STATEMENT
FROM CITY OF LINCOLNTON
The City of Lincolnton has been a
supplier of public water since the
1920's. The current Water Treatment Plant
located on Reepsville Road, was built in
the 1970's. In the early 1990's, the six
million gallon per day plant was
operating at near capacity. The state of
North Carolina applied pressure to the
City to develop a plan to produce
additional water in order to meet
increased demand from City customers.
The City explored several options in an
effort to proceed with the most cost
effective, and most dependable source of
water, for the future of the City of
Lincolnton. Several options were
discussed with the County, including a
water authority, a water district, and a
merger of the two systems. When an
agreement could not be reached with the
County, the City proceeded to develop
plans to expand the capacity at the
existing facility, from six to nine
million gallons per day. The State
assured the City that the water is
available from the South Fork River for
such an expansion
In order to finance the project, the City
issued bonds to pay for the expansion.
Bonds were also issued to improve older
water and sewer lines throughout the
City, as well as to extend lines into
recently annexed areas. In the mid 1990's
the City successfully completed the three
million gallon per day expansion at the
plant, as well as a major plant upgrade.
When the design for the plant
construction was developed, the City was
required to secure the services of a
specialized consultant, to determine a
plan for fmancing the cost of the bond
issuance. The plan took into account not
only the expense of paying the City's
debt, but also meeting the daily
operating demands of the entire Water and
Sewer Department. This includes the Water
Treatment Plant, Waste Water Treatment
Plant, Distribution and Collection
Department, as well as the debt incurred
from the bonds. Some of the major
expenses in these funds include
personnel, chemical supplies, sludge
removal, and electricity. The plan called
for a series of rate increases that would
be necessary to retire the debt, and meet
all operating expenses. The City followed
this plan for several years. Once the
plant was constructed, unfortunately for
the City, the average daily demand for
water decreased. The below bar graph
reflects a steady pattern of decreased
sales since the mid 1990's.
Water
Average Daily Demand
MGD (million gallons per day)
Annual Fiscal Year Averages
Note: 2009 is the average thus far for
this fiscal year
The City also had discussions with
various industries, in which they
explained the difficulty in continuing
their operation, due to significant
federal changes that resulted in
increased competition, particularly from
foreign countries. Much of the dying
operations that were taking place in
Lincolnton, were now being completed in
other parts of the world. In an effort to
do everything possible to allow the
industries in the City to remain open,
the City created an additional tier that
provided a lower water rate once a set
consumption amount took place within a
month. There were also years the City did
not increase rates at the amount called
for in the original plan, in an effort to
assist industries that are a major
supplier of jobs for the citizens of
Lincolnton and Lincoln County.
The City's bond covenants require that
the City maintain a certain debt ratio.
In other words, the City must take in a
dollar of revenue for every dollar of
expenditure that is made. If the debt
covenant is not met for any particular
year, several things may take place.
First, the City must hire a consultant to
complete another study at an approximate
cost of $50,000.00. The City could lose
its credit rating which would affect
future financing needs. There is also the
potential that a bond holder could bring
a lawsuit against the City for failing to
meet the covenant requirement.
The 2008-2009 fiscal year has shown the
greatest reduction yet in water sales.
Whereas the City was selling an average
amount of over 4 million gallons in the
early 1990' s, for the year 2008-2009
this average has decreased to
approximately 2.9 million gallons per
day. Obviously this has resulted in a
drastic decrease in revenues.
The City has consulted with the bond
attorneys, and Local Government
Commission in Raleigh regarding this
matter. The Local Government Commission
oversees municipal budgets throughout the
state. It is agreed by all parties that
the City must take whatever actions
necessary to meet the bond requirements.
Unfortunately, in order to meet these
requirements, a rate increase is
necessary at this time. There is simply
no way to cut enough expenses to make up
for the drastic decrease in water and
sewer revenues. Should water sales
pick-up in the near future, City Council
is committed to revisiting the rate
schedule, and in a best case scenario
would be able to lower rates. Council is
also committed to working with existing
industries, as well as pursuing new
industries that can take advantage of a
quality water supply the City currently
has available. In order to meet the
requirements the City is currently
facing. it will be necessary to increase
rates at this time for both water and
sewer, by 24.5%, effective April 5. For
the average residential customer, this
should be an additional $12.00 -$15.00
per month. While these increases seem
significant, comparisons of other
governmental entities in this area
reflect that the City's rates will still
be lower than several of these
neighboring entities.
The City is greatly appreciative of the
cooperation received from our customers
during these difficult economic
conditions. The governing body and
administrative staff will keep a close
watch on conditions and make adjustments
we feel necessary to continue providing a
quality water service to our citizens, at
the most reasonable amount we possibly
can.
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