- The Enterprise
- The Recorder
At least one Chesapeake Beach town council member and one council candidate have been spreading untrue rumors about the recently completed utility rate proposal compiled by a non-partisan citizens commission. This is an obvious attempt to discredit the commission and have the voters of Chesapeake Beach sign on to their ill-conceived proposals.
Here are the facts:
The existing structure for 25-plus years utilized the decreasing block formula. That is so much for the first “x” gallons used, less for the next “x” gallons used, etc. The existing structure uses capital connection fees to subsidize user rates. Chesapeake Beach rates are half of North Beach rates and a third of Calvert County rates. The system worked well as long as Chesapeake Beach was expanding and getting $6,000, to now $20,000, per capital connection. Other systems use capital connection fees to pay for capital costs. Capital connection fees in Chesapeake Beach between 2007 and 2012 were $8,156,000. Estimates for 2013 and beyond shrink from $720,000 to $240,000 per year in five years. Chesapeake Beach decided not to use capital connection fees for capital expenditures. It decided to bond those expenses. Instead, it used these funds to subsidize water and sewer rates in order to keep them as low as possible. Current long-term liability is $7,183,000, and the interest payment is $155,000. That amounts to about 50 percent of the total budget. Obvious fiscal mismanagement during the last six years has kept the utility budget from being debt free.
The council refused Mayor Wahl’s request to raise rates 10 percent in June 2012. It reverted back to fiscal 2012 rates. However, expenses for fiscal 2013 were not reduced. Carryover from fiscal 2012 is about $300,000. Carryover from 2009 was $1,200,000. Estimate carryover from fiscal 2013 will be close to zero or possibly negative, depending on necessary repairs.
Where will the money come from? Mayor Bruce Wahl called for a utility rate commission to report in 60 days a rate structure that was “sustainable for the future and equitable for all rate payers.” I was asked to be the chairman. Commission members included a lawyer, math teacher, accountant/program manager, business owner, government consultant and engineer. They were geographically located throughout the town. The commission evaluated many different rate structures, including all costs divided equally by total number of rate payers (very inequitable for low volume users) and all costs divided by total gallon used by each rate payer (very inequitable for no and high volume users). The commission selected a combination rate structure: fixed costs graduated based on volume used and volume costs the same per 1,000 gallons, no matter how much used. The plan is to phase it in during a three-year period to lessen the impact and continue to use capital connection fees with a higher initial year rate for businesses that could pass on costs. There will be an equal percent rate increase over three years for all categories, and a 15 percent reserve was added to the budget due to aging infrastructure.
The council decided not to consider this at the August 2012 meeting. The commission presentation was made and added to the Chesapeake Beach town website, www.chesapeake-beach.md.us. The council held a work meeting to review the commission’s recommendations. It did not understand the proposal, and council member Valerie Beaudin volunteered to make a structure of her own. No council action was taken in September.
Major capital expenditure enhanced nutrient removal (ENR) for the wastewater treatment plant will add $4,028,000 in long-term liability and an interest rate of 2 percent ($80,000).
Beaudin and another council candidate have presented to the public a misrepresentation of the commission report. They want to use a structure that is not quantified except for non-volume users. It will increase the non-volume user rate immediately from $66 per quarter to approximately $200 per quarter. Other volume categories are not defined, so costs per rate payer cannot be determined. They also call for a rate schedule similar to Baltimore Gas and Electric Co., where everybody, they think, pays the same. In actuality, commercial and industrial rate payers pay up to 30 percent less per KWHR (equated to 1,000 gallons) than residential rate payers. Read BGE’s published schedule.
Their actions are an obvious ploy to put off any increase until after the election. They are afraid to tell the truth to the voters and gradually raise the rates.
John Bacon, Chesapeake Beach
The writer is the chairman of the Chesapeake Beach Utility Rate Commission.