my statement today to the NSCUDD board that is now on record.
I understand that the NSCUDD board must set rates for the CSU operation. With our pledge to the public to do better than a private company making profits, we, the board should be very careful on how we establish a rate structure. As I am told that the CSU operation will be a separate entity unto itself, the rates we use for it may differ from our other operations. Thus, I was disturbed last Friday to see on the agenda a proposed rate increase of 2.5 % compounded for 10 years for CSU even though Kenny mentioned in the October and November meeting that it’s what he would propose. It’s one of those approve it or your wrong items where the board has few if any options.
In the CSU Purchase Public Interest Determination presented to the board on September 18th of this year, the following was stated as positive impacts on the purchase of CSU by a public entity such as NSCUDD:
1. The District believes its existence as a government entity also provides for the sustainability of delivering services at more reasonable rates and service than a private entity can provide over the long term ownership.
2. These advantages would allow the District to eliminate or reduce certain costs incurred by a private utility.
3. The District would not have a profit motive as with a private utility. The District would strive to keep costs as low as possible in order to avoid rate increases.
We purchased CSU from a firm that certainly operates to make a profit. The rates they charged would I assume give them a profit in its operation. Thus, those same rates should give NSCUDD a positive balance in year one and maybe for a few additional years.
As I live in CDD 10, I looked at my water and sewer rates starting in February of 2015 thru November of 2019. In that almost 5 year time period, my water and sewer rates went up almost 2 %. Let’s double that and say for ten years it might go up 4%. Does anyone on the board know what a rate increase of 2.5 % compounded over 10 years would be? It would amount to almost a 28% increase.
I am told that in 33 years the CSU rates will be lowered when the Bonds are paid off. That sounds reasonable yet I question whether those promises will be remembered by those still alive 30 years from now. In the meantime, we grin and bear it?
It seems that everything is tied to the repayment of Bonds needed to purchase CSU. If the previous owner charges a certain amount while making a profit, what has changed to make us need to increase charges to his same customers? We would be using the same equipment and personnel to provide the same level of service. The bonds we need are of course dependent of the price we paid for CSU. Maybe a price too high?
As a member of the board, I have not seen projected numbers that forecast our financial operation of CSU to help me determine what rates we may need to charge in future years. I am looking forward to the budget process we go through in 2020 to accurately provide the revenue needs of CSU. Until that budget review time, I find it difficult for me to vote for any increase in rates before day one of our operation of CSU. At this time, I would ask other board members to express their opinions on this rate increase and comment on my uneasiness that it’s breaking a promise to have more reasonable rates than a private entity and to try to avoid rate increases.
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