FAQ: Water and Sewer Rates
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How do our water and sewer rates compare with other communities?
Hillsborough charges for a minimum usage of 2,500 gallons each billing cycle. Additional use is billed per 1,000 gallons. The rate charged to out-of-town customers is 1.95 times the rate for in-town customers. For in-town and out-of-town rates, see the Utility Fee Calculations on the Water and Sewer Billing and Collections page.
Across the State: A number of systems in the state have higher rates. In the Neuse River Basin, the watershed in which Hillsborough lies, Hillsborough’s rates per 5,000 gallons in January 2016 were:
- Water rates — higher than the median by $1.78 for in-town rates and by $5.89 for out-of-town rates
- Sewer rates — higher than the median by $14.54 for in-town rates and by $32.29 for out-of-town rates
Around the Triangle: In the Triangle region, comparing in-town rates for customers using 5,000 gallons per month as of January 2015, Hillsborough ranked:
- Water rates — 6th highest of 32 systems for in-town rates and 3rd highest of 24 systems for out-of-town rates
- Sewer rates — Highest of 29 systems for in-town rates and 2nd highest of 22 systems for out-of-town rates
- Combined water and sewer rates — 3rd highest of 31 systems for in-town rates and 2nd highest of 27 systems for out-of-town rates
Note: Most systems with lower rates are within larger communities; these communities have a larger customer base over which the cost of service can be distributed. The source for the above information (Water and Wastewater Rates and Rate Structures in North Carolina report) notes that comparing rates is not simple as the cost of service for each utility is based on a number of diverse factors.
Interactive Rates Dashboard: Compare Hillsborough’s rates with other water and sewer systems that are in the same basin or regional council of government or that have similar characteristics.
Rates and Rates Structures Report: View the report Water and Wastewater Rates and Rate Structures in North Carolina. Included is a section regarding myths about pricing.
Rates Research: View the summary report on rates and rate structures in the state, Water and Wastewater Rates and Rate Structures in North Carolina, as well as individual rate sheets for each water and sewer provider that answered a rates survey conducted by the UNC School of Government's Environmental Finance Center and the N.C. League of Municipalities.
Why are our rates higher than those of some surrounding communities?
Hillsborough’s rates are higher than some surrounding communities due to:
Terrain — Gravity is the most cost-effective way to transport water; however, Hillsborough’s terrain requires the use of many pump stations to keep wastewater flowing to the Wastewater Treatment Plant. The pump stations are expensive to operate, and failures can result in sanitary sewer overflows and fines from the state. Because of its terrain, Hillsborough has more pump stations than a typical municipality. In comparison, per million gallons treated, Hillsborough has three times the number of pump stations as Mebane and nearly 12 times that of Raleigh.
Watershed — Hillsborough is within a watershed that drains into Falls Lake, which has been designated nutrient-sensitive by the N.C. Division of Water Resources, part of the N.C. Department of Environmental Quality, and is on the EPA’s list of impaired waters. The state created the Falls Lake Rules to protect and restore Falls Lake’s water quality. The first stage of more stringent rules for wastewater discharges go into effect in 2016 and the second stage in 2036. Recent upgrades at the Hillsborough Wastewater Treatment Plant were constructed in part to meet the Stage 1 wastewater rule. Additional upgrades probably will be required to meet the Stage 2 requirements, likely to be the nation’s strictest limits on treated wastewater.
Maintenance Needs — Taking care of the town’s infrastructure is one of the guiding principles used in determining the town’s budget and financial plan as waiting to address, repair or replace these assets can be more costly in the long term. Nationally, the American Society for Civil Engineers has given federal, state and local governments a D- for drinking water and wastewater infrastructure. In North Carolina, water systems rate a B- and wastewater systems a C+. Little growth in Hillsborough and declining water use over the past 10 years are making it difficult to pay for rebuilding much of the town’s aging water and sewer system.
Hillsborough is not alone in facing serious challenges in operating and rebuilding its water and sewer systems. In a September 2012 article, USA TODAY reported that its study of residential water rates over the past 12 years found costs more than doubled in a quarter of the systems surveyed nationwide because of crumbling infrastructure and the need for repairs.
In Hillsborough, water and sewer rates are paying for a number of major projects and the debt service on those projects. The largest project is the Wastewater Treatment Plant’s upgrade and expansion, which was completed in Spring 2014. To avoid a large increase in the sewer rate at one time due to the project’s cost, the town spread a necessary rate increase over several years. The annual 8.8 percent sewer rate increase to pay for the plant’s Phase 1 expansion and upgrade started in Fiscal Year 2012. The final year for those planned increases is expected to be FY2016.
Critical Savings Level — Because small towns deal with smaller amounts of gross funds, they need larger savings levels to be fiscally sound and to satisfy criteria established by bond rating agencies. A reasonable savings level — also called “fund balance” or “retained earnings” — for a utility is critical to ensure the town does not have cash flow problems and can handle unexpected revenue shortfalls, expenditure overruns and emergencies. The town believes dropping below three months of the annual budget, or 25 percent, is dangerous.
Loss of Large Customer Base — In September 2000, the town’s largest water customer at the time (Flynt Fabrics) closed its operations, costing the town about $700,000 per year in revenue. The loss forced the town to take dramatic action to keep the Water and Sewer Fund financially solvent by raising rates by 34.2 percent in 2001 and making expenditure cuts.
The Efland-Cheeks sewer system is expected to disconnect from Hillsborough and become part of Mebane’s system. These customers generate about $250,000 (or 7.5 percent) of Hillsborough’s sewer revenue. This loss was included in the calculations to maintain a steady increase in rates, rather than a large increase when the customers disconnected.
Where does the money we pay for water and sewer service go?
The majority of revenue from water and sewer payments funds:
- Water and sewer operations
- Employees who provide the services
- Debt payments
Cost savings over the years have been shared with the Water and Sewer Fund through:
- Position cuts in the General Fund in fiscal years 2012 and 2013
- Major reductions in the town’s wellness program in the FY2013 budget cycle.
Recent Breakdown of Expenses:
In Fiscal Year 2014, the breakdown for water and sewer expenses was:
- 20 percent to operations
- 25 percent to personnel services
- 28 percent to debt service
Note: The Water and Sewer Fund budget for debt service payments grew to 28 percent (about $2.6 million) in 2015 because of debt payments for the Wastewater Treatment Plant.
Why are out-of-town fees higher than in-town fees?
Out-of-town fees are higher than in-town fees due to:
Cost of Service — Customers located farther away from the town’s core usually are more expensive to serve because of lower densities and greater distances, on average, from the town’s water or wastewater treatment plants. National cost-of-service studies generally find that serving out-of-town customers costs 25 to 75 percent more than serving in-town customers, with typical costs in the range of 45 to 50 percent more.
Investment Risk and Equity — As Hillsborough citizens, in-town customers bear more of the investment risks of owning and operating a utility, and more of the burden of financing and facilitating its operations through their local government, including through paying municipal property taxes. In return, owners of the system pay lower rates to compensate for the additional responsibility not shared by out-of-town customers.
Growth Management — Higher out-of-town charges also are a part of managing growth and annexation. Water and sewer service is a way to attract the type of development and tax base desired by residents. Lower in-town fees also make annexation more desirable in areas that already have water and sewer service, particularly since annexation would increase property tax rates to provide additional in-town services, such as police protection and garbage collection.