Rate hike addresses debt spiral



SOUTHWEST HARBOR — The sewer department here might be financially under water for only 12 more years, according to Town Manager Don Lagrange.

The department’s debt to the town’s general fund is currently about $550,000.

The board of selectmen last week approved a sewer department budget for next year that includes a 7 percent increase in user rates effective July 1.

Without that increase and greater operational efficiency, Lagrange estimates it would take 50.5 years to pay off the debt.

Now, he said, it is likely the sewer department can pay off about $17,000 of its debt next year and $17,000 to $20,000 the following year.

“The year after that, it would bump up to a $50,000 repayment because our debt service on the clarifiers will be paid off,” Lagrange said. “So we can start repaying the town a good portion of that half-million dollars.”

He said a big reason the sewer department got so deeply into debt was that until last year, no money was budgeted for capital improvements.

“We’ve introduced a capital improvement program for the sewer department and started tucking away some money in that because every year we have machinery we need to replace,” he said.

Asked if the 7 percent rate increase would allow the sewer department to get out of debt, Lagrange said, “It will do us handsomely.”

In 2010, the rate that sewer customers pay was raised 49.8 percent in an effort to reverse the sewer department’s plunge into debt. But it turns out that wasn’t quite enough.

Selectman George Jellison said that if the board didn’t raise the rate a relatively modest amount now, the debt would continue to grow, requiring a much larger increase in a few years.

“If we don’t do something now, it’s never going to get paid off,” he said.

Selectman Lydia Goetze said that raising sewer rates to pay off the debt to the town’s general fund is matter of equity.

“The people who use the sewer should pay for it instead of all the taxpayers,” she said.

Lagrange said he and selectmen also are looking at ways to improve the operation of the sewer system and make it self-sufficient. They said in December that they plan to seek approval from the Maine Legislature to create a quasi-municipal utilities district to own and operate both the sewer and water systems. Under the legislation, the selectmen would appoint a three-member board to oversee the utilities and to hire someone with the expertise and experience to manage them.

Such a restructuring, Lagrange said, could improve efficiency, lower costs for customers and promote long-range planning.

If the Legislature passes a bill allowing for the creation of a utilities district, the town’s voters also would need to give their approval.

 

Dick Broom

Dick Broom

Reporter at Mount Desert Islander
Dick Broom covers the towns of Mount Desert and Southwest Harbor, Mount Desert Island High School and the school system board and superintendent's office. He enjoys hiking with his golden retriever and finding new places for her to swim. dbroom@mdislander.com

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