When the economy is, um, flush, and the infrastructure doesn’t break down, Red Bank’s water utility sometimes generates a surplus that gets poured into the general fund.
That happened last year, when $300,000 was moved, offsetting the need for that much in property tax collections. And the Borough Council hopes to wring another $200,000 out of the utility in the coming tax year.
But the economy has slowed, and with it, construction, which means reduced growth in connection and use fees for water and sewer services. And the turndown comes at a time that principal payments on $6.38 million worth of long-term debt for a string of emergency repairs kicks in, adding a whopping $337,000 in charges over the current year.
Bottom line: a loss in 2007 of $183,259 that has to be made up, and a forecast of $607,000 in higher costs in the coming year.
The only solution, officials say, is to jack up the rates.
Last night, the Borough Council introduced an ordinance to boost water charges by 10 percent, to $4.84 per 100 cubic feet used, from the current $4.40. Sewer fees would also rise. Here’s the ordinance: Download 2008-6.pdf
According to an analysis completed last week by borough auditor David Kaplan, the change is expected to yield an additional $237,600 in water consumption fees. Sewer charges would bring in an additional $312,000, and base rates charged to large-volume users would pump up collections by another $117,000
The leap in water charges would put borough prices more than 35 percent above the $3.58 per hundred feet paid in nearby towns to customers of the private provider New Jersey American Water Co.
Officials defended the increase as necessary, and noted that a significant portion of the total revenue generated would come from non-profits such as Riverview Medical Center, which otherwise pay no taxes to the borough. Riverview, said Mayor Pasquale Menna, is the single largest consumer of borough water.
But council members Grace Cangemi and John Curley expressed misgivings about the approach. “I have grave concerns about it,” said Cangemi, emphasizing the difference in water costs for borough residents versus those paid by homeowners in Fair Haven and other towns served by New Jersey American.
“Our water is the most expensive around,” said Curley. “There needs to be something done within the utility as far as operations are concerned.” He cited as an example a problem in getting out bills on time recently.
A $202,867 deficit in the current year “is directly attributable to one cycle of billing being prepared very late in the year thereby allowing virtually not time for collection,” Kaplan wrote in a memo to borough CFO Frank MasonMason dated Feb. 22. Councilman Mike DuPont said that Mason had “taken full responsibility” for the lapse and corrected systems in his office to prevent a repeat, and noted that the late collections would be accounted for in 2008.
Curley also argued that if the borough “stayed within our cap” in the overall budget, it wouldn’t have to use the water and parking funds as cash cows a practice he called “double taxation.”
But Menna and Borough Administrator Stanley Sickels argued that the increases were attributable to debt service on bonds issues to pay for various critical repairs.
“It doesn’t seem like the problem was in the utility,” said Menna. “It’s that we’ve authorized very expensive capital improvements.” And those fixes were not optional, he said.
“When an underground water main breaks, we can’t think about it,” he said. “We have to respond.”
Over the last decade, residential water costs have roughly doubled, Sickels acknowledged, owing to consecutive rate increases in 2003, ’04 and ’05, as well as because of a switch to digital meters on homes that more accurately measure usage than the mechanical devices they replaced.
A public hearing on the proposed increase is scheduled for March 10.