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Havre de Grace seeks to borrow more than $14 million for water and sewer repairs

Havre de Grace seeks to borrow more than $14 million for water and sewer repairs
This map showing water main breaks happening around the City of Havre de Grace going back to 2016 was displayed during a presentation to the City Council Monday about the many capital repairs needed for the water and sewer system. (David Anderson/The Aegis / Baltimore Sun Media Group)

Havre de Grace Mayor William T. Martin and his administration are seeking approval from the City Council, as well as city voters, to borrow more than $14 million to fund badly-needed capital repairs to the municipal water and sewer system.

“It’s going to be a $14 million ask,” said Steve Gamatoria, the mayor’s chief of staff and a city staff member of the Water & Sewer Commission.

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Gamatoria gave an in-depth presentation on the current state of the city’s infrastructure, the financial health of the water and sewer fund, also known as Fund 9, and the commission’s strategic plan to fund repairs and upgrades in the coming years, during a City Council meeting Monday evening.

The commission recommends a $22.1 million, five-year capital improvement plan, which would be followed by a $3 million annual CIP to cover routine maintenance, Gamatoria said. He noted $7.75 million could be covered by cash in the city’s budget, plus city staff will continue to seek grants.

Officials would need to go to the bond market to borrow the remaining $14.35 million, however, and that debt would be repaid over 10 years. Any borrowing from bond sales must be approved by Havre de Grace voters.

“We can’t depend on getting our infrastructure back up to speed with grants,” Gamatoria said.

He emphasized, in response to a question from Councilwoman Carolyn Zinner, that the city would not borrow the $14 million all at once. He noted Public Works Director Tim Whittie is looking for about $5 million for the “first influx,” which would suffice for two to three years, and then the city would re-evaluate based on the state of the national economy and the availability of grants.

Havre de Grace Chief of Staff Steve Gamatoria gives the mayor and City Council a presentation Monday on the many long-term capital repairs needed for the city's water and sewer system. Gamatoria said the mayor's administration seeks to borrow more than $14 million to support those repairs.
Havre de Grace Chief of Staff Steve Gamatoria gives the mayor and City Council a presentation Monday on the many long-term capital repairs needed for the city's water and sewer system. Gamatoria said the mayor's administration seeks to borrow more than $14 million to support those repairs. (David Anderson/The Aegis / Baltimore Sun Media Group)

The commission, which was established in 2008 by City Council ordinance, is composed of citizen, council and city staff members. It makes recommendations to city leaders regarding funding and management of water and sewer infrastructure.

Fund 9 is set up as an independent enterprise fund supported by revenues from city customers’ water and sewer bills and capital cost recovery fees paid by developers to connect structures to the municipal system. It has struggled over the past decade as the Great Recession decimated the national homebuilding market, and Havre de Grace took on $27 million in debt to expand its wastewater treatment plant.

The city pays $2.4 million a year in debt service on the wastewater treatment plant, plus $190,000 a year for debt service on water treatment plant improvements, according to Gamatoria’s presentation. Havre de Grace voters approved in 2016 issuing up to $2.4 million in bond funding for water treatment plant upgrades.

Fund 9 has received payments from the city general fund, or Fund 1, in past years to balance its budget, and Martin instituted a quarterly debt service fee, added to customers’ bills, when he started his first term as mayor in 2015.

The debt service fee has since been lifted, but the mayor added a quarterly $30 infrastructure replacement fee to raise revenue to repair aging infrastructure to his budget for the 2020 fiscal year, which began July 1. The council adopted the budget, with the fee, in late June.

Water and sewer revenues have also been buoyed in recent years as a number of new houses have been built and more capital cost recovery fees are paid. The city had 177 new connections in fiscal 2018, compared to 95 connections in fiscal 2017; new houses are being built in communities such as Bulle Rock, Greenway Farms and Scenic Manor, as well as infill development in established neighborhoods and the Havre de Grace Middle/High School scheduled to open in the fall of 2020, according to Gamatoria.

Capital cost recovery fees are meant to support infrastructure repairs, but Gamatoria warned that “we cannot continue to operate the city, basing our financial health on capital cost recovery fees.”

Martin raised the alarm about multiple leaks in water pipes, which happen all around the city, and the need to raise enough revenue to repair and replace aging infrastructure, when he presented his budget earlier this year.

Gamatoria brought up the issue of regular water main breaks, which cost the city time and money for which they have not budgeted — especially when Public Works staffers must be paid overtime to handle a break at night, on the weekend or over a holiday — during his presentation Monday. He also noted the need for repairs to the aging sewer system is growing.

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He said the city experienced water loss from its system at a rate of 18 percent in 2019, compared to 8 percent in 2015. The Maryland Department of the Environment considers an 18 percent loss “unacceptable,” and the city must submit a water loss reduction report to the MDE, Gamatoria said.

The water and sewer commission recommends a number of improvements to water and sewer lines, as well as replacing fire hydrants, replacing or upgrading sewer pumping stations, refurbishing and replacing several water tanks and towers, plus building new infrastructure such as a $4.1 million, 8,000 linear-foot line along Route 40 to deliver water from Havre de Grace to Aberdeen.

Commission members also recommend increases to water and sewer rates, in line with inflation, to ensure Fund 9 remains solvent, according to the presentation.

Havre de Grace voters would need to approve any borrowing from the bond market. Gamatoria recommended the City Council hold several public work sessions, during which residents can observe but not make comments or ask questions, plus additional sessions for public input.

He said the city could hold a special election in December or next January and go to the bond market next spring or wait until the annual city election in May and go to the bond market in the fall.

“We have the right people in the right positions, both on the commission and in the administration,” Gamatoria said. “The legacy of this administration can be putting a plan in place that gets us out of this horrible hole we’re in with Fund 9 that’s just been drowning us, literally, with these water leaks.”

Mayor Martin said he looks forward to hearing the public’s input.

“Even if you’re frustrated, work with your council members and bring suggestions," he said.

Council President David Glenn said officials “can’t kick the can down the road; we have to do something” on water and sewer infrastructure.

“We need everybody’s input,” he said. “We need everybody to stay engaged.”

Councilwoman Casi Boyer suggested that officials “go out and meet people where they are” during public listening sessions.

Councilman David Martin, also chair of the water and sewer commission, said commission members made a public presentation about two years ago, and they are willing to do so again.

“The biggest piece of that is, we need to educate the citizens, and this commission has said they are willing to go forward,” Martin said.

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