commercial institutional or even just commercial institutional as one um and

[44:40] then like inside outside tends to be the other denominator that we see if just

[44:44] cuz it's you're closer proximity it's easier to get it's you know easier to

[44:48] get water and collect waste water from folks that are within the boundary so

[44:52] those are those tend to be the two that we see um breakdowns most often

[44:58] some food for a thought for you guys um okay so the analysis that we did um uses

[45:03] 11 months of billing data August of 23 to June 24 um I just want to highlight

[45:08] that we're likely underestimating the consumption which means that we're

[45:11] actually underestimating the revenue um because we're missing key warmth warm

[45:16] month of July right so um with 12 months a day we get a little bit more uh

[45:21] picture but just highlighting that this revenue is probably a little bit lower

[45:25] because people are consuming a little bit more in July typically um I did

[45:29] build in a 5% increase year over-year um just to try to show kind of what that

[45:33] would look like and then a few assumptions that we include in our tool

[45:37] is um this 2% of uncollected bills per year um some folks have more around one

[45:42] but we try to again kind of buffer to expect a little bit worse of a scenario

[45:47] uh we do build in a negative um average consumption per year

[45:52] so that's a change so you think about people putting in more efficient um

[45:56] washers dishwashers those sorts of things are

[45:59] going to just kind of generally decrease consumption um we also put in a

[46:03] reduction so ative 3% it's a reduction sorry with a 10% increase in rates so

[46:08] what we've seen is that if you build up rates you know keep boosting them up

[46:13] people are likely to be going to be conserving a little bit more so we build

[46:16] in a little bit of that negative um consumption to account for that kind of

[46:20] conservation even within their own home um and I have built in a 5% inflation

[46:25] also um on the spense side because we need to be realistic that you guys are

[46:30] facing the same inflation rates that all of us are and actually on the

[46:33] construction side even more so so I'm making sure that that's

[46:37] consistent um and then this is just sorry this is the same number of

[46:41] customers here but I just wanted to show that I have included just mild growth

[46:45] here and this is based on the numbers of of customers that you guys have seen

[46:48] over the last year um so we've just got -22% of those inside 3/4 in and then

[46:55] we've got two positive ones that 1 in and that 2 in um but otherwise it's I've

[47:00] kept it at zero and this is something if you guys are experiencing growth and you

[47:03] feel like well let's actually include a little bit more because we think that

[47:06] we've got more growth or Hang on we're not we don't have that much growth we

[47:10] can adjust these so that you can kind of see over time what you think is going to

[47:14] happen um I have not included any connection or late penalty fees so

[47:18] that's another little bucket that will add a little bit of Revenue um that I

[47:21] haven't included just to kind of be on the safe side other The Rue I got a

[47:26] question go Ahad go just so like if you for those cities that actually do the

[47:31] rat separately than the way we do it do they tend to see and I know this is

[47:35] generalization but do they tend to see the residential rates be lower or higher

[47:41] on average than a system like this typically the residential rates would be

[47:46] lower than the commercial and Industrial because you're TR most of the folks

[47:49] doing this are trying to think about affordability fixed income right they're

[47:53] really trying to be cognizant of folks that it's it's harder vers

[47:57] a business which of course lots of small businesses could still struggle with

[48:00] budgeting but they're able to adjust you know their annual budgets to try to

[48:04] account for some of those changes a little bit more easily or some of the

[48:07] bigger industrial folks um or your schools things like that right there's

[48:11] there's more creative ways to kind of work with those rates versus a resident

[48:16] which has a little bit more of a challenge Mr manager can we do a feed

[48:19] change I I am sorry I'm try to remember can we do a fee change throughout the

[48:22] year or is this one of the ones that's tied to the budget this is tied to the

[48:25] budget got

[48:28] but we can you know if that's something you guys are interested in kind of

[48:31] playing with that's something that we can easily kind of run a few scenarios

[48:35] to help show you what what that might look like um especially since you're

[48:39] already tracking the residential commercial that makes it a lot easier

[48:42] for me to just go ahead and plug and and see what we can come up with if that's

[48:45] of Interest right I know I'd be interested okay great um okay so on the

[48:52] Water Utility side um this is so this is this staying with the existing rates

[48:58] this is blue and this is if you were to use FIS leader

[49:02] 23 so this is what you guys had already been using not including this new rate

[49:07] increase that you guys did um and this is if you were just staying with those

[49:11] existing rates same number of customers all those assumptions that I already

[49:15] made you know you'd be bringing in right at that kind of break even Point um and

[49:20] then this is with those new rates um which is good so we're we're seeing

[49:25] above the expense line with the new rates the increase that you guys just

[49:28] did um which I love this is this is ideal if I had all my towns like this it

[49:33] would be great however this is using the expenses from fiscal year 2023 now what

[49:39] Justin was just showing you is that they're not complete audited financials

[49:43] right so we have to take with that for the grain salt but if we put in the

[49:47] expenses from fiscal year 24 which were kind of projected we're now kind of

[49:51] missing that Mark right there was a big increase in expenses on the water Side

[49:55] by about a million and a half um so this is where it's like well okay

[49:59] we don't have audited financials so this isn't exact but seeing this makes me

[50:04] feel like okay we're still not quite getting there if those expenses are true

[50:08] and and and you keep in that general direction now if this was kind of a fluk

[50:12] year and your expenses go back down next year right then we're not going to see

[50:16] this big of a discrepancy but if if you guys if the expenses kind of keep going

[50:20] in this Direction that's when it's going to be a bit more of a concern it'd be

[50:24] hard to believe that it was a fluke with 60% of our you know 60 you got 60% of

[50:32] you know depreciated assets in the ground so it's not a fluke yeah say it'

[50:37] be hard I mean we did spend an exorbitant amount of money which you

[50:41] know hopefully as we've been talking about since the retreat you know we're

[50:45] changing the trajectory of that right but it's not going to be abrupt right

[50:49] that trajectory is going to change over a 5 6 8 year period not over a one or

[50:53] twoe period Josh no you answer my question okay um so yeah so while the

[50:59] increase does it helps right this this doesn't feel it feels trivial based on

[51:03] the size of the bars but the increase helps um and like I said this is a

[51:07] built-in 5% increase over the years so you know if you stick with this kind of

[51:13] trajectory with the expenses right those 5% increases year-over-year help but um

[51:19] they're not still quite getting you to the expenses especially if you think

[51:21] I've built in 5% on inflation right there's that 5% on the increased bills

[51:26] right there um so that's on the water

[51:31] side and then on the waste water side we're seeing kind of a similar picture

[51:36] here um this is basically know the old rates um this is the new rates here

[51:41] again I love to see this kind of going above the expenses um and then with

[51:46] those fiscal year 24 projected expenses you know your expenses in 24 were over 4

[51:52] million more um on the Wastewater side so this is you know this then becomes

[51:57] kind of a big jump right to go from about 5 million to to almost 10 million

[52:01] that's a pretty big jump to cover um so again we'll you know once we take a look

[52:06] at the audited financials this will that'll give us a little bit better

[52:10] picture um but there's there's some kind of room for concern I would say here

[52:15] based on the most recent expenses okay oh questions on rates and

[52:23] this is a functional modifiable tool right so as as many

[52:29] scenarios as you guys want me to plug in or you guys to fiddle with I'm happy to

[52:33] do so so this is really kind of an itative process um up to you guys and we

[52:37] can try to see like can we get closer in this way or change it in this way to try

[52:41] to get closer so from that

[52:44] perspective I don't know if there's a cart before the horse so if the if the

[52:48] board said you know once once we got the 2024 audit done you plug those numbers

[52:53] in and we can see that a little bit more definitively the board said our goal is

[52:57] to meet the needs of expenses which technically we should be over that right

[53:03] but because if you're just meeting needs of expenses and we're not ready for

[53:06] whatever's about to happen so that's right let's just say the board said we

[53:08] want to at least hit that red line can you then reverse engineer what that

[53:12] looks like every year for rate change versus I guess the other side if the

[53:16] board came in and they said our pallet is I'll just make some up no more than

[53:21] 8% a year period you can do it from that direction too and say well that's where

[53:25] it lines you up y yeah okay so they can do it from either or both directions

[53:30] once you've got the final data to say I mean we went through this I don't 20

[53:34] years ago 15 years ago and it wasn't from both directions so it was like Hey

[53:39] if you want to meet it here's your number and the number was like everyone

[53:43] fell out of their chair crazy and and so then what the city did back then was

[53:48] they said well what's palatable yeah and and we kind of the the board at the time

[53:54] just picked percentages and and went through that um but it didn't cover the

[53:59] full Gap right we didn't cuz the Gap was defined here and we weren't willing to

[54:03] meet the Gap yeah U but I think it would be good to see it both ways if they say

[54:07] you need to do 12% a year I made that up it could be 18% a year I don't know it

[54:11] could be 4% a year but whatever won't be 4% whatever it

[54:14] is um you could say that's untenable what happens if we do this how far are

[54:21] we off our Mark yeah well and I think once we get those confirmed audit

[54:25] numbers we can go back to that debt service coverage ratio because for me

[54:28] when I see when I see you know this and I hear about some of the expenses that

[54:33] you guys are having that's pushing those expense numbers higher I think about

[54:37] well is there a way that we can find some funding to cover some of these

[54:41] bigger projects that's going to reduce your expenses it's very hard typically

[54:44] to reduce expenses but if you guys are having reacted expenses is there a way

[54:48] that we can get some funding replace some of these areas where you're having

[54:52] those reactive expenses and you can cover the debt through rates right

[54:56] that's going to be much easier to cover that debt payment annual debt payment

[54:59] through rates versus a $4 million increase in expenses per year that's

[55:04] going to be much harder to cover 200,000 you can cover in your rates right but 4

[55:08] million is a lot harder and so B we've talked about that with the perspective

[55:12] of the shot in the arm right if if you identifi these projects just absolutely

[55:18] if you took these off your plate that would make a huge difference but it's

[55:21] going to take this much debt service to do that and then what does that look

[55:24] like so she's saying they can help you know figure that out if you said we

[55:29] can get this much shot in the arm and what does that look like to our rate and

[55:31] how does that adjust

[55:38] it okay so I wanted to talk a little bit about uh just interaction the community

[55:42] and other funding things that I just wanted to just kind of all inclusive

[55:45] statement I really like the engineer BM had to say about the long-term Asset

[55:49] Management plan and the you Capital Improvement plan the idea of getting to

[55:53] a point where you're thinking about the future and what you're going to need to

[55:55] do every year to keep your system uh in in a good

[55:59] position one thing I just want to stress is that like that is information that

[56:04] would you should if you can be putting out in the public uh as much as you

[56:08] possibly can um I think that part of this whole problem is that people don't

[56:13] necessarily associate their water utility with being theirs it's but it's

[56:16] very much like your schools and your roads this is you know your water and

[56:20] the quality of your water and you're paying into a pool to keep that water

[56:24] healthy it's the ownership that I think can sometimes be something it's a

[56:27] culture of ownership that I think can sometimes really help make these

[56:30] conversations more palatable um AB you guys are kind of in this thing together

[56:35] and if it falls apart on you you're in a much worse FL there are places in the

[56:38] United States where people are straight piping their water into the woods behind

[56:42] their house because their water utility has fallen apart so much that they just

[56:46] have nothing to work with so I just wanted to put that out there um raising

[56:51] rates with intentionality with a particular Target in mind when we talk

[56:55] to uh you know DEQ Department of Environmental Quality about what they're

[56:59] looking for what they want to see from utilities what they want to see in order

[57:02] to you know grant funding they want to see the implementation of these

[57:06] long-term Improvement plans and that is partially a communication plan that is

[57:10] partially we're going to explain all the what what are we doing the next 10 years

[57:14] what is our team go where is our team going uh as a whole Community uh this is

[57:20] why we're doing that this is what we're seeing that is going to cause that this

[57:23] is the age of these pieces that is going to cause necessity take that uh they

[57:27] want to see you know they don't just want to see you make a capital

[57:29] Improvement plan and then it just hangs out somewhere and then you had it to

[57:32] check box they want to see how is that working into like the way that you're

[57:36] changing the way your water utility behaves um you guys more so than other

[57:42] water utilities North Carina have to be prepared for crisis uh and saving for

[57:46] Capital Improvement to deal with the climate resiliency and adaptation that

[57:49] is unique to your area there are Partners In the state which I'm going to

[57:53] get to in a second there are Partners In the state that will help you with that

[57:55] so it's not just on your own back but it is something to be considering and the

[57:59] last piece of this is that you know and this is something you can also be very

[58:02] real with your customers about is that you know utilities that totally neglect

[58:07] this sort of process and totally neglect you know get to the point where their

[58:10] water utilities totally insolvent do get taken over by the state that is that is

[58:15] a very that's a real reality that we work with on a regular basis um they can

[58:21] Google it real quick um at which point a municipality now had zero control over

[58:25] there correct and the first thing that LGC is going to do every single time and

[58:30] I talk to these gentlemen about ear they're going to raise your rates to the

[58:32] point where your utility is solving again which is going to be a lot more

[58:35] abrupt and a lot more painful and a lot more uncomfortable because they don't

[58:39] have to deal with whether or not they're going to get revoted in they are you

[58:43] know they are immune to that sort of so the most but the stuff we can solve in

[58:48] house is going to be the best possible outcome for

[58:51] everybody um so again towns frequently attempt to avoid raising rates by using

[58:57] State funding or hoping for political ear marks or finding grants and we will

[59:02] help you guys do those things and there are grants for you to pursue but it's a

[59:07] big pie right and part of it is rate increases and part of it is Grants and

[59:11] part of it is reducing expenses and that whole thing together is what's going to

[59:16] get you guys where you need to go so it's it's no one piece yes sir so uh on

[59:20] the on the grants and raising rates got to know the state's not going to have uh

[59:25] grants with every local local municipality but can the state actually

[59:30] help carve out like loans for actual municipality to actually apply for 100%

[59:35] uh and your water utility has applied for some of those and they are

[59:38] competitive so going back to his question earlier we said you know

[59:43] communities all across North Carolina have gotten to the point where their

[59:45] water utility is above 60% to asset appreciation there's a high level

[59:50] competition which is why it's so important to pull resources and get as

[59:53] many heads in the game as possible so that when you put for your Grant

[59:56] application it gets approved but yet uh State revolving fund loan and or grant

[1:00:01] money is available um I was talking to uh you know Chris earlier about the rccp

[1:00:06] or the uh resilient Coastal communities program which is all the Cana Counties

[1:00:11] have access to uh there's a number I mean you could potentially could even go

[1:00:15] after a brick one especially with which is a federal loan through FEMA based on

[1:00:19] what you've been experiencing in terms of all the coastal Hazard that you guys

[1:00:23] deal with and srf will match State revolving fund will match a brick loan

[1:00:29] so there's a matching requirement for brick that you could hit there yes sir

[1:00:31] and one of the other things that we'll be talking to the board about at a later

[1:00:35] date in a little more detail is currently we do a 5year CIP we get zero

[1:00:40] points for that on these applications we've got to

[1:00:44] get we've got to present to you and talk through what it looks like to do a

[1:00:48] 10-year CIP I don't know what the total points

[1:00:52] is for that but I know it's considerably more points than 10 zero so you got so

[1:00:58] yeah if you guys get to the point where you have a 10 year especially Asset

[1:01:00] Management plan so you know you're doing the holistic process that is 10 points

[1:01:04] to put this in perspective competitive score on a state revolving fund loan is

[1:01:08] about 54 all right so 10 points is huge 10 points is a like that's a that gets

[1:01:13] you almost a quarter of the way there um it's a significant amount and it will

[1:01:18] apply to every single project you undertake so if you guys have a long

[1:01:21] list of projects you want to undertake you want to do one every year having an

[1:01:24] updated Asset Management plan it's just giving you those 10 points over and over

[1:01:28] and over and over and over and over again and it's good practice um you will

[1:01:33] never keep up with the costs and issues that you're dealing with just going

[1:01:37] after them with political ear marks and great funding so you

[1:01:42] know be as commun being as communicative as possible about why rates have to be

[1:01:46] raised is excellent people should be all in on the same page and we need to know

[1:01:50] what's going on but every single town we found that is in a really bad place

[1:01:55] right now financi a lot of it can be tied right back to we

[1:01:58] didn't wi to raise rates for a decade or more sure um okay this is what uh Chris

[1:02:05] was talking about earlier access to State revolving fund money is directly

[1:02:08] connected to having a capital Improvement plan and rates so another

[1:02:11] thing that scores you P like points on that funding application is going to be

[1:02:16] whether or not your rates are where they're supposed to be so if you are

[1:02:20] asking for grant money from the state government and they look at your rates

[1:02:23] and they're lower than what the state says that they should be you are going

[1:02:27] to lose points there because the first thing they're going to say is well

[1:02:30] before you're asking us for money you should be raising rates in your town

[1:02:33] sure so having rat set where they're supposed to be also helps you go after

[1:02:37] that grand money it's it's again it's a big pie it all works

[1:02:41] together I mean if I was a state i' I'd feel the same way if you're not going to

[1:02:44] do your part why do you want me to come in and and and fix it for you correct

[1:02:48] correct um so any consistent dialogue you guys can

[1:02:53] do with the fun or with the public I think is going to be super helpful

[1:02:56] um rate increases are totally unavoidable but you know the more we can

[1:03:01] communicate why these things are happening the better um a lot of

[1:03:05] utilities found a lot of success publicizing their kpis their key

[1:03:08] performance indicators the stuff that I gave to you guys earlier the long boring

[1:03:12] part of the presentation that was all graphs sending those out from time to

[1:03:16] time saying like hey guys you know this is how depreciated this is what

[1:03:19] depreciation is and this is how depreciated our assets are and this is

[1:03:22] why we're going to need to do some projects coming up pretty soon just know

[1:03:25] knowing why what's what is going on and why do you need me to pay more money can

[1:03:31] sometimes do a lot and not all not every customer can come to a public listening

[1:03:34] session so sometimes they they're confined to their house they D

[1:03:37] Transportation a number of things can be easier to meet them where they're at um

[1:03:43] if your if your utility your utility deals with like I said hazards other

[1:03:46] utilties don't deal with if you're spending money to deal with salt water

[1:03:49] intrusion let them know hey we're looking at our reservoirs and the amount

[1:03:53] of solidity in our Reservoir is going up this is how much it's going up this is

[1:03:56] how much that will probably cost a fix letting them know that's a problem you

[1:04:01] know because salt water in your Reservoir makes the water unable um if

[1:04:05] you have failing Palm stations letting them know that sort of stuff that can

[1:04:07] really help um and again many custom we we had a woman come and speak at our big

[1:04:13] class last year from a town whose infrastructure was built before their

[1:04:17] roads were built so when they went to replace their utility they had wooden

[1:04:22] pipes in certain places customers have and somebody men this earlier it's all

[1:04:26] under the ground customers have no idea how old they're at Water instruction and

[1:04:30] you tell you A lot of people you say hey the pipe that brings water to your house

[1:04:34] was built 60 years ago and I want to replace it and that's why you got to pay

[1:04:38] $5 extra on your water pill they're receptive because they don't want

[1:04:42] 60-year-old pipes spring in the water um and these are just some ideas that I

[1:04:47] thought you know uh mailers anything on the internet where they can download the

[1:04:51] key performance indicators obviously you're already doing Council meetings if

[1:04:55] you have a project in somebody's neighborhood having a staff member on

[1:04:57] site to explain what's happening what why are we here why are we doing this

[1:05:01] and then just Public Service anouncements General I know a lot of the

[1:05:04] stuff you guys are already doing but anything that can help build that public

[1:05:07] trust is going to make this whole process easier and I just want to

[1:05:11] reiterate that one more time is that every water utility in the whole country

[1:05:16] is a business uh and that business can't raise its own Reigns it has to ask other

[1:05:21] people permission to it can't raise its own prices and they have to be approved

[1:05:24] by regulatory Authority and that makes it really difficult for water utilities

[1:05:28] to be successful um but unfortunately if they remain unsuccessful for long enough

[1:05:33] they lose their autonomy and you guys don't want to lose your autonomy so I

[1:05:36] feel like your utility is kind of out a Crossroads you have an excellent

[1:05:39] customer base which means you have a lot of options you're not a 500 town of 500

[1:05:44] that has none um you building an asset management plan and becoming more

[1:05:49] systematic with these issues it's going to help your Public Communication it's

[1:05:52] going to help your financial planning and it's going to help forecasting where

[1:05:55] your rates need to go over time because you'll know what you need to put in the

[1:05:59] ground every year systematically and this is our

[1:06:03] information if you'd like to contact us again I'm Justin N this is Al Fraser and

[1:06:08] I appreciate you y'all got any more questions for

[1:06:12] them yeah so I'll ask you this one thing you did

[1:06:18] not cover and I'm sure you've seen a lot of it because we've seen some of in East

[1:06:22] North Carolina are municipalities giving up there water and waste water to these

[1:06:27] um for profit corporations and and I I'm just going to tell you what we think

[1:06:34] that looks like and you can tell us if if you've seen that as the case so

[1:06:37] everywhere around us that's happened the rates immediately double triple

[1:06:41] sometimes there's examples of four and five times increase because they're

[1:06:45] running for as a for-profit corporation um and then we've also um

[1:06:51] seen that you give up a lot of your ability for growth because now you're

[1:06:55] dependent on them and if you say we've got a craven 38 track like you saw up

[1:06:59] here earlier we're going to need capacity for 300 new homes they can just

[1:07:03] say no we're not willing to put that money in the infrastructure or yes but

[1:07:07] we're going to raise everyone's rates by this amount so is that kind of what you

[1:07:10] see or is there anything else you see that we should be aware of and I only

[1:07:14] say that because every time we go to Le municipalities conferences those guys

[1:07:17] are there and they hit up every commissioner and they want to talk about

[1:07:21] what great things they can do for your system and they can run your system

[1:07:24] really really well but it just cost a ton of money that's what we've seen so

[1:07:28] your thoughts yeah I I mean I think the second thing you said is is huge if my

[1:07:33] if a company in my profit share my profit area right is the entire

[1:07:38] Southeast right and one small town in the middle of that is really concerned

[1:07:42] about its growth and where it wants to develop but we determin that that's not

[1:07:46] the best for our profit margins well that town being upset with me that town

[1:07:51] you know protesting whatever doesn't really affect my bottom line my bottom

[1:07:55] line is out across the entire region right there's no incentive for me to

[1:08:00] really prioritize this town's goals but also it's like right now you guys are in

[1:08:04] a position where you can come to these meetings and you can hash it out and you

[1:08:08] can discuss and you can input and you can elect people and all those things

[1:08:11] you can affect all of that if you seed your authority to a private industry

[1:08:16] you've immediately got rid of that entire dialogue that doesn't exist

[1:08:20] anymore so it's it's kind of a you know worst

[1:08:24] case scenario eject button option uh and most of the time when I see it it's in

[1:08:30] situations where a town is hit the point where they're Tri Tred to even

[1:08:33] regionalized they tried to merge with another utility and other utility said

[1:08:36] no and that's that is the it is this or we

[1:08:41] dissolve I was say I feel like you guys aren't in a dire enough position where

[1:08:46] it's kind of a a worthwhile thing to consider right where I see it successful

[1:08:51] is these tiny towns because the companies have ways to make profit off

[1:08:55] of other places they can kind of take on some of these smaller towns and slowly

[1:09:01] get it to be more you know palatable but they can kind of help that like this is

[1:09:06] It's either this or or you all have to go to well and septic right because

[1:09:09] they're small enough towns with failing systems that really can't kind of crawl

[1:09:14] out on their own but you guys have a customer face right you're big enough

[1:09:18] you you've got I mean you guys are in no way failing so you also have some really

[1:09:22] interesting potential regionalized uh partnership options

[1:09:25] so I mean honestly if I was to create a scale you know developing Partnerships

[1:09:30] with close by municipalities to kind of share certain you share certain parts of

[1:09:34] our infrastructure is here uh going private is here and and

[1:09:39] that's just right above dissolving as a utility uh because it's again it's the

[1:09:45] very it's the last resort I'm glad to hear yall say that cuz that's the way I

[1:09:49] have thought about it for the last year or two since it became kind of trendy is

[1:09:53] to not I say Trend became more common and that's been my thought is we're a

[1:09:58] long way from that but you'll occasionally have sens that are just

[1:10:00] like you know privatized the system and I don't think they understand the

[1:10:03] ramifications of of what that means and I think if you're the kind of community

[1:10:08] that really wants to drive what your development looks like that's reason

[1:10:11] number one not to privatize your system and then to have zero control over the

[1:10:15] rates it sucks to have control over rates sometimes I'm not going to lie

[1:10:18] most every time it sucks to have control over the rates but it doesn't mean you

[1:10:21] give that up just cuz it sucks I think it's still our responsibility you give

[1:10:25] that over somebody else yeah you hit the easy button for you but all of our rates

[1:10:29] are going to quadruple in some cases I mean we've seen that in in counties and

[1:10:33] municipalities around us so it's good to hear that perspective from you guys

[1:10:36] where you see it across a larger region than we do it's a real strong argument

[1:10:39] that everybody who has an effect on your water and your water rates and your

[1:10:44] water infrastructure has to drink the water yeah they are making those

[1:10:47] decisions yeah no I mean that's a great Point too fantastic point I mean those

[1:10:51] folks are going to be corporate people sitting in office somewhere about the

[1:10:54] quality of your water every single one of us sitting at this table pay you have

[1:10:58] to remind that we're paying the same bill drinking the same water and and

[1:11:02] using the same um you with the consequen of decisions you make it's the same

[1:11:06] thing if you see company in New York City owning a landfill in Mississippi

[1:11:10] they don't care what people put in that life that's

[1:11:12] right all right other questions Justin Alicia anything else that's great thank

[1:11:19] you'all fantastic absolutely appreciate I would expect we'll be

[1:11:24] bothering you um a little bit more

Havelock Board of Commissioner Workshop: September 9, 2024

Transcript