REVENUE VERSUS EXPENSES
A. R. Hathaway, Registrar of Springfield. Mass., Replies to a Query on this Subject by a Water Works Man
The following letter, which is self-explanatory, has been received by FIRE AND WATER ENGINEERING from the clerk and treasurer of an Eastern water works department
To the Editor:
On the subject of “Preaching Just Rates,” perhaps there are some readers who could enlighten us on arriving at a just decision in this matter. Last year our village received the sum of $4,916.43 from actual water receipts. This did not include an appropriation of $10,000 from the taxes. Our actual expenses, outside of the interest on the bonds and the payment of a bond, was $9,249.09, showing a loss of $4,332.56. We are endeavoring to decrease this loss by two means: First, the lowering of overhead expense, and second, the increase of our revenue. All water is metered. We charge $3 per quarter for a ⅝ meter and the minimum is 1,500 cubic feet. All in excess of the minimum is charged for at the rate of 15 cents per 100 cubic feet. We furnish the meter, and the consumer installs it. We also furnish to the plumbers the corporation cock and goose neck, the curb cock and box, and the house cock, and have our man inspect the work and do the tapping. This is charged to the plumber. How does this compare with villages the size of Wappingers (4,000)? The department recently passed a rule, and the village trustees approved the same, that all buildings occupied by more than one tenant would be charged for each tenant using water and instead of installing another meter the building would be allowed an increase in the minimum amount of water, that is, a building occupied by two tenants would be charged $6 for the quarter and the minimum amount of water would be 3,000 cubic feet. Do you, in your experience, think that this is a better way to arrive at a just charge to increase your revenue? Or would it be better to reduce the amount of the minimum of water to say 500 cubic feet? Thanking you for any information you may be able to give us on the subject, we remain,
Yours very truly,
May 23, 1921. D. M C.
On receipt of this communication FIRE AND WATER ENGINEERING referred it to A. R. Hathaway, registrar of the Springfield, Mass., water department, who is an authority on the subject of water works accounting, and his reply, which follows, will interest all of our readers concerned with water works finance:
To the Editor:
Regarding the inquiry as to proper and just rates for the village referred to in your communication of the 23rd, I confess that I would not feel competent to advise specifically with out knowing more of the conditions and details of the case. It looks to me that the village should at this time take up the matter in a thorough manner and work out the proper rates on the modern, scientific and equitable lines as prescribed by the special committee on meter rates of the N. E. W. W. Association, whose several studies and reports can be found in copies of the Journal of that association of the following issues; September, 1914, September, 1916, and December, 1916. (Also in the Journal for March, 1915. an article on “Rates for Water Supply,” by B. M. Wagner, C. E.; and in the Journal for March, 1918, an article on “Rate Revision in Municipal Works,” by Bertram Brewer, would be found helpful.)
The above Committee on Meter Rates (of which Allen Hazen, C. E., was chairman) recommended a standard method or form for establishing just and equitable meter rates, the principal features of which were the following: a “service charge” (so-called) to provide for taking cue of all supply costs (expenses of gathering, purifying, storing, transmitting); all commercial costs (reading meters, billing, collecting, accounting, etc.) ; and all losses of water from non-registration. Phis “service charge” to be made in all cases whether water is drawn or not, and that all water drawn should be charged at a current rate. The service charge may be called “meter rent” or some other term. Current rates, per unit of 100 cubic feet, or some other unit, may be divided into two or even three classes, according to amount of water drawn, or can be one rate for all classes; but should be in addition to the service charge.
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Revenue Versus Expenses
(Continued from page 1079)
It seems to me that the village works in question should first determine what their revenue in total should be; to take care of all supply costs (operation, maintenance, depreciation, taxes on plant, and a fair rate of interest return upon value of the plant cost); then what portion of such revenue is to be derived from the municipal use of water and general fire protection (should be payable from general taxes), and assess the balance upon the private consumers by means of an adequate “service charge” (according to size of the meter demand), plus the “current rate” for water drawn or registered. All expenses, including payments of maturing water bonds, as well as bond interest, and a reasonable annual amount for extensions of distribution mains, should be provided for from the water works revenues, if the water works is to be conducted as a municipal enterprise and a self-supporting public utility.
The foregoing general outline of procedure, in accordance with the recommendations and prescriptions of the best and acknowledged authorities of the present day in water works matters, appears to be the best I can offer under the circumstances.
Your subscriber mentions the appropriation of $10,000 from taxes, indicating that the water plant is not now self-supporting; also the payment of bonds and interest as excluded from expenses This all has a bearing on the revenues to be raised from the rates, which I judge would need to be increased to meet such costs at least. The lowering of overhead costs, as mentioned, is of course a matter to be worked out always where possible. All items of cost for services, stop-cocks, meters, etc., furnished by the water works, should naturally be included in cost of plant and its equipment, and the fair rate of interest on same to be provided for in whatever rales arc to be determined.
Trusting the foregoing may serve to help in some measure the consideration of the problem, I am,
Yours very truly,
A. R. HATHAWAY, Registrar, Water Department. Springfield, Mass., May 24, 1921.