Benefits of Performing A Thorough Review of Cost and Revenue Optimization Options Before Implementing Rate Increases To Fund A Major Water/Wastewater Capital Program: The DeKalb County, Georgia, CIP 2021 Experience

BACKGROUND
DeKalb County, Georgia (County), provides centralized county-wide water and wastewater services to its approximately 750,000 customers by developing, operating, and maintaining an estimated 6,000 miles of pipe in the water distribution and wastewater collection systems and major water and wastewater treatment facilities. In recent years, with the need for new capital investments thoroughly identified and documented through newly developed hydraulic models and master planning, the County has developed a new $2.408 billion, in 2021 dollars, Capital Improvement Plan (CIP) for the years 2021 through 2030 (CIP 2021). In February 2021, the County's Governing Authority, including Chief Executive Officer (CEO) Michael L. Thurmond and the County's Board of Commissioners (BOC), adopted a resolution approving CIP 2021, initiating a new era of major investment in repairing, maintaining and improving the County's valuable water and wastewater infrastructure.1.
REVENUE OPTIMIZATION
The size of CIP 2021 has required the CEO to direct the Finance and Watershed Management Departments to complete a thorough and detailed review of key expense and revenue sources to ensure that expenses have been minimized and revenues maximized so that the funding of CIP 2021 can be delivered with minimum financial impact to its customer base. The scope of this process is represented diagrammatically in Figure 1 below. Figure 1: DeKalb County Revenue Optimization Process Overview
DECREASING OPERATING COSTS
To decrease operating costs, the County focused on two key areas: 1. Improving the water distribution and wastewater collection systems, and 2. Reducing the cost of debt. Improving the Water Distribution and Wastewater Collection Systems The County estimates that approximately 29% of the water it produces is lost before creating revenue to the County. This is substantially greater than industry best practice of around 10%. Similarly, the County's wastewater collection system is known to be 'leaky', with substantial amounts of inflow and infiltration that must be treated by the County. CIP 2021 includes both short- and long-term investments in addressing both lost water revenues and added costs due to infiltration to the sewer system. Reduced Cost of Debt CIP 2021 will far exceed the County's cash on hand or ability to fund from operating income. A thorough review of debt options has led the County to identify much cheaper options, as follows: 1. Water Infrastructure Finance and Innovation Act (WIFIA) loans 2. Georgia Environmental Finance Authority (GEFA) loans 3. Lower cost revenue bonds and refunding of existing debt. The WIFIA and GEFA loan programs, administered through U.S. Environmental Protection Agency (EPA) and state of Georgia, respectively, are especially attractive debt instruments that provide significant interest savings. Further, these debt instruments allow for long-term debt amortization, capitalized interest, and deferred payments. These financing vehicles also eliminate negative arbitrage through the delaying of interest payments until construction funds are drawn for disbursement.
New and/or Re-Financed Revenue Bonds The County's existing revenue bonds were obtained both at a time when interest rates were much higher, and at a time when the County's debt rating was less attractive. The current low interest rate environment together with concerted efforts by the County to improve its financial rating, the County can both refinance existing bonds and enter into new bonds at much lower interest rates. INCREASE REVENUE
Convert Unauthorized Consumption to Revenue The County has entered a contract with a 3rd party company to perform an audit to identify commercial users who are not paying the correct amounts, if at all. Historical billing information is reviewed, with in-field audits to confirm findings.
Assist Those in NeedPlumbing problems and leaks often result in increased bills that are greater than the ability of low-income customers to pay and may result in the customer not being able to afford either to fix the leak or to pay their bill. To help the most vulnerable and stop this cycle, the County has implemented programs to both make available Federal grants to those in need, as well as creating programs to customers in need in obtaining needed plumbing repairs.
Accurate Meters and Bills In 2016 the number of metering and billing issues being escalated to the County increased dramatically, garnering significant customer outrage and negative press. In response in 2017 the County's leadership implemented a disconnection moratorium where customers would not be disconnected if they did not pay their bills. In response, the New Day Project was implemented to identify the root causes of the billing issues and address them. The New Day Project has replaced and upgraded over 82,000 meters and has restored public trust that bills are accurate. With public trust restored, on September 1, 2021, the CEO and BOC lifted the disconnection moratorium and began a process for re-engaging the customers disengaged by previous mismanagement.
Increase Current Accounts Since the disconnection moratorium the County has seen a substantial rise in the number of customers who are not current. In early 2021 only 86% of the County's customers were current with their payments. This is well below industry best practice. In July 2021, 13,325 customers had not made any payment to the County for at least six billing cycles. In 2021 the County began a concentrated effort to re-engage their disengaged customers. Initiatives included offering repayment plan options, including special considerations for those impacted by COVID. Additional call center staff were added, and the County started proactively calling customers with past due balances. These efforts have yield exceptional outcomes, and as of December 2021, the number of customers had not made any payment to the County for at least six billing cycles had dropped to 4,900.
OUTCOMES
The efforts described above have yielded substantial benefits to the County, including allowing the County to both substantially reduce rate increases while deferring these rate increases for several years.
CONCLUSION
CIP 2021 is a major investment in repairing, maintaining and improving the County's valuable water and wastewater infrastructure. To ensure that this major investment can be delivered cost effectively, the CEO directed Finance and Watershed Management Department staff to complete a thorough and detailed review of key expenses and revenue sources to identify both opportunities to reduce operating costs or increase revenue. This process has been thorough and broad, and has yielded exceptional results, allowing rate increases to be both substantially reduced and delayed up to 4 years, a real win for all residents of DeKalb County, Georgia.