Tuesday, June 14, 2011
CMUD Welcome to the Matrix
Last night Charlotte City Council approved the 2012 budget that will more than likely increase your water bill.
You have to hand it to CMUD as they have managed to cook up another brilliant move that will confound even the most seasoned accountant. A formula so complex that it had Charlotte City Council member Warren Cooksey tongue tied last night, while trying to explain why the big users will pay more.
Back in February Charlotte City Council approved a rate "re-structure" for CMUD customers. The idea, as the sales pitch goes is to lower rates for the lowest and highest users, while "bumping up" the rates for the average user, which if the scheme proves true will make for better average revenue flow.
(Note: CMUD can't effectively manage the changes between peak and off peak seasons.)
But the scheme doesn't decrease the rates for anyone, as it is expected to increase the average monthly bill by nearly 10%.
How did we get to this point?
In the early 90's CMUD decided it needed to adopt a "tiered" rate structure, that sent a "conservation message" and helped to recover the "additional cost of meeting excess demand" in other words a pricing scheme that penalized those who used more water per month than the rest of us and the windfall would be used to build bigger waterlines to meet the larger demand.
So back in 1994 the first tier was set at 1-18 ccf which is where most of us found ourselves, and the new bills didn't seem to cause much confusion. In reality if you went crazy and filled up a swimming pool and went over the 18 ccf, you expected a bill spike.
In 2001 the tiered rates matrix was "tweaked" to reflect updated consumption data by lowering the first tier from 18 ccf to 16 ccf. Still no real issues since most citizens used less that 16 ccf even during the summer.
All was well and fine until the drought of 2002 when the tiered rates were raised by nearly 60% for "high use" customers. The sales pitch back in the day was to "force" more conservation.
Then in 2007, CMUD and mother nature along with the help of Duke Power drained the water in the Catawba River System to scathingly low levels. This prolonged drought did two things, if forced residents to re-think how they managed their water use and taught CMUD a valuable lesson, that consumers are as fickle as the weather.
So CMUD rolled out the new "four" tiered system lowering the first tier to 4 cff a second tier was created at the 5-8 ccf level and another at 9-16 and the fourth at 17 cff and above.
This caused some unforeseen consequences. First it was a massive "stealth" price increase as most customers averaged in the 9-16 range, second it complicated the billing for nearly 93% of customers who found themselves with consumption that jumped month by month between two price tiers.
Who could forget the March 2008; notice that CMUD customers received thanking them for conserving and informing them of a 15% rate increase due to the decreased demand for water. A letter so comical it was even featured on the "Ripley's Believe it or Not" television show.
Charlotte Observer - April 8, 2008 "its official, Charlotte-Mecklenburg water and sewer customers: Your rates will go up because you conserved. Charlotte City Council approved an unusually steep water and sewer rate hike Monday - double the normal annual increase - to make up for lower water sales in recent months, as the region has stopped lawn watering. The vote was 7-3, and several council members including Andy Dulin in support of the motion complained that they had little choice."
What CMUD soon discovered is that those in Charlotte who have expensive homes and irrigation systems will pay for water up to a point. But, as a local doctor explained it to Cedar Posts, "just because I can afford a 50 dollar hamburger doesn't mean I'll buy one."
The entire pricing system was counter intuitive. Normally if you buy more you "earn" break points, buy the extra large size of laundry detergent and it costs less per ounce.
The other lesson learned was that the tiered system was so confusing and the penalty for going to tier 4was so steep, causing huge price spikes that it over whelmed the customer service side of CMUD. Customer service began to fail, as call center staff resorted to out right lies, and denial.
In 2010 CMUD finally admitted it had issues with its billing and metering system. While they are still making excuses and claim errors in billing are less than 1% at least they acknowledged a problem that citizens have long known existed.
The simple reason for all of the upheaval is that as long as the water rates were low, and a 15% error was only a couple of dollars it didn't matter to most people. But after years of increases often at a rate nearly 10 times that of inflation these spikes have become really money.
The ugly truth is the CMUD has been "stealing" from Charlotte citizens for years. The system so bloated with employees and so shockingly inefficient and so accustom to an endless stream of revenue that it is not a business but a ponzi scheme. The only way it could stay afloat was to bring in new investors and expand the matrix.
Now council members Dulin and Cooksey have again joyfully approved the changes. The effect will mean an across the board increase for the majority of Charlotte's citizens that will show up in their mail boxes sometime in July.
CMUD has been to the feed trough time and time again buffaloing their way to higher rates and ever more creative fees and charges.
Under the new rate structure, about 94 percent of Charlotte-Mecklenburg Utility customers will pay between $1.60 and $6 more a month for water and sewer. City Manager Curt Walton projects that the increase will be mostly due to two new monthly "availability charges" of $3.73 for sewer and $2.19 for water.
Council members approved the new rate structure with an 8-3 vote, with Democrats Michael Barnes, Warren Turner and Patrick Cannon voting no.
Sobering thought, the department is more than $1 billion in debt, and about 60 percent of revenue goes toward debt services, according to Charlotte council member Warren Cooksey.
Cedar's Take: So here's what troubles me, the reason we all live in a city versus the wide open spaces is economies of scale. Providing cost effective basic services should be a mandate in Mecklenburg County.
But over the last five years our water rates have increased on average more than 8 1/2 times the rate of inflation.
2007 Rate Increase 6.25%
2008 Rate Increase 14%
2009 Rate Increase 5.2%
2010 Rate Increase 7.6%
2011 Rate Increase 10.0%
CMUD has managed to complicate the obvious and trivialize the momentous. Their past efforts to confuse and deceive have created a monster that even they don't understand.
CMUD's pricing scheme has become so complex that it required the hiring of "outside" consultants to prepare a document to justify another rate increase and further complicate the rate structure in an effort to optimize billing and revenues.
A report so filled with calculations that city council member's eyes simply glazed over from confusion. Leaving members Cooksey and Dulin little choice but to vote to approve the change, for fear of actually having to understand what a mess they have approved.
The bottom line is Charlotte’s past record of growth can not be maintained in the future because it is incompatible with our water resources. Justifying continual rate increases with comparisons to other water departments, on the state or national level is misguided. Numbers and percentages do not equate to "local" taxpayer's cost of living.
We need to elect local representatives who will not only put a stop to reckless spending and growth of government but reduce the size of the matrix, and strive to simplify the billing process and reduce the burden on taxpayers.
Finally the water supply provided by God in the Catawba Basin is finite. We have reached the point were "water wars" are inevitable, and this is an issue that can not be fixed by council members with limited ability to grasp complex concepts.
Cedar Posts Extra Credit: Want to dig in to the matrix further? Check out the Mayor's Water Solution Task Force report to Cornelius mayor Jeffery Tarte which is here.
CMUD tries to explain the method to their madness here.