Havre de Grace's Water and Sewer Commission is recommending that the city increase user rates by at least 5 percent to close the water and sewer fund's deficit.
Garrett Lyttle, a citizen member of the commission and former city councilman, presented the commission's annual recommendations to the Havre de Grace City Council Monday, which gave "recommendations that the commission feels would enhance the operation and financial needs of the water and sewer fund," he said.
The commission, comprised of councilmen Fred Cullum, as chairman, and John Correri, as council liaison, as well as Donna Geiger, from the department of public works, Tracy Conaway, from the city finance department, Director of Administration Carol Mathis and citizen members Joe Kochenderfer, Douglas Wilson, William Russell and Lyttle, came to the consensus that to bring the water and sewer fund back into solvency by the end of fiscal year 2016, rates for residential water and sewer use should be increased by at least 5 percent.
As detailed in the commission's report, "the City's Department of Finance Water and Sewer Fund will realize a deficit of $542,000 for fiscal year 2012 and a deficit of $606,000 for fiscal year 2013.
To approve the rate increase, the city council would need to pass an amendment to Chapter 196-4 of the City Code that would replace language that includes, "The schedule for water and sewer rates (paragraphs one and three of Exhibit A) of the Mayor's proposed budget for water and sewer service shall be adjusted, at a minimum, consistent with the change in the cost of living for the most recent calendar year as measured by the Consumer Price Index, All Urban Consumers, Baltimore-Washington Area, as published by the United State Department of Labor."
The amendment continued, "In no case, prior to fiscal year 2017, shall the annual adjustment of rates in paragraphs one and three of Exhibit A be less than a five percent increase."
Other recommendations in the commission's report include having all capital projects that have been deferred or proposed be reviewed for necessity and feasibility, as well as establishing a capital reserve fund with a minimum of $500,000.
Lyttle told the council he believes he and the commission have devised a plan that will work and urges the council to pass the amendment.
"I think we have a good plan," he said.
Mayor Wayne Dougherty thanked Lyttle and the commission's other members for working diligently on the report, calling it "a positive step to move forward" toward solvency.
Cullum also thanked the rest of the commission, adding that they worked to "painlessly bring this fund back to solvency," but there was no painless way to "have a future [that would] maintain the [water and sewer] system we have."
Havre de Grace officials have been wrestling with a mounting deficit in the water and sewer system's finances, which are supposed to be supported by user charges, connection fees and developer contributions, not general tax revenue. The deficit has been blamed on a combination of economic factors, including lower than expected connection fee revenue from developments and the city's share of the cost of installing a mandated enhanced nutrient removal system at its sewage treatment plant.
Last year, the city council took the unprecedented step of allowing the city's general fund to loan $1.1 million to the water and sewer system while a permanent solution to the revenue shortfall was studied. That action also put off implementation of a major user rate increase.
Director of Finance George DeHority said Wednesday the general fund loan has not been paid back and won't be until the water and sewer fund recovers.
"That's what the [water and sewer commission] report was about," he said. "It's a road map to getting there."
The increase detailed in the report should create a "gradual, absorbable increase" that will go toward paying off that loan, DeHority continued.
"As the [water] fund comes out of the red, effectively they're [the city] taking every extra dollar they're making to give it back to the [general] fund," he said.