The Goldsboro City Council discussed the need for water and sewer infrastructure improvements and how to fund them at its meeting Monday night.
The discussion was a follow-up to a unanimous vote by the City Council in September to ask the N.C. Department of Environmental Quality to designate the city’s water and sewer systems as a distressed unit.
The designation allows the city to apply for grant funding through the state’s Viable Utility Reserve to improve the systems, and required the city to conduct a rate study. The City Council had already hired Stantec Consulting Services to conduct a survey in 2019 at a price of $75,000. The study was conducted to examine the viability of increasing customers’ water and sewer rates to help pay off any debt incurred by the city in updating its water and sewer systems.
Dave Hyder, Stantec Consulting Services senior principal, led Monday evening’s discussion. He talked about the needed improvements, the cost thereof and how it might affect customers’ utility bills. Hyder pointed out during his presentation that the price tag for the proposed improvements was estimated at $188 million during the next 10 years and expected it would be debt-funded. Debt funding is money obtained through outside sources for the sake of paying for projects.
On a related note, Hyder’s report stated that the city has an existing debt in the amount of $24.5 million. That debt is in connection to monies from sources, such as the State Revolving Loan Fund, various general obligation bonds, and vehicle and equipment leases. Hyder stressed that the combination of that existing debt, continued flat utility rates and lack of growth in customer accounts could lead to financial concerns for the city.
The city has approximately 14,500 customer accounts in terms of water and sewer, he said.
Hyder told the council that Goldsboro is one of many municipalities nationwide that needs improvements to its water and sewer infrastructure.
“We do see communities that are dealing with the need for infrastructure replacement,” he said. “A lot of the infrastructure that was put in place is now reaching the end of its useful life all over the county, so a lot of utilities are re-investing in that infrastructure.”
Hyder presented two separate rate increase plans to the council. Each plan would see water and sewer rates increase beginning in fiscal year 2022-23.
The first set of plans that Hyder presented outlined rate increases of 15% in fiscal years 2022-23 and 2023-24 respectively, an additional 12% in 2024-25 and another 10% in 2025-26. The plan would result in customer bills increasing on average to $77.85 during the 2022-23 fiscal year, $89.51 in 2023-24, $100.27 in 2024-25, and $110.28 in 2025-26.
The second set of plans outlined rate increases that varied depending on the amount of debt the city takes on in order to pay for infrastructure improvements.
The initial proposed plan was met with concern by Councilwoman Brandi Matthews and Councilman Taj Polack.
“After we get to the 10, when does it level off?” Matthews said. “What’s 2027 gonna look like? What’s 2028 gonna look like?”
Hyder said the city may need to continue with a 7% increase in 2027 and 2028.
“The reason for that is that you’re taking on so much capital at $188 million if you tried to do that over a 10-year period,” he said.
Polack also shared concerns about the proposed increases.
“It seems like it’s now aggressive because we avoided any incremental rate,” Polack said. “I mean I see three, maybe four, maybe five, but now it’s at a point where we’re having to do so aggressive ... It’s almost as if there’s an epiphany all of a sudden as to how we can resolve a critical issue that’s been ignored, and I hate it for the citizens that they’re having to pay this cost.
“It’s going to be 7% after the 10, so you’re at $110 after five more years, and then it’s going to continue to go up. That’s what’s unfortunate. I just want to know if any consulting groups had done anything prior to this where it’s at such an aggressive rate increase. That’s my only problem with it.”
The city council voted 4-3 in favor of increasing the city’s water and sewer rates by 17.5% in 2020. A proposal to increase rates again in June failed to gain support.
“This is not a unique scenario unfortunately around the country,” Hyder told council. “I’m out of Maryland, and Baltimore’s been raising rates at 15% for about 10 years now.”
Hyder closed out his presentation by reiterating that the city’s existing water and sewer rates are incapable of meeting the city’s needs over time and that rate increases are needed to help pay for updates and improvements needed to the city’s infrastructure.
Mayor David Ham said the council needs to review the proposal for a possible decision after the first of the year.
“We have a difficult decision to make here,” Ham said. “We’re not going to deal with that tonight. We ought to give this some serious thought, come back in the first of the year and make a decision. We cannot just sit here and do nothing. We cannot rely on grants and funding from outside the city, necessarily.”