Letter from Mayor Martin and Q&A regarding Capital Improvement Plan Havre de GraceLetter from Mayor Martin and Q&A regarding Capital Improvement Plan Capital Improvement Plan Fellow Citizens of Havre de Grace, For the last 24 months, the Water and Sewer Commission has worked diligently to identify and develop a practical and affordable plan to address the City’s aging water and sewer infrastructure. The members of the Water & Sewer Commission include our own citizens and neighbors that have varying backgrounds and expertise in these matters. Members include Mr. Dan Wusinich, former Council members Mr. Garrett Lyttle and Mr. Fred Cullum, Mr. Harry Miller and Mr. Bill Russell; along with City Staff and Council members including Council Member Jason Robertson and Council Member David Martin, DPW Director Tim Whittie, Chief of Staff Steve Gamatoria and Finance Chief Tracy Conaway. Council President David Glenn held public work sessions on September 12, 2019, October 8, 2019, and October 22, 2019 to allow dialogue among the Members of the City Council, City Administration and Water/Sewer Commission to discuss a long term Capital Improvement Program plan, including funding options. To assist our citizens with better understanding these challenges, I have included a map of the number of water main breaks throughout the City since 2016, and a Q&A document that may help to explain where we are in this process and available options to address the infrastructure needs that would be the most affordable to our citizens. One such funding mechanism would be to seek bond funding which, by City Charter, will require a referendum vote to obtain citizen approval. The referendum vote could take place during the regular May 2020 election or by a special election in early January 2020. At this time, the January 2020 special referendum vote is preferred by the Commission, Council and Administration because it would allow the City to enter the bond market earlier (March-April issuance), rather than wait until an October- November bond issuance. Thank you for taking the time to understand what is at stake and working towards accomplishing a solution. William T. Martin, Mayor Questions and Answers 1) What is meant by ‘infrastructure‘? Infrastructure includes any part of the Water and Sewer System that creates clean, safe drinking water, delivers the water throughout the City, collects the wastewater from throughout the City, processes (cleans) the waste water, and returns the processed waste water to the Chesapeake Bay. This includes, the Water Treatment Plant (WTP), the Wastewater Treatment Plant (WWTP), water and wastewater pumping stations, fire hydrants and of course all the pipes and valves along the way. 2) How old is our infrastructure? Our infrastructure is constructed [in part] every year. In some of the older parts of the City (St John Street, North Washington Street as an example), the water mains are 120+ years old; Recently, a water pipe was removed from the Ontario Street/North Adams Street area that was from 1904. 3) How do you know the system is in need of large repairs? There have been an increased number of breaks occurring ‘city-wide’ over the past several years. The type and cause of the failures indicate a deterioration of the water distribution system. Video camera footage from engineering studies performed confirm wear and tear to an extent that large sections of pipe are in need of replacement, and the expected useful life of many components has been reached. The most recent 2018 City water audit identified an unaccounted water loss of 18 % of our total water production. This was an increase of about 11% as compared to the 2017 water audit which revealed only a 7% loss. That 18% loss costs the water and sewer fund about $615,000.00 to produce. 4) Is there a risk of a catastrophic failure within our system? There are no known imminent catastrophic failures within the City’s infrastructure. The City constantly monitors the entire water and sewer system to identify potential failures and minimize system down time. While there is no realistic or absolute guaranty against some kind of system failure, City employees constantly perform preventive maintenance and monitor all systems throughout the City. The City also has on-hand the critical components needed to address failures on a timely basis. 5) Should we be worried about the Fire Hydrants working when we need them? Absolutely not. The City’s fire hydrants are an integral part of the City’s water and sewer system. The City continues to execute the planned replacement of the fire hydrants to ensure they can be counted on when needed. Further, the Susquehanna Hose Company (SHCO) scored 47.17 points out of a total of 50 available points as part of the International Services Office (ISO) rating system’s measurement of available water supply within a community. ISO ratings are often used by insurance companies as part of their formula to determine homeowner’s insurance premiums. The SHCO’s ISO score is among one of the highest in the United States. 6) How come the City has not been pro-active and replaced the infrastructure over the years as needed? The City operates its water and sewer system as an ‘Enterprise Fund’, or as a stand-alone business. The City Charter mandates that the Water and Sewer Fund be self-supporting. As a result, the City can generate revenue in the Water and Sewer Fund from the users of the system, or from County, State and Federal subsidy programs. Over the past 3 years, the City has spent, on average, over $1.2 million per year on capital replacement projects in the Water and Sewer Fund. Further, the City borrowed $2.4 million to make repairs and upgrades to the Water Treatment Plant. The City was very pro-active with the updating of the Waste Water Treatment Plant in 2006. At that time, a bond bill was taken out to cover the debt service to pay for the Federal/State mandates, as well as to upgrade the Wastewater Treatment Plant for future growth. That bond has about 7 years left at a cost of $2.4 million annually. The original plan was to use anticipated new connections to the system to fund the debt. That plan had a fatal flaw (it required about 130 new users to come on board each year). Since the recession in 2008, the required connection numbers have only been achieved one time. Since taking over in 2015, the Martin administration has identified three distinct elements to address the continuing deficit in the Water and Sewer Fund; (1) restructure or remove itself from a 30 year old County Water Agreement that required the City to sell its water to the Harford County at a loss; (2) task the Department of Public Works to have an independent study completed of the entire Water and Sewer system and determine and develop a plan to make the Water and Sewer Fund solvent, and (3) task the Water and Sewer Commission to develop a plan, using the DPW Study, that provides the best results with the least amount of cost to the system users. We are now at a point in time, where we have the opportunity to address the current and long term improvements necessary to bring the Water and Sewer Fund infrastructure up to date. 7) What are the Options for funding the Capital Improvements and associated costs, based on the DPW Capital Improvement Plan, which is about $24 million over the next 10 years? a. Bond Bill Requires a voter supported referendum. The cost to the average consumer is going to be the continued implementation of the Infrastructure Replacement Fee (IRF) that is currently on all water bills. For the average user that cost will continue to be $30.00 per quarter. For high volume commercial and industrial users the cost is more, but will not exceed the current amount. Currently, the IRF generates about $800,000 which will cover the projected bond payment. There is not any planned increase to the IRF. A bond is a fixed loan made by the investors to the borrower (City of Havre de Grace). The bond option could be thought of as a “home improvement loan” to fund needed repairs. The Water and Sewer Commission has projected that the City can repay the bond over 20 years without having to raise usage rates or add any additional fees and still perform ongoing maintenance to the system. b. Grants While the City will continue to submit for assistance through qualifying grant programs, the likelihood of receiving funding to support water and sewer capital projects is very low. The issue of aging water and sewer infrastructure is growing nation-wide but there is no indication that Federal or State officials intend to develop programs to deal with this. It is therefore up to local governments to deal with this issue. c. Special Assessment The City could assess property owners with a special assessment. This approach would likely require an average assessment of approximately $1,000 per property for the next 5 years. This approach has the advantage of being “interest free” but it is also a much greater financial burden to citizens while the special assessment is in effect. The assessment also carries the risk of deterring residential and commercial investment in the City. d. Pay as you go or PAYGO As noted previously, the City already spends about $1.2 million of its annual revenues on maintaining the current water and sewer system. In order to generate the additional funds for the needed capital projects would require metered water and sewer rates to increase by over 33%. As is the case with the Special Assessment option, the increased costs would be a significant financial burden on residents and potentially deter future development. Submit a Public Comment or ask a question about Capital infrastructure Water main breaks throughout the City since 2016 Click image to view Important Links NOTICE OF PUBLIC WORK SESSIONS – Sept 12, Oct 8, Oct 22. Minutes from October 8, 2019 Council Open Work Session Important Dates Notice of Public Input Session – Thursday, November 14, 2019 The Mayor and City Council of Havre de Grace will hold a public input session on Thursday, November 14, 2019 at 6pm in the City Council Chambers, 711 Pennington Avenue, Havre de Grace, Md. to receive input from the public concerning the Water and Sewer Capital Improvement Plan and the cost of implementation. Saturday, December 14, 2019 – 10:00 A.M. – 4:00 P.M. The City of Havre de Grace will be hosting an open house and tours of its Water Treatment Plant located at 415 Saint John Street and the Wastewater Treatment Plant located at 1 Jerry Foster Way. -The Havre de Grace Water Treatment Plant is responsible for providing citizens with safe and reliable drinking water. -The Wastewater Treatment Plant is responsible for treating wastewater before it’s returned to the waterway.