Residents here might not have to pay inflated water and sewer rates for as long as expected.
Residential and commercial growth have picked back up, giving town leaders reason to think Knightdale can pay off debt from its utility merger with Raleigh sometime this fall or winter, about two years ahead of a revised target.
“We’ve had a lot more growth in the past few years than in the years prior to that, and that’s what has drawn us closer,” said Knightdale Finance Director Kim Kenny. “It depends on how much development is going on, water usage by customers. There’s a lot of factors that go into it. If any of those things fall off, then the payback goes further back.”
To join Raleigh’s water system in 2006, Knightdale and other Wake County towns committed themselves to purchasing water and sewer capacity based on economic growth projections. The idea was to quickly pay Raleigh for that capacity through development fees and higher water and sewer rates.
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But the 2008 recession left the merger towns with fewer customers than anticipated – one reason Knightdale pushed back its target date for paying off its obligations. The drought that followed in 2010 set the towns back further.
Garner, Rolesville and Wake Forest have since paid Raleigh back. When the remaining merger towns do so, their water customers will pay the same, lower rates Raleigh customers pay.
In-town Raleigh customers, for example, pay $2.47 per 100 cubic feet of water consumption up to 400 cubic feet per month. They pay $4.12 for 500 to 1,000 cubic feet and $5.49 for 1,100 cubic feet and more. Customers inside the Knightdale town limits pay $6.31 per 100 cubic feet.
“It gets us out of the water business and gives us lower rates for our residents,” Knightdale spokesman Jonas Silver said. “It’s a guaranteed water source, and City of Raleigh maintains it.”
At the time of the merger, when the economy was growing, Knightdale’s estimated payoff date was 2012. But after the bottom fell out, an amended agreement with Raleigh pushed the date back to 2018. And until recently, Kenny said, a more realistic year was 2019.
Knightdale’s merger debt was about $8.5 million as of June 30, 2015, and about $4.5 million on that same date last year.
Kenny now thinks the debt-free date could fall sometime between September and December. But because of many factors, that’s a moving target she said.
“It’s based on year-to-date revenue collections and some of the historical collection rates,” Kenny said. “It’s not an easy number to come up with. We’re looking to meet with Raleigh folks sometime in March to get a closer estimate. If we’re able to get the information from Raleigh, we may have a better understanding of where we are.”