Purcellville Wastewater Funding: “It’s not a good idea,” Mayor Milan says as senior management advocates raising utility rates to reduce debt

At the Purcellville Town Council Work Session on Jan. 25, the Council voted unanimously to use the $926,000 plus interest in monies obtained from the sale of nutrient credits on the Aberdeen property to offset wastewater increases.

The payments to the Wastewater Fund would be over three years, with a $500,000 payment in FY25, $300,000 in FY26, and approximately $200,000 in FY27.

The choice before the Council was deciding whether to apply the money to either Capital Improvement Projects or the Wastewater Fund.

In his Council comments, Vice Mayor Chris Bertaut said he favored applying the nutrient credit money to the Wastewater Fund. “The thing abut the CIP proposals is every CIP project needs to be individually evaluated. We can’t just evaluate them as a grab bag that happens to equal approximately the amount we put together from the nutrient credits … I continue to favor applying the nutrient credits [$926,000] to pay down debt as it becomes due.”

Town Manager David Mekarski said even with the nutrient credit monies, it will still be wise to increase the utility rates to avoid “a huge spike.”

Just last year, Stantec, the Town’s utility consultant, recommended increases of 3 percent for water and 5 percent for sewer over the next five years.

For FY24, they are recommending an increase from 3 percent to 6.5 percent for water and from 5 percent to 9 percent for sewer to “meet essentially our debt responsibility,” said Mekarski.

Then Mekarski said, “So for FY24 we can probably hold water at 3 percent and take wastewater to 7 percent and that’s with the $926,000 from the nutrient credit revenue.” He said if the Town doesn’t make the rate increases, the cost will increase significantly in the future.

Director of Finance Elizabeth Krens said, “We would recommend that you continue to raise rates because of compounding interest rates. Any rate increase you should defer today, you are going to have a higher increase to get that same level of revenue in the future.”

Mayor Stan Milan said, “I don’t think personally that the citizens would stand another rate increase of that amount … It’s not a good idea. We need to look at some way to lower this debt to where we will not have to increase the rates substantially … to the citizens.

Krens said, “The hard truth is yes … you can avoid a rate increase in FY24, but you can’t avoid a rate increase once that debt service comes fully on board … as far as reducing debt — there’s only one way to reduce debt, and that’s to pay for it.”

Milan said he remembered when “I first got on Council before I heard of the American Rescue Plan Act money [the Town received $10.5 million], Council had approved $3.5 million to take care of the reservoir issues. We then received the ARPA money … What happened to the $3.5 million?”

Dale Lehnig, Director of Engineering, Planning & Development, explained that the money was to be used for the drudging project and “instead of taking the $3.5 million out of reserves, it came out of the ARPA funds. So it remains in reserves.”

Milan said the Town could use the already allocated $3.5 million for the CIP projects and the utility debt. “We didn’t use it. It was approved to be put towards the reservoir inlet valve, outlet valve, and valve to the Town. We allocated $3.5 million for that, right? But we never used it … Is it still in reserves?”

Krens replied, “It appears that some of these monies were budgeted with the USDA loan; it looks like we never went for that loan. There is some budget clean up we need to do.” Then she added, “It looks like we never went for that loan; it’s an error. We need to verify it.”

Accounting Manager Paula Hicks said, “I believe we weren’t given direction to take the money out of reserves. Somewhere before we did an actual budget amendment to take the reserves, we got the ARPA money. We never actually moved forward with taking it out of reserves.”

Milan asked, “So, it’s still there?” Vice Mayor Chris Bertaut commented that it sounded like “we need more research on whether the money was actually there in the first place.”

Krens concluded that they needed to re-look at “our reserves because that was a couple years ago,” and they need to make sure “we have it.”

Milan asked senior management, as he has done in the past, to apply for the $1.3 trillion in Bipartisan Infrastructure Bill grant monies available to localities such as Purcellville. But again, management said they didn’t have the time and the process is too competitive.