Oxford officials, residents react to sewer rate increases
08/02/2016 11:55AM ● Published by Steven Hoffman
Residents and elected officials in the Oxford area are concerned because sewage rates will be rising by 30 percent on Oct. 1 as a result of a recent decision by the Oxford Area Sewer Authority board. But, according to several local officials, it’s simply too early to know the longterm ramifications that the sewer authority’s current financial woes will have on local residents.
The sewer authority’s eight-person board approved the hefty sewer rate hikes for users on July 20, but warned that local residents could be impacted further. The sewer authority was not able to make the most recent debt-service payment on a $27 million loan that was due on June 25, prompting the rate hike.
According to sewer authority officials, the financial woes can be attributed largely to the fact that when municipalities provided the sewer authority with the number of Equivalent Dwelling Units (EDUs) five years ago, those figures are much higher than the actual number of EDUs that have been purchased so far. The projected EDUs amounted to a total of 2,042, but so far only 193 EDUs have been utilized, leaving the sewer authority to deal with heavy revenue shortfalls that have made it impossible to meet its financial obligations. Another debt-service payment of $637,000 is due on Dec. 25, and if the sewer authority’s revenues aren’t sufficient to make the payments due before the end of the year, the four member municipalities could be forced to pay the difference.
In order to secure the $27 million loan, the four member municipalities had to agree to back the loans. Each municipality accepted a portion of the debt-service payment in the event that the sewer authority could not make those payments in a given year—Oxford Borough is responsible for 44 percent, East Nottingham is responsible for 28 percent, Lower Oxford is responsible for 16 percent, and West Nottingham is responsible for 12 percent.
Oxford Borough residents will be hit particularly hard by the sewage rate increases, but they also stand to shoulder the biggest burden if the municipalities have to make up for the sewer authority’s revenue shortfalls. Several council members have already expressed their concerns about the potential burden on borough residents.
“We really don’t know how all this will affect the borough, other than paying more for sewer,” explained council vice president John Thompson. “Only time will tell.”
He explained that the higher sewage rates could have an unintended consequence for borough residents because those higher rates could force residents to reduce overall water usage. That would decrease the borough’s water revenues, which would make the municipality’s financial situation even worse at a time when expenditures are rising.
Council member Randy Grace said that he was appalled by the prospect of the 30 percent rate hike for borough residents. He questioned whether the rates will be reduced in the future when more EDUs are sold and the sewer authority’s revenues increase from tapping fees and new customers.
Council member Peggy Ann Russell pointed out that one unfortunate aspect of the current situation is that, even though a large majority of the EDUs that have been utilized since the sewer expansion have been allocated for projects in Oxford Borough, that municipality’s residents could be hardest hit if the sewer authority can’t make its debt-service payments.
“I am convinced that the decisions were made in good faith,” Russell said. “Unfortunately, things did not go as planned, and we have to pay the consequences for that. The fact is that we most often act in good faith, and sometimes it doesn't go according to plan.”
Randy Teel is a former longtime council member who just recently joined the sewer authority board as a representative from Oxford Borough. He said that he’s worried about the impact that the rate increases and potential tax increases could have on borough residents—especially senior citizens and those on a fixed income.
Local residents are concerned about the situation, too.
“I have three neighbors who are on fixed incomes,” explained Pete Vanderhoef, a resident of Oxford Borough. “This rate increase is going to hurt them. Then, you’re looking at a tax increase on top of that.”
He lamented the fact that the Oxford area has been slow to attract economic development, and that the infrastructure isn’t in place to allow for that economic development. A strong commercial tax base would not only alleviate the tax burden on residents and small business owners, it would boost the Oxford Area Sewer Authority’s revenues.
Vanderhoef, a borough resident for the last ten years, said that higher sewage rates and tax rates could hurt local businesses and residents—to the point where people might look to leave Oxford for neighboring towns.
“It’s very frustrating,” Vanderhoef said. “There’s a lot of disenfranchised people out there.”
Several local officials have said that the sewer authority didn’t do enough to communicate the financial issues that they were having. At the July 20 meeting, two West Nottingham Township supervisors said that Ed Lennex, the executive director of the sewer authority, came to a township meeting last year and said that the new EDUs that were being purchased were sufficient at the time.
Thompson echoed those concerns.
“My main concern is that Ed Lennex came to us early this year and said that their financials were fine, and that there was nothing to worry about,” he said. “We have not received one letter from then until now about any financial troubles.”
Thompson said that he would like to have Lennex attend a council meeting to update everyone on the situation. The borough’s millage rate already stands at 12.25 mills, one of the highest rates in the area, and it would be difficult to absorb any additional costs related to the sewer authority’s debt-service payments.
Shelley Meadowcroft, a supervisor in East Nottingham Township, said that it’s too early to know the potential impact that the sewer authority’s financial situation might have on the township.
“We’re still gathering information and asking questions,” she said. “We have not received official notice from the sewer authority, so we don't have a definite answer as to how this will affect East Nottingham and its residents, aside from the rate increase for sewer customers, moving forward.”
For now, local officials have little choice but to adopt a wait-and-see attitude until the sewer authority finalizes its plan for the debt-service payment that is due in December.
While most of the sewer authority’s current financial situation can be blamed on revenue shortfalls, there are a number of other factors at work. The most significant may be that a crippling sewer moratorium stalled any commercial or residential development for years, preventing the sewer authority from expanding its own revenue base. It’s not unusual for new connections to be slow to develop following a moratorium.
Another factor was a $1.3 million cost overrun on the construction of the new wastewater treatment plant that was officially unveiled in October of last year. Sewer authority officials also pointed to the fact that rates were not increased adequately between 1992 and 2004, when money should have been placed in reserve for the inevitable capital projects that arise.
Thompson questioned why the sewer authority would not raise rates for years, but then raise them an extraordinary amount at one time.
Ron Kepler, a supervisor in Lower Oxford Township who also is a member of the sewer authority board, said that, with the benefit of hindsight, the one thing he thinks the sewer authority board might have done differently is to raise rates by smaller amounts over the last few years. The reason the rates weren’t increased?
“Nobody ever wants to raise rates,” Kepler said.
At the July 20 meeting, Kepler suggested that they might explore the possibility of selling the sewer system operations.
“Ed [Lennex] is going to retire in a couple of years,” Kepler explained. “Now would be the time to explore the option. And it’s just a option. I don’t know if it’s the best option at this point.”