Harford County faced a fiscal crisis. The annual revenues in their operating fund were not adequate to cover even their annual operating costs. Reserve funds built during good economic times were depleting rapidly. Without a funding infusion, the water/sewer fund faced a $7.5 million deficit in fiscal year 2017 that could grow to a $74 million deficit by fiscal year 2021.
A primary cause for the forecasted deficit was the sustained practice of adjusting customer rates based solely on the Consumer Price Index (CPI), rather than a comprehensive financial plan. Other factors, such as declining water usage, aging infrastructure and an expanding service area, further contributed to the county’s fiscal challenges. To address these challenges, Harford County selected Black & Veatch Management Consulting, LLC, to perform a Comprehensive Utility Revenue Study that included a cost of service rate analysis.
Comprehensive Study
The comprehensive study included seven distinct work items, which were integrated into a 10-year financial plan. The plan included:
- Asset renewal forecasts and capital requirements.
- Additional costs to support the transition from quarterly billing to monthly billing.
- Funding of merchant fees to enable electronic payments and enhance the customer experience.
- Creation of an Asset Renewal Charge to further support capital funding.
- A phased, five-year financial plan that helped secure approvals for a series of five rate increases.
Customer and stakeholder engagement are critical components of any rate increase or restructuring. This took on a greater significance in Harford as the county had not done a comprehensive study in decades. The team worked to engage, educate and embrace inputs from the County Administration and County Council through multiple work sessions and council workshops. Transparency throughout the process was critical to engagement and education. The team posted its reports, presentations and other materials to the county website in addition to participating in public hearings.
“The nature of raising rates in a political environment is a difficult task, but the Black & Veatch team was able to provide clarity in presenting new rate concepts. The iterative approach not only established a reliable roadmap to financial resilience, but also launched a best practice process for financial planning and rate setting within our water and sewer division in Harford County.”
Joel Caudill, Deputy Director, Water & Sewer Division, Harford County
