With a dozen pressing water projects on the horizon and years of stagnant utility revenues, the Purcellville Town Council is facing pressure to ramp up rates on its residential customers.
The council met for a second time last Tuesday to discuss an imbalance in the water and sewer funds—which declined last year by 39 and 16 percent respectively, all while there is nearly $31 million of sewer debt and $21 million worth of water projects awaiting work. During the meeting, representatives of Stantec, an engineering firm that conducted an assessment of the municipal system, laid out in detail how much the town spends to operate its water system versus how much revenue it’s pulling in from customers.
The findings revealed that the town is spending about 20 percent more to serve single-family residential customers with water than the amount of revenue those customers are providing the town. Meanwhile all other users—mainly the town’s businesses—are providing the town with 24-46 percent more revenue than what the town is spending to serve them—a statistic that has the town working to restructure its 17-tier water rate structure, which could result in an increase to single-family residential users’ water fees.
Stantec highlighted that most single-family residential users don’t use more than 20,000 gallons in a two-month span, which means those customers are usually paying first- to third-tier rates at $6.66 per 1,000 gallons up to 5,000 gallons to $10.71 per 1,000 gallons up to 15,000 gallons. According to Stantec numbers, that means they’re spending on average $9.67 per 1,000 gallons of water, but it costs the town at least $12.08 per 1,000 gallons to provide that service.
That’s a problem because those single-family residential customers account for about 72 percent of the town’s 178 million annual gallons of water usage, meaning the higher rates paid by 273 multi-family, 14 commercial, and 12 institutional customers are subsidizing those homes.
No single-family water user has been using more than 100,000 gallons of water in a two-month billing cycle—meaning none are paying more than $18.17 per 1,000 gallons. But other water customers are using upwards of 600,000 gallons every two months and are spending up to $57.26 per 1,000 gallons in the 17th tier.
“It’s pretty obvious what the issue is,” said Stantec Principal Dave Hyder.
Town Manager David Mekarski said the town’s water rate structure is faulty because non-single-family users are paying much more for the water they require to operate while single-family users are paying much less. “Our current structure is neither equitable nor [does it] have a rational nexus to actual cost,” he said.
When Mayor Kwasi Fraser asked how the town’s disproportionate ratio of water service cost to revenue generation stacks up against other towns, Hyder said the ratio in Purcellville is “pretty misaligned.”
“There’s pretty significant subsidy happening,” he said, noting that most other towns with a population similar to that of Purcellville’s—about 10,000 residents—use a simpler rate structure.
Hyder cautioned that the town could find itself stuck in a loop in which commercial users might start leaving the system to find less-expensive water sources—leaving the town with fewer customers to spread costs out more evenly.
He told the staff and council members that the town’s 17-tier rate structure doesn’t work. “We need to come up with something that makes more sense,” he said.
In its place, he recommended that the town adopt a system that uses a tiered structure for one class of customers and a uniform structure for another, similar to what Loudoun Water does.
He proposed two customer classes—a single-family residential class and a non-residential class that would combine commercial, multi-family and institutional users.
He said the single-family residential class could feature a block rate with four tiers, the first of which could correspond with interior usage, the second with usage for large families, the third with usage for irrigation needs and a fourth with usage needs beyond that.
Vice Mayor Tip Stinnette asked why Stantec didn’t suggest a broader “residential” class, as opposed to the specific “single-family residential” class. Hyder said his firm didn’t suggest that because multi-family users, like those living in apartment complexes, don’t usually have a demand for irrigation and that grouping them with single-family users would be inequitable.
Hyder also pointed out that some multi-family residential dwellings have one meter that measures water usage for the entire building, which would complicate the tiered structure.
In general, he said that, while the town needs to raise its water rates, increases for single-family residential users wouldn’t need to be made by too much because those users contribute to nearly four-fifths of the town’s total annual water usage, so even small increases would bolster revenue to some degree.
When Fraser asked generally how much the town could raise water rates before customers begin to curtail their usage, Hyder said water users are already conserving “pretty aggressively.”
“I think the pricing signal is already there,” he said. “I’m not sure how much more people could reduce.”
Councilman Joel Grewe said council members need to be cognizant of the state regulations governing equitable water rate distribution when discussing out-of-the-box solutions to the rate structure. To that, Hyder said the industry standard is for municipalities to not be “arbitrary and capricious” when setting rates.
The Town Council will continue its deliberations during two work sessions next week at the Town Hall—one on Monday, Oct. 28 and another on Wednesday, Oct. 30.
On Oct. 28,Stantec will present its proposed water and sewer rate structure, which the town will use to revamp its existing 17-tier structure and set rates for the next decade. On Oct. 30, the council will meet to further discuss Stantec’s findings and potentially come to a consensus on a revised rate structure.
Town Manager David Mekarski said that if the Town Council needs, it will convene in three additional meetings in November and two in December.