What are revenue bond rate covenants and what is their connection to water and sewer rates?
As noted above, revenue bonds that are issued to fund water and sewer infrastructure are not backed with City tax revenues. These bonds depend on the charges and fees collected from water and sewer customers. As such, bondholders generally require that the water and sewer rate structure be sufficient to provide for all system costs, including debt service. That is, current charges for services must cover the cost of those services. As the issuer of the bonds, the City agrees to a process that will assure the rate structure will be raised in order to provide for “coverage” of these costs if revenues drop below expenditures of the system. While water and sewer fund balance can be utilized to provide for a funding gap as a “one-time” revenue source, it cannot be utilized as a permanent source of on-going revenue and does not count as revenue for purposes of these bond rate covenants.

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1. What are tiered water rates?
2. Why are only Single Family Residential (SFR) customers subject to the tiered rate system?
3. If I use water in the higher Tiers, will all my water be charged at that amount?
4. Will sewer charges be assessed at the tiered rates?
5. How are commercial customers billed?
6. Do business customers pay more for water and sewer services than residential users?
7. Why are water and sewer rate increases necessary?
8. What do water and sewer service charges pay for?
9. What do water and sewer consumption/usage charges pay for?
10. What is an irrigation rate?
11. Does the City have resources for customers that may not be able to pay their water and sewer bill?
12. Does Durham use tax money to provide water and sewer services?
13. Why does the use of “one-time” revenues have an impact on the water and sewer rates?
14. What are revenue bonds and why are they issued?
15. What are revenue bond rate covenants and what is their connection to water and sewer rates?
16. What are fixed sewer consumption charges – also known as sewer only charges?