Elkton Orders Another Utility Rate Study, After Hearing About New Shortfall of Nearly a Half-Million Dollars

Elkton Town Hall, June 9, 2010 – This afternoon as the town considered a proposed nearly 60% utility rate increase, representatives of Holly Hall Terrace talked to the board about the burden this will create for customers.  While officials did what they could to mitigate the impact, an announcement afterwards indicated that yet another cost elevation should be anticipated.  The major facilities sewer utility fund is experiencing a shortfall of nearly one-half million dollars so additional revenue will be needed to fill that gap.

But before the mayor and commissioners considered how to make up that revenue, Holly Hall residents presented their case.  The post-World War II development is just beyond the municipal boundary so a long-established practice doubles the rate for unincorporated areas.  Over the decades as charges climbed, the multiplying effect created a larger, growing disparity in what out-of-town users pay.

With all those present exchanging views,  Steve Repole, the finance officer, summarized the situation:  “There were several scenarios that had been presented by the Financial Services Group [the consultants], all of which collect the same amount of additional revenue.  Whatever pricing structure we use, the bottom line is we have to generate the same amount of money.  We can’t have a better rate for everyone.  If we give one group a discount, we’ve got to get that money from somewhere.”

Once Mayor Fisona polled the board to see where the commissioners stood on the new pricing points, they agreed to go with Financial Services Group’s option A.  The officials had considered lowering the minimum usage to 3,000 gallons, a point that only benefited seasonal owners, part-time residents and others with extremely low consumption.  Option A returns the minimum rate to 9,000 gallons, which is in line with the current pricing practice.

In discussing the next step, professional staff asked the elected officials if they wanted to do two additional studies.  One concerning an examination of the differential between out-of-town and in town rates was quickly dismissed.  But the other relating to a previously unexamined shortfall in the major facilities fee for the sewer fund got the attention of the mayor and commissioners.

The town, which is exhausting the money in the major facilities fund for the sewer system, has a $475,000 shortfall, according to Repole.   “There isn’t a lot of building going on and we need to meet the debt service,” Lewis George, town administrator, noted as he recommended the town engage the consultants to evaluate the adequacy of that major facility fee.  Several of the elected officials expressed concern about this announcement.  As they mulled the idea over George reminded them “You have to do this or we’d have to take it out of the general fund and you shouldn’t.”

A bunch of questions about the impact of this additional rate study came up.  “Will we have to go back and add this to the increase we’re considering?” was one.  Someone else wanted to know if they’d have to increase the major facilities fees to keep the fund in balance.  There weren’t too many answers at this point since the consultants will have to examine those question.  But George emphasized, “We’ve got to cover this and we may need to shift the burden over to the user rate since there’s not a lot of building going on.  When some of the board expressed dismay at this, George replied:  “I hate to throw this bad news at you but the economy has affected a lot of people and now it’s affecting us. “

The board agreed to have Financial and Municipal Services do an additional rate study at a cost of $4,000.  Once Elkton gets the evaluation, the town will decide what it’s going to do.  Some of the offficials were still talking about the apparent need for yet an addition increase beyond the decision they’d just made.  To that George emphasized, “We’ll have new rates.  There’s no way you’re going to have the same rate and make up the difference in the debt service from some mythical fund, because you don’t just don’t have it.  You don’t.”  That was the final word for the moment on this subject, but it’ll be on the table again soon as they figure out how to fill get more money to fill the growing gap in the major facilities fund for the sewer system.

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2 responses to “Elkton Orders Another Utility Rate Study, After Hearing About New Shortfall of Nearly a Half-Million Dollars

  1. The election is over, the budget is not a month old, and there is a shortfall of $475,000! You have known for 2 yrs. about the expected increases in the water & sewer & spent a lot of meeting time discussing with the people that did the study. They made the recommendation & the board agreed. The only problem was the election & everyone agreed to wait till after the election. This is public record. If you weren’t so secretive about everything & let people talk at the meetings maybe you could be more productive. You have waived $225,000 in fees for the new Senior Housing on High Street. This is a for profit group. Now Holly Hall doesn’t like the suggested increases. Your surplus is disappearing fast.

  2. Debbie: The situation does raise a number of interesting questions. Why did it just now become apparent that the fund was being depleted? Why wasn’t the shortfall of the major facilities fund included in the original study, which is very recent?

    The town administrator made the point that revenue from this fund traditionally comes from the major facilities charges but now may get passed to the ratepayers.

    The consultant made the same point when he discussed waivng fees on newe projects. He said you can do that and it is an appropriate public policy consideration, but understanding that that revenue will have to come from somewhere since the town needs to collect that revenue from some source.

    By the way, we weren’t the only media covering the meeting lasst night. The Whig had a reporter there and that’s a good thing. The more sunlight on the activities of government, the better it is for everyone.

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