Streamline - Summer 2016 - (Page 33)

Revenue and Reasonable Rates BY JIM MARAS, COMMUNITY PROGRAM DIRECTOR FOR RD IN VIRGINIA EVERY WATER SYSTEM has expenses. Those expenses usually include salaries, electrical, chemicals, repairs, etc., that fall into an operating-type category. Most systems also have debt and, therefore, debt payments. For the most part, the operating expenses and debt payments do not vary much. Sure, repairs can vary from year to year and tend to increase as the system matures (mature is a nice word for getting older). Proper budgeting and planning should provide a good idea on what it costs to run your system. You must pay your expenses and that means you must have money. Your money comes from revenue generated by your rate schedule. Revenue, like expenses, is not difficult to predict. Your customers are generally pretty consistent on their monthly/annual water usage, which means usage applied to your rates will tell you how much revenue you will have. It all seems so simple - your expenses are $XX per thousand gallons and your rate is set a little higher than $XX per thousand gallons. Reality hits you when you see that the "magic" number is significantly higher than your current rate and/or higher than what you and your customers feel is reasonable. So let's talk about reasonable rates. Think about the other utility services you use and their cost. A nationwide cell phone provider offers a family package (4 phones) for around $160 per month. If you Google the average monthly electric bill in Virginia, it will provide information indicating $124 is average. Cable and/or satellite TV packages seem to run near $100 per month. We don't think twice about these monthly costs, but I hear every week from water systems that customers cannot afford water rates that are less than half these other utilities. I remember back in the early '80s when my cable cost $15 per month. Sure, everything has gotten more expensive for these other utilities and they have raised rates accordingly. They ensure revenue exceeds expenses. We must ensure our water systems' revenue exceeds our expenses, too. Revenue exceeds expenses - repeat that phrase over and over. The amount that revenue exceeds expenses will be based on your budget/plans that allow for some critical reserve accounts. You should have an operation and maintenance reserve that will help cover those unexpected repairs. You should have a short-lived asset reserve to cover replacement costs of short-lived assets, and you should have a debt service reserve. You should also consider capital improvement plan reserves to help offset future borrowings. As I mature, I find myself spending more on maintenance, so I spend less on other things. Revenue must exceed expenses. Use the Virginia Rural Water folks for a snappy water rate checkup! t Never needs painting t Sizes to 6 Million Gallons t Ground Storage Tanks t Standpipes t Composite Elevated Tanks Storage Systems, Inc. Greg Mullins 740-895-6028 Jim Wary 740-895-6029 www.midatlanticstorage.com 658420_Mid.indd 1 9/12/13 6:05 802661_Davis.indd AM 1 w w w . v r w a . o r5/3/16 g 33 8:36 PM http://www.midatlanticstorage.com http://www.dbfinc.com http://www.dbfinc.com http://www.midatlanticstorage.com http://www.vrwa.org

Table of Contents for the Digital Edition of Streamline - Summer 2016

From the President: Life’s a Dance
From the Executive Director: Drum Roll Please...
VRWA’s 2016 Conference Highlights
VRWA Says “Until We Meet Again
System Efficiency and Production: Time for a Change???
Confessions of the Chronically Late
OSHA’S Recordkeeping Rule
Lead
Revenue and Reasonable Rates
Spoofed!
When and How to Use Piping Restraints
Retaining Operators: Is it Really Just About $$?
NRWA Recap
What is WaterPAC?
Note from Myrica Keiser, Executive Director, VRWA
Throwing My Loop: The Secret to Creativity
VRWA Members Corner
eLearning Benefits
Membership Application
Benefits for VRWA Members
Mail Bag
Board of Directors
VRWA Committees
Index to Advertisers/Ad.com

Streamline - Summer 2016

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