In addition to Rates Dashboards, the Environmental Finance Center at the University of North Carolina at Chapel Hill regularly publishes tables of water rates and rate structures of various states. Last month, in addition to tables of water and wastewater rates, the EFC at UNC also published tables of public fire protection charges in Wisconsin as of January 2018. These data tables are one of several products created from data for water rates and rate structures of 575 water utilities throughout the state of Wisconsin. The data tables list each utility’s residential water rate structure details, monthly-equivalent bills computed at different consumption levels, and public fire protection charge information.
This post explores what fire protection charges are, how they are collected, and how system size plays a role.
What is a public fire protection charge?
A public fire protection (PFP) charge is designed to recoup the cost of building and maintaining a water system’s capacity to provide high pressures and flows to hydrants in the water system for the purpose of fire suppression. Depending on the system, the PFP charge pays for a portion of the cost of wells, pumps, storage facilities, water mains, and hydrants, associated with delivering water required for fire suppression purposes. It is important to note that the PFP charge is not simply a “hydrant rental” fee.
In smaller water systems of 1,000 or fewer customers (Class D), the fire flow typically represents the largest potential demand on the system. In larger systems of 4,000 or more customers (Class AB), the maximum hour demand for general service may be larger than the fire flow requirements. In simple terms, this means that maintaining fire suppression capacity in smaller systems represents a significant added cost of infrastructure capabilities, while it is less significant for larger systems. Table 1 shows that the median PFP charge as of January 2018 in Wisconsin for the 559 water utilities with PFP charges are larger and make up a higher percentage of the both the base charge and the total bill at 5,000 gallons for smaller systems (Class D) than for larger systems (Classes C and AB).
Table 1: Median and Average PFP Charge by Utility Class as of January 2018
|Number of Customers||Median PFP Charge||Median % of Base Charge||Median % of Bill at 5 kgal|
|Greater Than 4,000 (Class AB)||$ 6.02||45.8%||21.1%|
|Between 1,000 and 4,000 (Class C)||$ 9.75||55.1%||28.1%|
|Less than 1,000 (Class D)||$ 12.19||59.0%||30.4%|
How are PFP charges collected?
PFP charges may be collected by one of three methods: direct charge, municipal charge, or combination of both. A direct charge is simply included directly on a customer’s water bill. This charge is specifically authorized in Wisconsin Statute § 196.03(3)(b). Direct charges allow the water system to recoup costs of fire protection from tax exempt entities like churches and schools. Utilities have the option of calculating their direct charges using a number of different methods, including meter size and property value. A municipal charge is a PFP charge recovered by the municipality or sanitary district via property tax bills. Finally, a combination charge, as the name implies, charges the customer through a combination of a direct charge and a municipal charge. Table 2 explores pros and cons of direct and municipal charge methods, respectively. Some of the pros and cons of direct charges may be affected by the methodology used to calculate them.
Table 2: Pros and Cons of Direct and Municipal Charge Billing Methods
|Direct Charge||· Does not count towards municipality’s tax levy limit
· Tax exempt water users contribute to fire suppression costs
|· Not tax deductible for customer
· Cost to customer may not be strictly proportionate to benefit received
|Municipal Charge||· Tax deductible to customer
· Charge is proportionate to benefit received
|· Counts towards municipality’s tax levy limit
· Tax exempt properties do not pay
A previous blog post by guest author Susan Ancel from EPCOR Water Services Inc., explores in more depth the decision-making process involved in a water system choosing a PFP charge method.
Table 3 below displays PFP charge data by billing method in Wisconsin. While just 34 percent of rate structures use a direct charge, the majority of the population served in Wisconsin (73.4 percent) pay PFP charges through this method. These data show that larger systems are more likely to bill with direct charges than smaller systems.
Table 3: PFP Charge Data by Billing Method
|Number of Rate Structures||Percentage of Rate Structures||Percent of Population||Median Monthly PFP|
|No Public Fire Protection Charge||16||3%||0.2%||–|
This short analysis shows that fire protection represents a proportionally larger portion of the bill for customers of smaller systems than for customers of larger systems in Wisconsin. Additionally, larger systems are more likely to charge customers for fire protection costs via direct charge. For more topics related to water services and systems in Wisconsin, look for our upcoming 2018 Report of Water Rates and Rate Structures in Wisconsin.
More Public Fire Protection Resources
Evan has been with the EFC at UNC since 2016, when he graduated from UNC-CH in 2016 with a degree Environmental Science. He is currently a master’s candidate in City and Regional Planning at UNC with a concentration in land use and environmental planning. Evan works on the EFC at UNC’s water and wastewater rate surveys and the UNC Nutrient Management Study as a research assistant.