SWH District bond repayment based on old ordinance

SOUTHWEST HARBOR — Officials of the town and the Water and Sewer District are trying to figure out who is on the hook for bond payments that cover the district’s projects.

That question will go to voters in an upcoming special town meeting for which the date has yet to be set.

When the Water and Sewer District was formed in 2016 as a separate municipality, the district’s Board of Trustees adopted an existing ordinance from the town’s then-extinct Water and Sewer Department regarding bond payments.

At the 2011 Town Meeting, voters approved an amendment to the Water and Sewer Department ordinance on paying back bonds. That amendment stated that bonds with a lifespan of 20 or more years would be the shared financial responsibility of all the town’s taxpayers — not just the residents of he water/sewer district.

Any bonds with a shorter lifespan would be the sole responsibility of the ratepayers within the district.

But the Water and Sewer District is a quasi-municipal organization and ordinances created by the town do not apply to the district, nor can the district create or amend town ordinances. Not all residents of Southwest Harbor are on the town’s water and/or sewer service.

With two projects expected to begin within the next month, there is a question of who will bear the financial burden to upgrade the town’s water and sewer systems.

The district might get pushback from the town.

“They’re [the district] able to get their own bonds,” said Town Manager Justin VanDongen in an interview with the Islander. “They just can’t obligate the town to pay them.”

After VanDongen explained the issue to the Select Board at its Sept. 11 meeting, there were questions, concerns and a wish to correct the situation in a way that was fair to all parties. VanDongen suggested going to the voters to ask what funding model they would favor. He explained the current situation puts both the town and the district in a precarious position.

“How could they [the district] be issued a bond without them being the payee of the bond?” Select Board Chairman Chad Terry asked. “I’ve brought this up several times. I think the district was not a great thing.”

At the formation of the district in 2016, the town’s water and sewer debt was rolled over into the district’s books, explained Jim Geary, chairman of the district’s Board of Trustees. There was $875,000 in water bonds and $831,000 in wastewater bonds that went from the town to the district.

In addition to that $1.7-million debt, because the town’s sewer and water department was not collecting enough money to pay its operating costs as a town department, Geary said, the district took on an additional $500,000 operating loss.

“It’s still a struggle,” said Geary. “Reality is, it’s expensive infrastructure and there just aren’t enough users.”

At the beginning of July, ratepayers on the sewer system saw a 10 percent increase in their rates. Rates had not increased since 2015, which was a year before the district was formed.

“We’re deliberately chipping away at the bigger maintenance issues and the long-term maintenance schedule,” said Geary.

In the next two weeks, a half million dollar bond will go out to bid for a project to renovate the pumping station at the south end of Long Pond and replace an outdated pump at that location. The building at that location is more than a century old.

“We want to finish the project before winter,” said Geary. “What we decided as a district is if the voters didn’t approve it, the water district could afford to do it.”

He said the terms of that bond are 40 years, which makes it an easier pill to swallow. It is the first item to go to bond since the formation of the district.

Also set to begin in October is the $2.3-million infrastructure project that includes replacing some of the aged water and sewer pipes in town, as well as drainage and road repairs. There is more than $400,000 in low-interest rate loan/grant money coming from the district to assist in this project. According to Water and Sewer District Manager Steve Kenney, there is a percentage of that low-interest loan/grant from the state’s Drinking Water State Revolving Fund — that can be forgiven depending on how the funds are allocated for the project.

One of the Select Board’s greatest concerns with the current funding model is how it would affect taxpayers when a $15-million wastewater treatment plant renovation project is bonded within the next couple of years.

Public Works Director Scott Alley expressed concern at the Select Board meeting that a major hike in costs to the ratepayers would drive folks out of town. He also suggested the town offer pumping of private septic systems as a compromise for contributing to the costs of the district. The practice would be similar to what the town of Mount Desert offers residents who are not on the public system, Alley said.

Sarah Hinckley

Sarah Hinckley

Former Islander reporter Sarah Hinckley covered the towns of Southwest Harbor, Tremont and neighboring islands.

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