[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