Proposed 2015 Sewer Fee Increases

I respectfully offer the following questions/comments concerning the Proposed 2015 Sewer Fee Increases: 

Proposed 2015 Sewer Fee Increases

 

The 2013 AUD (page 36) shows that, as of 12/31/13, the combined Sewer Funds had:

• $1,629,656 in Cash (65% of 2015’s Combined Sewer Operating Budgets of $2,513,895).
• $1,247,520 is Due From Other Funds (50% of 2015’s combined Sewer Operating Budgets).

The 2015 Budget (page 20) shows no change in the combined Sewer Funds’ Fund Balance expected for 12/31/14 (admittedly, the value of the Fund Balance components may change).

Questions:

• Given the above, are the proposed Fee increases needed?
• What is the value of the proposed Fee increases?
• What is the effective date of increase for the 18 residential users in Hampton Manor that are on meters (charged the same as for users in the General Sewer District), February or July?
• Is the assumption that the existing multi-family units having in excess of three (3) or more units refers to those not separately metered, correct?  Note that “in excess of three (3) or more units” is redundant.

EFC Debt Service

The 2015 Sewer Budgets are in balance, i.e., revenues = appropriations, and reportedly include funds sufficient to cover the $60,000 in new EFC Debt Service payments.

Although I dislike tax or fee increases as much as anyone and realize there are likely some “tail” revenue increases in 2016 due to the effective dates of the proposed 2015 fee increases, I am more concerned about the  impending additional EFC Debt Service payments needed in 2016 and 2017, $120,000 and $420,000, respectively, than the proposed 2015 structure.

The 2015 combined Sewer Revenues total $2,513,895 and would have to increase by:

• 4.8% in 2016 ($120,000 / $2,513,895 = 4.77%); and
• Another 16.7% in 2017 ($420,000 / $2,513,895 = 16.71%); for total increases of
• 21.5% over the two years ($540,000 / $2,513,895 = 21.48%).

All other things being equal and absent any savings due to potential Sewer Debt refinancing, in order to meet these future EFC Debt Service requirements, either:

• Sewer Taxes would have to increase by a total of 44.2% over 2016 and 2017 ($540,000 / $1,221,912 = 44.19%).
• Alternatively, other Sewer Revenues would have to increase by a total of 41.8% over 2016 and 2017 ($540,000 / $1,291,983 = 41.80%)
• Or some combination thereof.

Taxes vs. Fees

I’ve long favored taxes over fees for the simple fact that the Federal and State Governments subsidize local taxes for those who itemize deductions.

I also prefer that taxes support Capital Projects and fees support Operating Expenses.

Furthermore, taxes are due January 31 while user fees are billed and paid throughout the year. 

• The Town can earn more in interest on the tax payments than the fee payments;
• Taxes ensure that the cash to pay the Debt Service is available when needed, the sporadic fee payments do not.

Citizens Fiscal Advisory Committee Review

I respectfully suggest that action on 2015 Sewer Fees be deferred until the Citizens Fiscal Advisory Committee has the opportunity to review and develop recommendations on both the proposed 2015 Sewer Fee increases and the approach to be used to support the impending additional EFC Debt Service payments needed in 2016 and 2017, $120,000 and $420,000, respectively.

 

Sincerely,

Peter Stenson