(4/22) Chris Simms, principal of Smart Utility Management, presented a data analysis on current water rates and sewer rates to the Board of Commissioners. Based on his data, he suggested the Town of Thurmont increase their rates for both water and sewer, which the Council plans to vote on at a future meeting.
Water rates and sewer rates have not changed in Thurmont since 2012, despite inflation in recent years. "Up until this point, the Town was able to manage those expenses, but it’s increased at such a pace that it’s going to take an actual intervention and change in the rates in order to cover those increasing costs," Simms said. At the end of the fiscal year, he expects the water and wastewater departments to see a combined $200,000 loss.
Simms conducted a three-year analysis comparing three different scenarios: no retail rate change, minimum retail rate change and maximum retail rate change. He increased predicted operating expenses by 4% each year to take inflation into account. However, according to Simms, he knows that some expenses, such as utilities, will increase by more than 4% each year. For those costs, the calculations include an increase of 15%.
Without an increase in retail rates for both water and sewer, Simms’ analysis revealed a $301,529 loss to the Town for both water and sewer operating income in FY-25. The deficit would continue, Simms found, to a $402,760 total loss in FY-26 and a $508,507 total loss in FY-27.
"If we were just to effectively break even for FY-25, then that would require a 14% increase in the water rates and a 10% increase in the sewer rates," Simms said. With these numbers, according to Simms, the Town would bring in about $136,000 more for water and about $165,000 for sewer. The total operating income for FY-25 would be $76 after expenses.
Increased water rates and sewer rates will allow the Town to contribute to a capital reserve account for emergencies or other, unexpected expenses. "If we do not contribute to the capital reserve accounts, then we will deplete all of the cash available to cover any capital project," Simms said. "So any capital project going forward, no matter how small, will then need to be financed." He went on to explain that a financial institution will charge fees, which the customer will end up paying. However, by increasing rates for water and sewer, residents will essentially be "prepaying" for these emergencies or other unexpected expenses.
Commissioner Marty Burns was concerned about the Town spending the money recklessly once it has a capital reserve in place. Simms said that even if the funds are in one bank account, the money in the water and sewer reserves will still be required to be used for projects under their respective departments.
Mayor John Kinnaird supported the idea of a capital reserve fund, assuring Burns that the Board would be responsible with the money. "We can’t plan for computer failure, we can’t plan for a pump failure," Kinnaird said. "We can’t plan for any of that stuff, unless we do this kind of thing, where we put money aside so it’s there in case of emergencies."
Burns said that he’s not against an emergency fund, that he is just concerned about the amount of money and reckless spending. He would prefer to be "strategic" about any increases.
