In most of North Carolina, the most solid investment one can make is to buy farmland.

But Orange County isn’t like most of North Carolina. Apparently, Chapelboro farmland has lost half its value since 2006.

In 2006 OWASA purchased the Ray Farm (400 Jones Ferry Road, at the corner of Old Greensboro Highway). Although listed as 76+ acres, for tax purposes it’s listed as 73+ acres. The Ray farm backs up to OWASA owned land surrounding the University Lake reservoir, part of the OWASA system. In 2006, the OWASA board decided that owning more buffer land within the University Lake watershed was a “good idea”, good enough to spend $2,200,000 on the purchase. The farm came with a conservancy easement limiting the development

Four years later, OWASA has another “good idea”. Sell the Ray Farm for estate residential development. The property can be subdivided into four estates, some with University Lake views.

What’s the asking price? $1,100,000. That’s half the 2006 OWASA purchase price, less than the $1,286,064 assessed value. You can see the listing.

Why is OWASA selling close, in-town farmland with lake views for half what it paid four years ago? Don’t worry your water rates can continue to rise faster than your income to make up the difference.

The best way to boil a frog is to put it in a pot of water and slowly, progressively turn up the temperature. The frog doesn't hop out. It doesn't realize how hot it's gotten since it jumped in. That’s also the best way to cook the books and boil an OWASA water and sewer customer. Progessively, as well!

From 2000 to 2009, median household incomes rose in Orange County, North Carolina from about $53,184 to about $66,500. The increase was about 25%, based on HUD/ US Census figures.

From 2001 until October 2010, the OWASA “average” residential water and sewer bill for a family using 5000 gallons a month of OWASA water has increased from about $42.40 a month to $81.85 a month. The OWASA increase will be about 93%. In the words of OWASA, “Our rates are on the high side compared to other water utilities in our region.” Talk about the proverbial understatement.

Only locals with a Progressive mindset, one based on what sounds good and feels good, no matter what the cost, can accept these two sets of increases, side by side, as being “sustainable”. Incomes rise about 25% while utility bills rise about 93%. The billing temperature turned up slowly each year.

Consider Pulpsters that you’re now being forewarned that OWASA has a need “to continually renew and replace aging infrastructure (pipes, treatment plants and equipment) to ensure high quality and reliable service, now and in the future.” So a 93% increase hasn’t even allowed OWASA to keep up with the long term system maintenance requirements.

Here are the bubbling facts.

^ ^ ^ OWASA Water & Sewer ^ Monthly Bills ^ ^

Apparently, none of the Progressive municipal governance boards have bothered to tell OWASA that a Great Recession is wracking the national and state economies. On 27 May 2010, OWASA’s Board of Directors is holding a public hearing to approve a 9.25% increase in monthly rates. This almost double digit increase is on top of last year’s increase of 9.75%. That’s an average basic annual increase for a typical residential bill of about $170 in just the last two years.

What gives? Why is OWASA water so expensive? According to OWASA, the primary reasons for the proposed rate increase are lower drinking water sales, reduced connection fee revenues from new development, and the need to renew and replace aging infrastructure.

OWASA didn’t emphasize the 8% increase in healthcare costs that are being placed onto you bill. Apparently, no effort is being made to align OWASA employee healthcare contributions with those in small business. OWASA also didn’t emphasize the 30% increase in OWASA contributions to OWASA employee pension benefits. Finally, OWASA didn’t emphasize OWASA employee merit salary increases of 2.5% of OWASA payroll. (See OWASA Explanation.)

OWASA has a lot of questions to answer. Why didn’t it know that its customers would reduce their water usage by 25% over the last decade, particularly as the residential customer base grew? Why didn’t OWASA anticipate the massive reduction in the UNC water usage and adjust rates years ago BEFORE UNC would escape paying its fair share for the OWASA infrastructure? Where is the infrastructure aging, and why are all customers paying equally for this aging infrastructure?

Expect those answers when OWASA answers why it used capital revenues for years to offset operational expenses, offering UNC unrealistically low water rates. Remember, it what’s in the water that makes it golden.

In most of North Carolina, if a municipally funded field study on the effects of sludge spraying fell through, then money held and budgeted for that study would be returned to the municipal general fund. After all, no study, no need to spend the money.

However, Orange County isn't like the rest of the state. Here, the need to spend budgeted money outweighs any reason for budgeting the money in the first place. According to county bureaucrats, if you have the money, then you spend the money, no matter what. County commissioners must decide if they agree.

Years ago, Orange County residents concerned about ill health effects from nearby fields sprayed with UNC medical center sewage laced municipal sludge (euphemistically called “biosolids”) demanded a study proving how “safe and effective” the practice really is.

Responding to the bad publicity back in 2006, the Orange County Health Department (OCHD) agreed to have the UNC School of Public health conduct a field study and got $10,000 in its budget to conduct such a study. (See N&O Sludge Story.) However, study problems developed when a proposed researcher left and a suitable field couldn’t be found. Although UNC researchers now indicate a study can be done, $10,000 will no longer be enough money.

Rather than return the money to the county general fund, OCHD wants to spend $6,000 of the budgeted $10,000 for a restricted two day conference in October 2009. UNC employees, local officials and state municipal officials will tour the OWASA sludge operation site. You can’t.

Why are local activists deliberately being excluded? According to OCHD Director Dorothy Summers, “We weren’t looking at this as a community forum. We were looking it as being designed to be neutral. Our intention was to really provide education on biosolids and also understand the limitations of any science that’s out there.” Apparently, those most in potential danger from sludge can’t provide any education or understanding.

In the words of Ms. Myra Dotson, an Orange County resident concerned for years over the long term health effects of constant sludge sprayings, “I think to take money for an unbiased study and spend it on a pro-sludge forum is outrageous.” (See Chapel Hill News of 19 August 2009.)

No word on how much more money must be spent in order finally to have an empirical field study of potential health effects conducted using OWASA practices and OWASA/UNC Medical Center sludge on local county fields.

OWASA water demand is 16% down from FY 2001. That's a significant achievement considering that customer accounts have increased by about 3100. What’s the reward for OWASA user conservation? Is it lower costs? No.

OWASA (fresh off telling off Orange County Commishes to keep their hands off ten acres of a spray sludge area for a trash transfer station) proposes to reward OWASA water and sewer users with a 9.75% monthly user charge. (That's in addition to the 17% increase last year.) A public hearing is set for May 28th to approve this increase for FY 2009-2010.

Here’s what the proposed increase means to you as an OWASA individually metered user.

This increase comes in spite of OWASA eliminating 10 full time filled employment positions and freezing hiring on 8 full time vacant positions.

OWASA blames increased chemical costs. OWASA is silent as to whether or not the chemical increase stems from inflationary pricing or from inflationary usage due to a change in practices, such as the odor reduction programs recently put in place.

A strong and independent governance board helps to ensure fair, transparent, and understandable dealings. If a board is stacked with unknowledgeable and inexperienced figureheads, then the shades are closed on understanding, on the public knowing who is making what decisions, for whose benefit. The principle applies not only to for-profit corporations, but also to tax-exempt, governmental corporations.

The de facto southern Orange water and sewer development support bureau (aka OWASA) is a private, tax-exempt corporation owned by local governmental authorities. OWASA is a significant local employer, having 150 employee positions. The OWASA budget deals with $39,700,000 in projected revenues and other receipts. The OWASA governance board oversees an outstanding debt of $115,200,000 (as of 30 June 2007).

To oversee this substantial organization, the government owners (the town of Chapel Hill, the town of Carrboro, and Orange County) each appoint a portion of the OWASA governance board. Orange County has just appointed its newest board member.

OWASA announced recently the installation of board member Ms. Joy Preslar. She is presented as an easily engaging person you would find at a local non-profit gathering. She works as a substitute school teacher. Ms. Preslar’s past private work experience includes working at a daycare center, as well as working retail sales, public transportation, and private security. Her public work experience is as a member of the Carrboro Arts Committee. She sings locally in her own band – Storm Front. Perhaps Ms. Preslar’s strongest credentials for overseeing a 150 person, $40,000,000 organization is that she’s a pal of Commish Mike Nelson, having worked together on Carrboro Day events.

Recently, the Pulp reported on the average 10% increase in water rates. (See Pulp OWASA Rate Increase Story.) Readers asked, what about the sewer rates?

OWASA’s monthly rates for water and sewer combined will increase about 17% on 1 October 2008. With the new rates, the monthly bill for an individually-metered residential customer using 5,000 gallons will increase $10.06, from $58.18 to $68.24.

Why a 17% increase? Two reasons are given. First, water demand is expected to be 13% below past projections. OWASA customers responded to OWASA's higher conservation rate structure of last year by implementing conservation practices. OWASA never publicly acknowleged how its structure would create a need for even higher fees. (What a fantastic business model. Charge more for a product. When your customers use less product in response to your price increases, charge even more!) Second, new development connection fees are expected to remain about 40% below normal due to the local residential housing slowdown.

You are being hit with the consequences of an unusual accounting practice. OWASA has been using capital revenues (connection fees) to offset operating expenses. Why? If you believe that the local residential growth machine can never stop (a premise supported by the pro-growth governance boards of local municipalities) and your number one customer (UNC) is more interested in lower usage fees than connection fees, it's no surprise that such creative accounting is used.

The extent of the capital revenue transfer can be seen by the fact that OWASA has only 90% of its authorized employment positions filled, and has admirably reduced FY 2008 costs by $1,360,000. Even so, OWASA must raise basic residential water and sewer rates by 17% on average.

No word on when the Assembly of Governments will announce that “sustainability” includes the concept of “carrying capacity”.

No word on when local governments will limit residential development to conserve water.

The recent drought of 2006-2008 was for the record books. In response to the drought, OWASA water customers cut back dramatically on their usage. Not only did that voluntary reduction stretch the water supply, it stretched OWASA finances as people paid less in water bills despite OWASA efforts to hit its customers with raised rates. (See Pulp OWASA Rate Story.) To reward customers for their response, OWASA is increasing basic residential water rates, raising your bill by 10%.

Off-peak Winter Rates
In the seven months from October 1 through April 30, a lower “off-peak” seasonal rate is in effect. The off-peak rate from October 2007 through April 2008 was $3.08 per 1,000 gallons. In October, 2008, a new off-peak seasonal water rate of $3.40 per 1,000 gallons will go into effect as part of an annual adjustment of our rates

Peak Summer Rates
In the five months of May 1st through September 30th, a higher “peak” seasonal water rate applies to water use. From May 2008 through September 2008, the peak seasonal rate is $5.85. The peak seasonal water rate from May, 2009 through September, 2009 will be $6.46 per 1,000 gallons.

In the spring of 2002, OWASA completed a multi-million dollar expansion of the Jones Ferry Road Water Treatment Plant that increased production capacity from 15 to 20 million gallons per day. The improvements were necessary because the community’s peak demand for water had almost exceeded our treatment capacity. Based on Carrboro and Chapel Hill government supplied numbers in 1999, OWASA determined in 1999 that the service residential buildout will grow from 25,726 units to 45,542. However, neither OWASA nor the town governments are restricted to planning to these numbers.

No word on when the Assembly of Governments will announce that “sustainability” includes the concept of “carrying capacity”.

No word on when local governments will limit residential development to conserve water.

On Thursday night, May 22nd, the OWASA Board of Directors will receive recommendations regarding the proposed budget and rates and regarding current water use restrictions. The Board’s Budget and Financial Planning Committee will recommend that the water rates for a typical residential customer using 5,000 gallons be increased monthly bill from $58.18 to $72.69. That’s a 24.9% increase.

OWASA’s explanation for this record increase is threefold. First, responding to OWASA demands, consumers put in conservation measures. Second, growth has slowed in the OWASA service boundary. Third, OWASA didn’t plan for inflation in health insurance, energy and treatment plant chemical costs.

OWASA now predicts that water demand in FY 2008-2009 will be about 13% less than past projections, and that “connection fees” will decrease from less growth within the service boundary.

The proposed OWASA FY 2008-2009 operating budget is about $18.4 million, an increase of 2.3% over the current 2007-08 budget. According to OWASA, “the small increase in proposed operating costs reflects freezing of the vacant positions and other proposed cost reductions for the coming year.”

So if the operating budget is only going up by 2.3%, then why do your fees have to go up 24.9%? Let’s look closer.

On the revenue side, a comparison of Water & Sewer Operating Revenues (which includes the proposed rate change this year) reveals that in last year’s budget, these revenues were ($15,423,000 and $10,785,000) versus ($16,317,700 and $13,949,849) for this year. That’s an increase of 15.5%, recognizing that the 24.9% increase for the “average OWASA consumer” is not such an increase across the board, in particular for customers such as UNC. OWASA conveniently doesn’t tell you what UNC’s increase will be.

Likewise, a comparison of Service Initiation (connection) Fees reveals that in last year’s budget, these fees were $145,000 versus $148,952 for this year. That’s actually an increase (not a decrease) of 2.7% in revenues.

Curiously, in last year’s budget, there were listed revenues of $3,229,000 in ”Availability Fees”. The availability fee is applicable to each new connection to a water or sewer main, regardless of who may have paid for the installation of the main to which the connection is to be made. This year’s budget doesn’t use that term but does provide for an “Other“ revenues category of only $1,140,100, over $2,000,000 less this year or a decrease of about 65%.

On the expense side, a comparison of Total Operating Expenses (which includes all increases in energy, chemicals and healthcare costs) reveals that in last year’s budget, these expenses were $17,314,382 versus $18,407,951 for this year. That’s an increase of only 6%, not even close to 24.9%.

So what does this mean?

Once again reduced growth is the key element in municipal tax increases (although technically your water bill isn’t a tax but a use fee.), but in a different way from the role of growth in creating other municipal burdens (schools and parks) that must be covered by debt.

In this case OWASA used new growth-based tap connections to soften your water bill. In other words, connection fees from growth went into an OWASA operating revenue account and not into a capital accounts. By doing this, OWASA reduced operating expenses, thereby reducing UNC’s water bill. (You didn’t think that OWASA was as concerned about your water bill as UNC. UNC representatives show up at every public meeting concerned about the UNC bill.) Someone had to make up the $2,000,000 (or about 10%) in revenue shortfall in tap fees, hence a 24.9% increase for the “average OWASA consumer”.

See OWASA Proposed Budget.

At a 10 April 2008 meeting OWASA Directors rescinded the Stage 3 Water shortage notice and declared a Stage 1 Water Shortage. The reason? OWASA's storage capacity is now 70% full which represents 400+ days of storage (assuming no rainfall and average customer demand during the past 30 days). OWASA Directors didn’t say whether or not OWASA will still levy the high water rates that were effective between 28 February 2008 and 10 April 2008. (See Hot Orange OWASA Rate Pot of Gold Story.)

Local media stenographers have not asked the billing question. OWASA is silent. “Don’t ask, don’t tell”, alive and well in southern Orange.

In a fitting St. Patrick’s Day jig, the local southern Orange water authority (OWASA) charges higher water fees for water. The Stage 3 “luck of the Irish” rate structure promises a pot of gold at the end of the drought rainbow, for OWASA that is. By implementing Stage 3 water restrictions and rates, OWASA seeks a 10% further decrease in water usage from average non-restricted residential water usage.

Currently, under Stage 2 restrictions, the average domestic customer is using about 6400 gallons per month. At stage 2 rates, the first 2000 gallons is charged at $1.98 per 1000 gallons ($3.96). The next 3000 gallons is at $4.70 per 1000 gallons ($14.10). The final 1400 gallons at $5.53 per 1000 gallons ($7.74). That makes for a bill of $25.80 per month.

Under the ”count me lucky stars” Stage 3 rates, the average conscientious customer is expected to cut back 10%, using only 90% of that average 6400 gallons, or about 5800 gallons. Will that good citizen pay less?

With the Stage 3 rates, the first 2000 gallons remains at $1.98 per 1000 gallons ($3.96). The next 3000 gallons is increased from $4.70 per 1000 gallons to $5.875 per 1000 gallons ($17.62). The final 800 gallons is doubled from at $5.53 per to $11.06 per 1000 gallons ($8.85). That makes for a bill of $30.43 per month.

Although the conscientious OWASA customer has diligently cut their usage by 10%, their bill increases by about 18% ($4.63 per month).

What happens if the average customer only cuts usage by 5%?

Under those ”kiss the blarney stone” Stage 3 rates, the not so conscientious customer may use only 95% of that average 6400 gallons, or 6100 gallons will be used. How much more will they pay?

With the Stage 3 rates, the first 2000 gallons remains at $1.98 per 1000 gallons ($3.96). The next 3000 gallons is increased from $4.70 per 1000 gallons to $5.875 per 1000 gallons ($17.62). The final 1100 gallons is doubled from at $5.53 per 1000 gallons to $11.06 per 1000 gallons ($12.17). That makes for a bill of $33.75 per month.

The not-so conscientious OWASA customer sees a bill increased by about 31% ($7.95 per month).

How much does the average residential user have to cut their water usage in order to leave OWASA revenue neutral? About 15%. A difficult task for a family of five compared to a single individual. But OWASA charges don't discriminate on the number of users at a location. Of course, if revenues go net negative, OWASA will simply adjust its Stage 3 rates upwards. OWASA holds on to the pot of gold at the end of the rainbow no matter what!

Leprachauns in the for-profit world can only dream of a business model in which you produce less and charge more per unit, with the net result being increased net revenues with no downside risk and a captive market.

No word on how many more developer permits can be issued from living a semi-arid lifestyle.

No word on whether or not UNC will implement a tuition fee system based on the OWASA fee model.

Check out the OWASA Water Watch.

OWASA held a public forum on 24 January 2008 to solace southern Orange residents about the declining state of their local water supply during the current drought of 2007-2008 … and counting.

OWASA stressed an increasing need for residential water conservation, i.e., don’t wash your cars, xeriscape your yard, basically convert to a semi-arid lifestyle. In a “guns-and-butter” approach to local land development, OWASA continues to report to the southern Orange progressive governments that there’s enough water for more dense growth in Orange County.

The hard facts are as follows:
1) OWASA water supply is at 40% capacity.
2) Without rainfall, local water runs out in July.
3) Little water replenishment (aka rain) is expected in the peak spring period for renewal.
4) During the ’01-‘02 drought, the OWASA water supply fell to a low of about 30% right before the drought broke in Fall 2002.
5) Moreover, during that drought, the water supply stood at about 55% before the spring replenishment period in the second year, compared to 40% today.
6) Moreover, Spring 2002 say a replenishment period that elevated water levels to about 75%. Then the rainless summer of 2002 saw a precipitous drop from that level to about 30%.
7) Today’s supply would be at even lower levels (approaching that of the lowest level in the ’01-’02 drought) but for the water conservation efforts of citizens lowering demand by at least 15%.
8) Even assuming the rainfall pattern of the ’01-’02 drought, water supplies will reach about 15% levels in October 2008. Without significant rain, OWASA water levels will reach that same level by May 2008, hitting bottom in July 2008.

OWASA promotes interesting alternative responses pending digging more deep holes in the ground for developers. The options are:
1) Buy water from others.
2) Pump water from Jordan Lake.
3) Pump water from the Haw River.
4) Reclaim water from sewage and pump into University Lake reservoir for drinking.

OWASA doesn’t consider limiting growth even to be an option.

See Owasa Forum Report