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Posted December 18, 2013 | Leave a comment
Strasburg may use rate-hike money for facility project
By Alex Bridges
STRASBURG -- The town may use money collected through a recent hike in utility fees to help pay for a new public works building.
A majority of Town Council at a work session Monday decided that the town should pull $1.5 million from the water and sewer reserve accounts to cover part of the $5 million estimated cost of the new facility. The town has collected money through a series of rate increases in anticipation of needing to upgrade the sewage treatment plant. A new proposal for the plant project shows the work may not cost as much as feared.
Town Council held the work session to discuss a new list of projects and priorities. While talks centered on the list members said they were seeing for the first time, the discussion quickly veered toward the wastewater treatment plant upgrade project -- an initiative that now includes the construction of a new facility for the Public Works Department at an estimated cost of $5 million.
Finance Director Dottie Mullins said council decided the town should finance the remaining amount by borrowing $3.5 million through the Virginia Resource Authority and pay off the loan over 20 years. The interest rate remains unknown.
Councilman Robert "Bob" Baker voiced opposition to the idea of using money collected from the rate increases to pay for the public works building. Baker noted that council raised water and sewer rates several years ago in anticipation of the town needing to cover the costs of both the water and sewage treatment plants. The town implemented a staggered set of rate of increases over an extended number of years rather than impose a steeper hike all at one time.
Baker suggested the town borrow the $5 million and use the money currently in reserves as well as funds collected in the future to make loan payments and avoid additional rate increases.
"We may have to raise them anyway but we may not have to raise them as much if we use those funds currently there as opposed to invading them for a public works facility," Baker said.
The councilman noted that the Public Works Department receives about one-third of the revenue from each of the utility funds. Baker said he understood the proposal before council called for taking more money from the sources so the town would not need to borrow as much for the project.
Councilman Rich Orndorff Jr. said the sewage treatment plant upgrade as proposed means that the town must find a new home for its Public Works Department. Orndorff said he understood Baker's concerns and acknowledged council's initial intent to raise rates.
Councilwoman Sarah Mauck disagreed with Baker and said the town should spend the money it has collected now.
Orndorff said he didn't want to have to raise rates again in 2017 if the town spends the collected funds from the increased levies. He recalled that council already explained to residents the town needed to raise rates to help cover the cost of the upgrades.
"But if they find out we're borrowing more money when we have money, what effect does that have?" Mauck asked.
Baker said council made a commitment to ratepayers to set aside money collected through the increases. Baker argued that council would renege on that commitment if it spent the funds for any purpose other than to pay the loan on the plant upgrade.
Councilman Scott Terndrup said members set the fees based on a much higher estimated cost for the project. The latest proposal reduces that cost but adds the public works department space.
"So the citizens are still getting a bargain -- $5 or $6 million difference," Terndrup said. "It looks a little different because it requires a public works facility."
Baker disagreed with Terndrup and said council agreed to set higher rates based on an earlier estimate of $20 million that covered just the plant upgrade.
Contact staff writer Alex Bridges at 540-465-5137 ext. 125, or firstname.lastname@example.org
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