Water Partnerships in Surry County: Local Governments Working Together to

Provide Effective and Efficient Water Services

Lydian Altman, Jeff Hughes, Rick Morse and Andrew Westbrook

Environmental Finance CenterUNC School of Government

March 30, 2010

Agenda

• Overview of Project• Water Service Provision in Surry County• Partnership Principles• Strengthening Partnerships

– Existing agreements– New options

• Next steps – advisory committee

Public Outreach

Facilitated Work Sessions

Educational Sessions

Options and Opportunities

Financial Impact Analysis

Internal Workplan

Milestone Meeting(s)

Water Partnership Working Group

Community Education Workshops

Internal Workplan

Interviews / Research

Kick-off Announcement

Water Summit and Final Report

Partnership Principles

Water Partnership Working Group

Community Edu. Events / Public Outreach

Finance Profiles Modeling Assist. and

case studies

Past Partnership Research

GLF Workplan Internal Workplan Project Outcomes

3/29/2010, UNC School of Government

Current partnership models1. Long term bulk sales agreement/operations agreement (Multiple)

– Bulk rates covers capital and O&M costs for treatment and transport to master meter

– Operations agreement covers distribution and customer service O&M costs– Distribution capital costs not covered in contract and may be covered

through rates or other means2. Operations agent/Variation of lease to purchase (Flat

Rock/Bannertown) – Set portion of retail customers rates cover capital and O&M costs for

treatment and transport to master meter– Retail customers rates premium paid to county to cover capital costs of

distribution lines3. Authority (Elkin with Jonesville and Ronda)

– Local governments share ownership of an authority. All costs covered by retail customer fees.

Partnership principlesPreamble• Whereas, access to sustainable water and wastewater service is

essential to promoting public health, environmental quality and community development and economic development within Surry County.

• Whereas, water and wastewater partnerships between local governments often provide local governments and their citizens with substantial benefits. Such benefits include the creation of a larger and more diversified market for water and wastewater services that can more efficiently take advantage of existing capacity and that reduces the potential revenue risk of losing large volume customers.

• Recognizing the importance of promoting sustainable partnerships, local governments within Surry County will take into consideration a set of partnership principles designed to guide, but not dictate inter-local agreements and other forms of partnerships.

Partnership principles1. Information should be shared freely on capital planning for water, individual water agreements (interlocal in

final stages) and water partnerships in order to create a framework for communication. 2. It is important that we all benefit, but we will make efforts to avoid having debates over who benefits more

keep us from all realizing at least some benefits.3. Partnerships will be designed considering both long and short term impacts and if there are conflicts between

short term and long term impacts, priority will be given to long term impacts.4. Water partnerships among local governments in Surry County (individual agreements) should be as consistent

in form, content, and terms as is appropriate in order to promote transparency and good faith.5. Controlling availability and the price of water and waste water services is acknowledged as an

important component of local government growth strategy. At the same time, the secondary impacts of growth oriented water policies will be considered (e.g. considering how policies designed to promote annexation could impact low wealth customers outside of municipal boundaries that are not likely to be annexed).

6. There is a role for both long term capacity sharing as well as short term sharing. Expectations regarding the cost of capacity, however, should be realistic. Purchasers that do not contribute to the capital costs should not expect to count on capacity in the long term. Sellers of short term water supplies should focus on recovering operating and maintenance costs and not recovering capital costs.

7. Past investments and ownership of water assets should be recognized in partnerships. Agreements should include a fair return on equity/capital.

8. The value of a water system goes beyond its book value and should take into consideration future cash flow.9. We are open to creative innovative arrangements that take advantage of different statutory authorities and

resources of partners.10. To prevent service area disputes, communities will agree to communicate about proposed service areas

when extending lines and will clearly stipulate service areas in inter-local agreements.

4. Water partnerships among local governments in Surry County should be as consistent in form, content, and terms as is appropriate in order to promote transparency and good faith.

Current Situation:• Multiple models• Multiple variations of the same model• Multiple terms of the same variation of the same

model

10. To prevent service area disputes, communities will agree to communicate about proposed service areas when extending lines and will clearly stipulate service areas in inter-local agreements.• Develop county-wide service area

agreement– Current service areas– Projected future service areas– Criteria for running new lines

General findings

• Current contracts besides being inconsistent serve the basic purpose they appear to be designed for, but fall short tapping full potential partnership benefits.

• Significant costs related to upgrading or expanding capacity likely to lead to reevaluation of existing contracts

• Cost of existing capacity is a fraction of what new/expanded capacity

General findings• Costs of serving rural customers can

exceed cost of urban customers• Costs of serving rural customers without

strong policies promoting connections leads to higher costs

• Unallocated and unused capacity does not generate revenues and may lead to urban costs that approach cost of serving rural customers.

General Finding: financial sustainability of rural lines require widespread connectionsOptions• Mandatory connection policy (county)• Deployment of availability charge for residents that

do not connect but have access to lines• Financial incentives for early connections paired

with steep impact fees for delayed connectionsSecondary Options• Subsidized by general county tax revenue• Assessment financed line extensions (county)• Revenue supplemented by district tax levy

General finding – mutually beneficial untapped resources• County authority to promote increased

connections in rural areas• Surplus treatment capacity

Next steps

9. We are open to creative innovative arrangements that take advantage of different statutory authorities and resources of partners

Partnering Options and Strategies

1. Strengthened bulk sales agreements2. Expanded O&M service agreements3. Shared ownership of assets4. Municipal owned regional utility (e.g.

CMU)5. Creation of new authority (e.g.

ONWASA)6. County owned regional utility (e.g.

Harnett)

Models1. Streamlined and more consistent

coordination between existing owners2. Reduced number of owners – existing

providers and possible authority (e.g. Harnett County)

3. Single retail provider – authority (ONWASA, Tuckaseigee)

4. Single retail provider – existing provider (CMU, Raleigh, City of Sanford)

Next steps…• Advisory Committee: Purpose

– Assume leadership role on water issues – Develop and design new partnerships– Seek joint funding for projects– Develop template for agreements within the

county– Coordinate Service Area Plans

Next steps…

• Membership– One staff person + one elected official = 2

votes per community– Mandatory attendance, may find replacement

for scheduling conflicts– Include all local governments– Consider role of other community

stakeholders

Next steps…

• Meetings– Regular, set schedule (at least bi-monthly)– Hosted by single member unit of government,

with rotating duties• Support

– Member support• Single, rotating coordinator • Duties include arranging meeting place, food,

meeting notices, taking and distributing notes

Next steps…

• Communication– Meeting notes distributed, report back to

governing boards– Solicit input from governing boards about

progress and purposes– Provide regular updates to public through

press releases, public meetings

Next steps…• Support

– External analytical support• SOG, EFC, private consultant• Support through applied research of managerial,

legal and financial issues• Shared financial contribution from members and by

outside sources (GLF)

• Participation and Governance– MOU between governing bodes establishing

membership, pledging resources and adopting purposes

Questions?

Source: bettermondays.com

Option Ownership of Assets Operation of Assets Planning & Coordination (Governance) of Assets

1. Bulk sales agreementse.g. numerous Separate Separate

a) Separate orb) Coordinated through informal or formal coordinating structure

2. Bulk sales with O&M agreemente.g. Mt. Airy - Surry Co. Separate Unified - one entity on

behalf of other(s)

a) Separate (O&M entity only) orb) Coordinated through informal or formal coordinating structure

3. Shared ownership agreemente.g. Cary-Apex facility Shared

a) Unified - one entity on behalf of other(s) orb) Shared

4. Regional system, single unit on behalf of otherse.g. Charlotte-Mecklenberg, Raleigh, Salisbury

) Single entity (operating within confines of agreements) orb) Coordinated through informal or formal coordinating structure

5. Regional Authority (facility only)e.g. PTRWA

Separate (each entity owns own distribution system, billing, etc.)

Shared Coordinated through governing board made up of participating jurisdictions

6. Full-service Regional Water Authoritye.g. TWSA or OWASA Shared Shared

Coordinated through governing board made up of participating jurisdictions

Potential partnership models

Rates

Residential Rate Structures

Capacity and Operating Costs