Despite the dire warnings sounded about the financial health of Havre de Grace's water and sewer funds in recent years, Mayor Wayne Dougherty told members of the City Council Monday he expects enough money to come in from capital cost recovery fees during the next 20 years to cover tens of millions of dollars in projected debt and infrastructure costs and potentially lower the recovery fee.
"While the last few years have been difficult, I remain optimistic that opportunities will, in fact, present themselves," Dougherty said during a short speech to the council.
The recent water and sewer financial issues have been so great that members of the city's Water and Sewer Commission told city leaders in late 2013 that the fund, which is designated as Fund 9, faced "financial failure," citing a $1.7 million deficit for fiscal 2013.
The deficit was the result of debt service obligations to cover the cost of municipal wastewater treatment plant and falling capital cost recovery fee revenue as the city issued 36 fewer building permits than expected. Water consumption was also decreasing, and the costs of maintaining, repairing or replacing aging infrastructure continued to climb.
Fund 9 faced the same issues during fiscal 2014, but the fund had a negative balance of $805,689, which was money the water and sewer fund owed the city general fund, or Fund 1, out of the $1 million loaned to Fund 9 to cover debt service, commission members reported in February.
"We all know we love Fund 9; Fund 9's been a lot of fun, it's been a lot of challenge and we're always [asking], 'What can we do to make things better?'" Dougherty said in his speech to the council Monday. "My staff has come up with projections for the next 20 years, and I think it's going to be very helpful to each one of you as we proceed along, especially with budget and everything else this year."
Havre de Grace charges a $21,200 capital cost recovery fee for each new house built in the city, and the projected revenues for the next 20 years would be $9.1 million "above and beyond" the potential infrastructure and debt service costs, according to Dougherty.
The mayor proposed lowering the fee by $3,600 to a "break-even" rate of $17,600.
The mayor stressed Tuesday that reducing the fee would be "strictly a council action," and the revenue figures he presented are based on keeping the fee at $21,200 for the next 20 years.
"It will be up to council to actually take that on and proceed with it," he said of lowering the fee.
Dougherty acknowledged in his speech the challenges of recent years, but he was optimistic as he projected the city will generate an estimated $27.7 million at the current fee level from "planned development" through the next five years and an additional estimated $46.3 million during the next 15 years.
"That is a total of $74 million over the next 20 years," the mayor said.
Dougherty said city officials should expect $27.9 million in debt service and $37 million for infrastructure costs, or a combined $64.9 million through the next 20 years.
The projected 20-year revenue of $74 million would be $9.1 million above the projected costs for the same period.
"The council is already considering immediate reductions to the capital cost recovery fee tariff rates," Dougherty continued. "This course of action will necessitate that the administration continue to defer investment in the water and sewer infrastructure to allow the reduction in revenue without having to raise metered rates beyond the current plans."
The mayor warned that delaying needed repairs could mean infrastructure costs would increase, along with "the likelihood of emergency repairs and replacements as the infrastructure ages."
"Continued delay should be only considered after determining that identifiable projects can reasonably be delayed further or that metered rates can be adjusted accordingly," he said. "You should also note that the city will continue to search for and obtain county, state or federal grants to help offset the costs of infrastructure payments."
The mayor said the city has "shown steady improvement since the collapse of the real estate market."
"Only through continued careful stewardship can we fully recover without asking our residents to accept higher rates as a means to financial stability," he continued.
Dougherty said later that he expects the local housing market to turn around during the next two years, and he cited recent interest by developers who want to build houses and apartment units in the Greenway Farm and Scenic Manor communities.
He also noted the Bulle Rock community has space for more homes.
"I think, within the next two years, things will start picking up again, and that's why I went into those five year [revenue] projections, also," he explained.
The City Council has been considering ordinances to lower capital cost recovery fees for the Scenic Manor and Greenway Farm developers as an incentive.