After hearing from concerned residents and weighing the borough’s financial needs, the assembly voted unanimously to adopt rate increases for its water, electrical, sewer, harbor and trash pickup services. On average, the new rates will be 10% higher and will go into effect at the beginning of the new fiscal year on July 1.
At the March 28 assembly meeting, Finance Director Mason Villarma explained the reasoning behind the proposed rate increases. The water, power, sewer, harbor and trash disposal funds are all “enterprise funds,” meaning that they are supposed to run like a business, sustaining themselves entirely through fees instead of federal money or local tax dollars.
“We have to look at the cost of business for each of our enterprise funds and make sure that we absorb that completely and produce a sustainable path forward,” he said.
However, none of the borough’s enterprise funds are currently self-sustaining, especially after taking three accounting concepts into consideration: depreciation, inflation and future capital needs.
Depreciation measures the value of the borough’s assets, like vehicles, buildings and equipment, over time. These assets depreciate — or lose their value — until they eventually need to be replaced.
If the borough doesn’t factor in depreciation when establishing fees and rates, it may not be able to afford those replacements. “All of our enterprise funds have had net income after depreciation that was in the negative,” Villarma said.
User fees have also not kept up with inflation. When rates stay the same year after year, the borough’s purchasing power decreases.
Finally, rate increases are a way to guard against unexpected costs and prepare for major upcoming projects. “We have not saved enough in reserves for our capital expenditures in the future,” said Villarma.
He provided the assembly with two options for the new rate and fee schedule: a more aggressive approach and a more moderate approach.
The assembly adopted “Exhibit A,” the more aggressive rate increase that was recommended by borough staff, including Villarma. This option will raise water rates 10%, sewer rates 15%, harbor rates 11.1%, trash disposal rates 5.5% and electrical rates by one cent per kilowatt hour.
The alternative, “Exhibit B,” also proposed rate increases across the board, but these rate increases would have been less steep for some of the funds. The 15% sewer rate hike and 10% water rate hike would have stayed the same, but electric, harbor and sanitation rates would rise more moderately for an average increase of around 8% instead of 10%.
Villarma presented the more moderate rate option in case assembly members preferred an incremental approach to lessen the strain on residents. “We do recognize that raising rates by that much and with the property values increasing could cause financial burdens for some of the community,” Villarma wrote in his proposal.
That said, he endorsed the more aggressive hike, since it would put the enterprise funds on a more direct path to sustainability while allowing the borough to save for future emergencies or bonds to fund projects.
“Any reduction of the preferred Exhibit A would mean the assumption of more risk,” he told the assembly. “(Exhibit A) is the rate schedule that allows you to afford the projects that we have planned. But what are the projects that we don’t have planned? What does a failure of a water main cost? What does the failure of a (sewage) lift station cost? Those things aren’t budgeted, but we should have sufficient reserves to be able to address those when the time comes.”
Assembly member Ryan Howe expressed initial support for a more gentle increase, but no other assembly members backed him. David Powell moved to approve Exhibit A, the higher increase, and the assembly unanimously supported it.
Two community members spoke in opposition to the rate increases, citing economic hurt among residents.
Jim Collier criticized municipal government spending on big-ticket projects like the Alder Top Village Subdivision at a time when many residents are struggling against the economic stagnation in town. “Why should the city be doing more development when they can’t take care of what they already have? ... You’re just gouging the taxpayer for more, putting the burden on them,” he said. “It’s not fair to the taxpayer what you’re doing here.”
Jacqueline de Montigny shared many of his concerns. When combined with the uncertainty brought about by the recent property reassessment, the utility rate increases feel financially crippling to her. “As the public, I would say we oppose the rate increases. … We’re already paying more than we can afford,” she said.
Borough staff will use the new rate schedule to develop a budget for the upcoming year. The assembly will hold a public hearing on the municipal budget, with approval scheduled for June.
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