UAJA costs based on size of facility

Every businessman sets the price of his product to recover the cost of its production. The price a pound of sugar is determined by the combined costs of raw material, processing and distribution. The amount you spend for sugar is directly related to the amount of sugar you consume.

The amount you must pay to rent a facility like an office or to enjoy a service like television or internet cable is different. The cost of providing such facilities or services is almost totally independent of the amount you use them. You pay the same amount for TV cable whether you watch television one hour or one hundred hours each month. If you rent an office or apartment, you pay the same amount regardless of the amount of time you actually occupy the space.

The difference between the price of a commodity (like sugar) and a facility or service lies in where the actual costs are incurred. For commodities, the principle costs are those of raw material and processing — costs directly related to the quantity produced. For facilities and services, the principle costs are those of constructing and maintaining the facility or system; costs that are unrelated to the amount of use.

The University Area Joint Authority provides a service: the collection, treatment and safe disposal of “waste” water. The authority has invested tens of millions of dollars to build a modern treatment plant and collection system. Debt service, operating costs and the cost of maintaining the system are little affected by the volume of water treated each day. The authority believes that it is most appropriate to apportion these costs among its customers according to the size of the facility served.

The writer is chairman of UAJA.

This story was originally published September 25, 2017 at 11:35 PM with the headline "UAJA costs based on size of facility."