Town of Beech Mountain, NC
Water and Sewer Capital Improvement Plan and Utility Rate Review
The McGill team reviewed water and sewer operating and capital improvements costs in order to update the Town’s financial plan and user rates to ensure long-term sufficiency of revenue, equity among customer classes, and cost-justification of the rate structures. We presented our recommendations to the Town Council and were able to address public input and comments.
Beech Mountain is contemplating a secondary source of water supply to improve system reliability and resilience during periods of drought. Potential solutions include Watauga River intake (approximately 7.5 miles of pipeline and pump stations) and several groundwater wells developed within the Town limits. Adequate secondary supply construction costs could range from $1-16 million.
McGill developed a dynamic cost-of-service rate model that is able to determine revenue requirements, capital investments, debt service schedules, reserve account balances, rate structures, etc., based on client-defined input and assumptions that may be adjusted or changed to allow real-time evaluation of any number of scenarios. The model provides the framework for developing cost-justified recommendations to decision-makers as they consider needed rate adjustments.
The rate model produced several scenarios for the Town Council to consider, detailing potential impacts on water and sewer rates based a number of factors, including revenue sufficiency, conservation, customer equity, and overall sustainability of the utility; this allowed the Council to more clearly communicate the need for rate adjustments to customers, along with the basis for creating and tracking key performance indicators.
Combining several water and sewer main replacement projects and adjusting financing strategy from the FY2017 rate model allowed the FY2018 model’s 5-year projection of capital construction to be expanded from $4.8 million to $8.2 million, while remaining within the existing rate adjustment schedule; this allows critical water loss and sewer infiltration (health and safety) issues to be addressed in more timely manner.
“McGill’s understanding of Beech Mountain’s utility system, our customer base, and unique challenges facing our future water supply allowed them to create a financial model that will quickly adapt to the cost of each supply option and forecasts potential rate impacts. It’s a powerful tool that gives us confidence in our evaluation of these options and recommendations to the Mayor and Council.”