With Havre de Grace continuing to raise water and sewer rates and demand for those services declining, the city's water and sewer fund is projected to end this fiscal year with a deficit of at least $500,000.
Mayor Wayne Dougherty told the city council Monday the city's general fund was $600,000 ahead of budget projections in the second quarter and the water and sewer fund was operating at a $145,000 surplus.
Nevertheless, that was only 30 percent of the performance expected in the budget, and the deficit for the water and sewer fund is expected to continue rising from $490,000 at the start of this year to $550,000 by the end.
The main reason for the deficit is $1.8 million in debt service expected to still be paid during the year, according to the mayor's report.
"I have been working with the state, both the administration and the legislature, to reduce the city's debt service burden for future years," he said.
In 2011, the city made a short-term loan of $1.1 million from its general fund to cover the water and sewer deficit.
The city's water and sewer commission recommended a 10 percent rate increase in January 2011 to make up for the ongoing deficit. In February 2011, Dougherty said he wanted to stem the financial loss by having the city collect capital cost recovery fees from builders by changing the use and occupancy permit process.
Demand for water and sewer services fell by 4 percent in the second quarter from last year, and by 6.5 percent from budget projections.
But the city also raised metered usage rates and the base fee rate for this year, resulting in $305,000 more in revenues than last year through December.
Unexpected storm costs also added $255,000 more to the city's operational costs over last year.
Water and sewer operations generated an operating surplus of $400,000 through the end of the quarter, compared to $350,000 the previous year.
Besides water and sewer, the city's marina fund operated at a $4,000 loss in the second quarter and an even greater loss of $9,200 for the first six months of the budget.
The marina started the year with a balance of $255,000.