Streamline - Summer 2016 - (Page 33)
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
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
As I mature, I find myself spending
more on maintenance, so I spend less
on other things. Revenue must exceed
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 Composite Elevated Tanks
Storage Systems, Inc.
w w w . v r w a . o r5/3/16
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
Revenue and Reasonable Rates
When and How to Use Piping Restraints
Retaining Operators: Is it Really Just About $$?
What is WaterPAC?
Note from Myrica Keiser, Executive Director, VRWA
Throwing My Loop: The Secret to Creativity
VRWA Members Corner
Benefits for VRWA Members
Board of Directors
Index to Advertisers/Ad.com
Streamline - Summer 2016