Abby facing $70,000 sewer utility deficit
By Kevin O’Brien
Even after raising sewer rates earlier this year, Abbotsford’s elected officials are still facing an operational deficit of over $70,000 in the city’s wastewater utility next year.
City administrator Dan Grady pointed this out while presenting a proposed 2020 budget at Monday’s city council meeting, which featured a brief discussion on ways of closing the gap between the sewer utility’s expenses and revenues.
Mayor Lori Voss said $10,000 in additional revenue has been generated since the council approved a 7 percent rate hike in May, but the city will likely have to consider another increase in 2020.
Following the rate hike, a residential household using 3,000 gallons of water per month currently pays about $48 every month for sewer treatment. That comes from a monthly base charge of $28.93 for a 5/8-inch meter, plus $6.38 per thousand gallons of water used.
Grady said trying to erase the sewer utility’s deficit with a single rate increase would not be advisable.
“To break even, you would have to raise it more than anybody is willing to raise it,” he said.
Instead, Voss said the city should consider smaller rate increases over time, along with other ideas for raising revenue.
Adding more customers to the sewer utility is one way to close the budget gap, Grady said. That will happen whenever someone builds a new home in the Schilling subdivision or adds a business to the city’s new industrial park, he noted.
“We would take in more revenue without increasing those fixed costs,” he said. “So, growth is one of our ways to reduce that number.”
Grady and Voss said the city is also considering adding a late payment fee to the sewer portion of bills for customers who continually fall behind on payments. The mayor said it takes a lot of extra staff time to send out warning letters and put door hangers on the homes of those who don’t pay their bills on time.
With the city currently sending out about 125 past-due notices every month, Grady said a $10 late fee could raise as much as $14,000 per year in revenue.
“That only helps,” he said. “It does not get you down to zero.”
Also, utility operator Josh Soyk said he’s in the early stages of setting up a receiving station system that would allow private septic tank owners to bring their waste to the city’s treatment plant for a fee. This would generate more revenue, but it would also involve some initial capital expenditures, Grady said.
However, Soyk also told the council that the sewer utility will lose about $45,000 per year in revenue starting in 2021 after Abbyland Foods finishes paying off an old agreement for a sludge removal building.
Looking forward, city officials said they want to consider a variety of ways to address the sewer utility deficit.
“We’re open to any solution,” Grady said.
General fund contingency
In contrast to the sewer utility, the city’s general fund budget is projected to have nearly $90,000 in contingency funds available next year, according to Grady.
As presented, the city’s 2020 budget fully funds requests from the police department, fire district, municipal court and library while also allowing for 3 percent raises for city employees.
The budget is funded in part by a local property tax levy of $905,285 — a 1.5 percent increase over this year, or about $13,000 more in total taxes. The city will also be getting more money from the state next year, with transportation aid jumping by 15 percent ($21,699) and shared revenue going up $1,500.
Most of the increases on the expenditure side of the budget are related to a couple of major projects planned for next year, including a reconstruction of West Spruce Street and Safe Routes to School improvements. Those two projects are expected to cost the city $1.8 million.
Grady said he has tentatively included $650,000 in new borrowing for the Spruce Street project.
At the same time, the city will be paying off two previous loans in 2020 — a $100,000 loan for a development incentives at the East Town Mall and a $35,000 promissory note for purchasing energy efficient LED street lights in 2015.
Abbotsford’s tax incremental financing (TIF) district 6 will also see a lot of activity next year, with a half-million in revenues projected to come in from developments across the city. TIF 6 also has about $1.4 million in expenses planned for 2020, with the city planning to borrow another $850,000 to finance work on the new industrial park west of STH 13.
“This will be the last year for major construction (in TIF 6), barring any businesses coming in,” Grady said.
With all of the new property value that has already been added to TIF 6 in the past couple years, Grady said annual revenues will be more than enough to cover loan payments and other expenses.
If any new businesses are built in the new industrial park, that will only add more revenue to the TIF district. That money could be used to drill more wells if that business happens to use a lot of water, Grady noted.
The council approved a motion to schedule an official public hearing on the budget for Nov. 20 at 5:45 p.m. Grady said council members can propose any changes at that time, and they can either approve it that night or wait until the next regular meeting on Dec. 2.
Grady said budgeting $87,900 for contingency follows advice from the city’s auditor to have at least three months worth of expenses in fund balance, which had slipped slightly below that threshold at the end of last year.
“Those of you who have been on the council for a long time know that things just come up,” he said.