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Kannapolis officials say Salisbury is overcharging for water
Photo by James Nix
The Yadkin River near Spencer, in Rowan County. Salisbury gets its water directly from the river and sells it to neighboring towns.
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Published: June 7, 2009
Kannapolis elected officials say Salisbury is overcharging the city for water and they're tired of it.
"I resent the way we have been treated by them, and I think we need to make that known to them," Kannapolis Mayor Bob Misenheimer said after learning that Kannapolis' water bill would increase $37,500 annually because Salisbury increased its rates.
While many cities in the region sell water to other municipalities for wholesale rates between $2 and $3 per 1,000 gallons, Salisbury charges Kannapolis the regular retail rate of $4.12 per 1,000 gallons.
Kannapolis entered into a 15-year contract to buy a minimum of 300,000 gallons of water per day from Salisbury on Sept. 24, 2001. The agreement was made during one of the worst droughts in the area's history, said City Manager Mike Legg. Kannapolis reserved the right to buy up to 3 million gallons per day from Salisbury if necessary. It never has.
"We were counting the days — literally — that we had water left," Legg said. "We were counting the days before the lake water was gone.
"We needed the water and we needed it fast. We agreed to pay the rate that they would charge us and that is the retail rate," Legg said. "They said part of that is to pay for their capacity. But we haven't entered into any complex agreement to pay for capacity. We're charged the same as a regular retail customer."
Salisbury City Manager David Treme said all but one water customer pays the same rate to purchase water. Southern Power in Cleveland, was given a lower rate for investing $7.5 million in Salisbury's water plant for capacity improvements. Salisbury has a capacity of up to 24 million gallons per day. The city only sells between 7 and 10 million gallons per day.
Treme said the city entered agreements with Kannapolis, Landis and China Grove during a severe drought. A pipeline had to be added to get the water to those cities. The rate they and all other Salisbury customers pay includes the debt for that project.
Treme said Salisbury officials are willing to discuss a lower rate for Kannapolis and Concord, which both have approached the city for long-term water needs.
"If we can guarantee an amount of water for the longterm, then we would entertain a lower rate," Treme said, adding that the city would also need an investment in its system.
"For us to be able to do that there would have to be some improvements in our plant," Treme said. "A distribution line is not really an investment in our system and the current rate was set to cover the cost."
Kannapolis has five sources of water. The primary source is Kannapolis Lake. The other sources are Lake Howell, Second Creek and purchase agreements with Concord and Salisbury. Kannapolis produces 3.1 billion gallons of water per year. It costs the city about $1 per 1,000 gallons to produce the water, which involves chemically treating the water to make it safe and drinkable.
Kannapolis City Council members say they want a better rate like the one they offer to their municipal customers. Kannapolis charges Landis $2.10 per 1,000 gallons. Landis buys about 250,000 gallons per day from the city.
Kannapolis charges Concord $2.34 per 1,000 gallons and pays about the same when it buys from Concord. The amount of water Concord buys from Kannapolis varies, but last year the city purchased about 1 million gallons per day when Kannapolis Lake was stayed more full than Concord's water sources, said Wilmer Melton, Kannapolis' director of public works.
Melton said Charlotte also charges about $2 per 1,000 gallons for the water it sells to other municipalities.
Legg said Salisbury must be more competitive to keep Kannapolis' business beyond the current contract.
"To Salisbury's credit, they have their own system they have to maintain," Legg said. "All we're saying is it has to be competitive with our other sources we're negotiating with. If it's not competitive, it's never going to work."
Salisbury draws water from the Yadkin River and then sells it to its residents, businesses, Kannapolis and other cities including Landis and China Grove, which also pay the retail rate.
Experts on inter-local water and sewer agreements say there is no set formula for how much one city charges another for water.
"There are literally hundreds of inter-local agreements across the state between different government bodies," said Jeff Hughes, director of the UNC School of Government's Environmental Finance Center.
Hughes recently completed a study of inter-local water and sewer agreements and plans to release a list of guidelines to help municipalities navigate negotiations for water.
"The practices are just all over the board," Hughes said. "There are some that have bulk rates that may seem cheaper to other folks. There are plenty of agreements where one local government will charge the municipality a multiplier of the retail rate."
Hughes said it's common for municipalities to charge customers outside their city limits higher rates reaching up to 300 percent more than what residential retail customers who live in the city would pay.
"Salisbury, from what I understand with some of the agreements I've seen, treats all of its customers the same," Hughes said. "They are respecting a pretty well thought out approach."
But Misenheimer said that's not good enough when other cities close enough to sell water to Kannapolis can beat their prices.
"It's time for us to say, 'Look, you're taking advantage of us,'" Misenheimer said. "They charge us four times as much as it would cost to produce this. It's also four times as much as the potential agreement with Albemarle."
Kannapolis city officials said they plan to set up a meeting with Salisbury soon to discuss the water rate and options for the future.
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