Friday, December 4, 2020

My Statement on Water and Sewer Deficit

 I was stunned to find out this week that the administration needs $2.5 million more to bail out the water and sewer enterprise fund.  This is after an already $3.5 million bail out in the spring.  This means $6 million of taxpayer money is gone forever to prop up the water and sewer fund. 

The water and sewer fund has spent generously over a decade.  From about 2007 to 2017 the public utility operated by the City saw its rates double, creating a large burden on homeowners and businesses alike. Reacting to that burden, the administration has minimized rate increases the last few years to the 2% range.  The problem is nothing was done to slow the spending while easing the rates.  The combination of the artificially low rates and the unexpected pandemic wiped out all the reserves and then some.


Spending has been out of control in this fund since about 2007.  The City has hid behind an ill- advised administrative consent order that was hastily agreed to in 2007 mandating almost a quarter billion dollars of construction.  No question some was needed, but not to the extent and scale that was completed.  We are now burdened with huge upward rate pressure, large debt and no spending control.


One may say it is easy to criticize; I mean who expected a pandemic?  But the frustrating thing about this is many members of the City Council have been imploring the administration to slow the spending in this fund over the last few years.  Our concerns are not new, just unheeded.  We have asked multiple times for a construction plan that would control rate increases.  Many of us have asked the administration to stop spending capital funds (borrowed money) to pay about $1,000,000 a year in salaries.  


During just the last few months we have asked the administration to adjust spending to reflect we are in a pandemic, not normal times.  Some of us were astonished when a rate hearing was not even held this year after spending was set.  When we voiced fear about revenue shortfalls we were told there was a plan.  We just found out the plan doesn’t work.


Instead, the spending has continued only marginally abated by City Council efforts in both the general fund and the enterprise fund, with minimal reductions and no structural changes from the administration.  Now we are being asked to craft a solution within a week to ten days and make significant financial decisions that impact the City’s budget.  


The problem is not solved with the $2.5M solution being proposed.  First the solution takes 90% of the funds to bail out the water and sewer fund from free cash (the taxpayer’s savings account) or the school department.  It is likely buying your groceries with your savings account and your cousin’s grocery budget.  It does not solve your problem, it keeps you eating for a bit longer.  


Even with the bailout, there is likely a double-digit rate increase for the water and sewer fund in the near future.  This is potentially devastating to low and moderate income families and struggling pandemic burdened business.


We can’t keep solving the problem with short term solutions.  To take virtually all the money from the school department is a non-starter to me.  I would encourage the school department to participate in the solution, but to put it entirely on their back is absurd.   The proposal is not nearly creative enough for me to rush through the City Council.  We need more time for a practical solution to this unexpected problem.  I hope enough city councilors feel the same to avoid another last minute band aid to be applied to serious financial challenges.