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Posted September 4, 2012 | 11 Comments
Front Royal eyes rate increase
But new power plant could spare big hike in 2016
By Alex Bridges -- firstname.lastname@example.org
FRONT ROYAL -- Dominion's power plant should spare Front Royal utility users from a major rate increase in 2016, according to a report issued Tuesday.
Front Royal Town Council at a work session saw a presentation by Burton & Associates of an updated water and wastewater utility rate study that addressed the levies needed to cover the costs of providing the services. As Michael Burton, president of the firm, explained to the council, the town has seen its billable usage in both water and sewer drop by 25 percent each over four years from fiscal year 2008 to 2012.
"We're just seeing demands drop all over the country so that's something you and everybody else is experiencing," Burton said.
Economic conditions contributed to the reduced demands, according to Burton. Current rates remain insufficient to meet current cost requirements, Burton told council. Councilman Thomas H. Sayre noted some of the decrease in demand likely came in part from people using devices designed to save water.
Annual rate revenue adjustments, according to the study, recommend the town raise the water rate by 8.5 percent each year for fiscal years 2014 and 2015. Dominion's power generations plant under construction in Warren County is expected to go online in 2016 and would connect to the town's water and sewer systems thus increasing the demand on the services.
By comparison, without Dominion, the town would need to raise water rates in fiscal 2016 by 35 percent. Councilman Eugene Tewalt expressed concern about raising the rate so sharply in one year and suggested the town would want to even out the increase over the three years.
Town Manager Steven Burke noted that Dominion coming online is closer to certainty.
Front Royal also must increase its sewer rates by 14 percent each year for fiscal years 2014 and 2015. Without Dominion the rates would need to increase by 30 percent. However, even with the power plant connecting with the town, Front Royal still must increase the sewer rates by 14 percent in fiscal 2016. No increases are envisioned after Dominion goes online.
Expenses include line upgrades, capital inventory and vehicles and equipment. Key costs also include annual rate increases, health insurance, fuel and chemicals. Burton explained the utilities should keep three months worth of revenue in reserve, totally approximately $600,000. The town needs to make adjustments to the rates or else face drawing down this reserve amount below what Burton called acceptable.
Burton & Associates performed a study on the town's water and sewer rates in 2010. Council choice not to implement parts of that study at the time because of the upcoming Wastewater Treatment Plant project and work performed on the water treatment facility. The firm, which offers multi-year financial management plans for municipalities, proceeded with updating the previous study.