In fiscal year 2008, the division spent $9.9 million and raised $6.3 million only, resulting in a $3.6 million deficit, he said.
His division at the same time must comply with the federal government’s stipulated orders, which he said will cost CUC $2 million in FY 2009.
CUC’s consultant, Georgetown, is now “reviewing data and will propose rates that…balance economic conditions and the needs of the utility,” Megarr said in his Power Point presentation.
He reminded lawmakers that noncompliance with the stipulated orders will result in fines and penalties — which will increase for every day of noncompliance — as well as contempt charges and receivership.
“That’s what happened on Guam,” Megarr said. “The feds placed Ordot Dump under receivership and have ordered GovGuam to pay the receiver $1 million a week.”
The stipulated orders, he added, “didn’t come out of a blue. CUC was repeatedly cited for its failure to comply” with federal water and wastewater standards.
Megarr said CUC “has good people — they are doing their jobs, but we need funding.”
“Funding mechanism must be created or garnered from additional sources, not from existing rates. Why? Existing rates are not meeting current operational need.”
He noted that CUC’s current sewer rates were set in 1987 while the water rates were set in 1995.
A typical monthly water/sewer bill for commercial customers amounts to $50 while unmetered and metered residential customers pay up to $30 a month, he said.
“Water rates have remained unchanged for 15 years: $1 per thousand gallons as base rate [for] metered [customers]. $11 flat rate for unmetered customers. Sewer rates were decreased: $5 reduced to $3 per thousand — [a] flat rate; and 50 [cents] per thousand gallons of water consumed.”
To address its financial problems, CUC must complete its water meter program, Megarr said.
“Meters will provide customers with the incentive to conserve and fix leaks,” he added.
According to Megarr, “the good news is that the water and wastewater division, in coordination with the water task force, has met some stipulated order deliverables and others are in process of being completed.”
Besides “adjusting” its current water and sewer rates, CUC will need additional funding from the CNMI government for system rehabilitation projects.
The CNMI, he added, should also “lay [the] responsibility of increased cost at [the] feet of [the] feds.”
Megarr said the recently enacted federal stimulus package will help CUC.
“It may [provide an additional] $3 million to CUC’s water/wasterwater division,” he added. “The stipulated order will also allow the CNMI to be more competitive when applying for grants — federal agencies consider an applicant’s need to comply with these orders when awarding grants.”
Sen. Maria T. Pangelinan, D-Saipan, said “it is sad that we need to have these stipulated orders to require the CNMI government to ensure that our water systems do not present a health risk to the public.”
Rep. Tina Sablan, Ind.-Saipan, told Megarr that she and other lawmakers want to schedule a tour of CUC’s water and wastewater facilities.
Megarr said he will coordinate with Sablan in scheduling the tour.
It was Sablan, in her capacity as chairwoman of the Saipan legislative delegation’s Public Utilities and Infrastructure Committee, who invited Megarr to meet with lawmakers on Friday morning in the House chamber.
With Megarr was Robert Lorenz from the U.S. Public Health Service.
“He’s one of the engineers recently assigned to CUC to assist with the stipulated orders,” Sablan said.
