Havre de Grace voters will have their say in early February as to whether the city should borrow up to $15 million in bond funding to fix aging water and sewer infrastructure.
The City Council voted unanimously during its meeting Monday evening in favor of Resolution 2019-12 to put the bond issue on the ballot for a Feb. 4 special election. City officials stressed that their vote was just to put the matter on the ballot for voters to decide, not to borrow the actual bond funds.
“When we put it on the ballot, my vote is going to count no more than any other person’s vote in the City of Havre de Grace, and we’ll see what the citizens want to do,” Council President David Glenn said.
The ballot question, which is included in the resolution, gives the city the authority to issue bonds with a “face value” of up to $15 million over five years. The bonds would then be paid back, with interest, over up to 25 years, and officials are seeking an interest rate no higher than 4 percent, according to the resolution.
The special election is necessary because city leaders plan to go to the market when bonds are issued in April, rather than in October, as they hope to lock in a lower interest rate earlier in the year, Mayor William T. Martin explained.
The special election resolution comes following three work sessions with the City Council in September and October and a public input session in November on the plan to seek bond funding.
City water and sewer customers have been paying a $30 quarterly infrastructure replacement fee, meant to raise money for infrastructure repairs, since the fiscal 2020 budget took effect July 1. That fee, which is expected to generate about $880,000 a year, will be sufficient to cover debt service on the bonds, the mayor said.
“No one’s water bill will have to go any higher than it is right now to meet the debt service payment,” Martin said Monday.
The special election is scheduled for 7 a.m. to 8 p.m. on Tuesday, Feb. 4, 2020, in Havre de Grace City Hall at 711 Pennington Ave., according to the resolution.
City leaders will still address problems with aging infrastructure — which in some cases is more than 120 years old — and an increasing number of water main breaks and a loss of municipal water to those leaks, if the bond measure is not approved by voters.
“We’ll have to probably go after more sharper ways to pay for it,” Martin said.
Other options include securing grants, a special assessment tax or paying out of existing city revenues. Havre de Grace currently spends about $1.2 million a year to maintain its system, and water and sewer rates would have to increase by 33 percent to cover capital repairs, according to a fact sheet posted on the city website.
Residents can get more information about why the city is pursuing bond funding online at https://havredegracemd.gov/letter-from-mayor-martin-and-qa-regarding-capital-improvement-plan.
The mayor emphasized that the $15 million would not be borrowed all at once, but it would function similar to a line of credit, where the city could take out some money, finish a project and then make the debt payment, and repeat the cycle for the next project.
“Let’s just get real and stop kicking the can down the road,” Martin said. “No politician up here wants to tell people, ‘We want you to pay more money,’ but sooner or later, it’s got to stop.”
The mayor stressed that he and all other city leaders live in the same community and drink the same water as other Havre de Grace residents.
“The pipes can keep breaking, five, six, 10 times a year to a cost of $5,000 to $15,000 every time it happens, or we can take a very proactive approach and start going after these issues and replacing all of it and getting all of it done,” Martin said.
Resident Charlie Mike, who spoke during the citizen comment period early in the meeting, said he and his family are against the bond measure.
“I think that the mayor and council need to go back and explore every necessary avenue to pay for this infrastructure through the general fund, and not going back through the Fund 9,” he said of the water and sewer fund, which is an enterprise fund supported by revenues from municipal customers.
Fund 9 also can take on debt, such as the $27 million borrowed in 2006 to pay for upgrades to the city’s wastewater treatment plant. Voters approved a bond measure of up to $2.4 million in 2016 to pay for upgrades to the water treatment plant.
Fund 9 has struggled financially in prior years because of its debt obligations and a lack of residential growth that would otherwise generate funds through fees charged for new water and sewer connections — the city’s housing market has picked up in the past few years with a number of new houses being built.
The mayor, City Council and members of the water and sewer commission have worked over the years to get Fund 9 on solid financial footing, in a position where it does not need to borrow money each year from the general fund, also known as Fund 1. Rates have been increased, and a debt service fee was in effect for several years.
Mike said he did not object to the bond issue for the water treatment plant or the $30 infrastructure fee instituted this year, but he is against the city taking on even more debt.
“This really isn’t necessary; we need to find different ways to pay for this,” Mike said. “You have lots of money in the general fund where we’re paying for things such as Christmas lights, speakers downtown, sprinkler systems in the park.”
Mayor Martin stressed, in response to Mike’s comments, that the $30 quarterly fee will cover debt service on the bonds, and no new fees will be added to water bills.
The mayor said, disputing Mike’s contention that city officials want to “take the easy way out” with debt financing, that the bond issue was selected based on recommendations from the water and sewer commission and a study conducted by the Black & Veatch engineering firm in 2017.
"This is a very difficult decision to make, and it’s something we’ve been wrestling [with] for a very long time,” Martin said.
City Council members expressed their support for the special election and bond funding.
“In the opinion of our water and sewer commission, this was the best option for the city, going forward, to take care of our failing infrastructure,” Councilman David Martin, the council’s liaison to the commission, said.
Glenn, the council president, said the situation “comes to the point where I personally feel like we can’t continue to kick the can down the road.”
“Every year at the budget time, I’m one of the ones that tries to go through the budget with fine-tooth comb to find revenue sources and make sure that we’re making wise use of our taxpayer dollars,” he added.
Councilwoman Carolyn Zinner said she was “was a little bit alarmed” when she read the recommended rate increases included in the Black & Veatch study.
“I believe that the commission worked in good faith, or even better than good faith,” she said. “They looked at the Black & Veatch study, they saw what was recommended, and I do believe they did better.”
Councilman Jason Robertson said city leaders had discussed “at length” how general fund revenues could be applied. He said a special assessment “would probably be more painful for everyone” than a property tax hike, and he noted property taxes would have to be increased by about 10 cents per $100 of valuation to cover annual infrastructure costs.
Any money borrowed from Fund 1 to support Fund 9 would have to be repaid, and that could mean significant increases to the $30 infrastructure replacement fee, Robertson said.
“I’m very much against incurring debt when we can avoid it, but honestly, all the indicators for our fiscal well being as a city are in such a position that we can incur more debt without it being too much of a burden on Fund 9," Robertson said.
Councilwoman Casi Boyer encouraged people to contact council members or City Hall at 410-939-1800 if they have any questions.
“We’d be happy to talk to you as much as you want about it,” she said.