Dagsboro OKs water rate hike to offset supplier’s increase

DAGSBORO — Monthly water bills in the town of Dagsboro that go out in November will reflect a rate increase necessitated by a substantial rate hike from its water suppler — the neighboring town of Millsboro.

By a show of hands, Dagsboro’s mayor and council voted 5-0 Monday night to keep its $35 fixed rate and increase the variable rate from $4.15 per 1,000 gallons to $6 per 1,000 gallons of water used.

In July, the town learned of Millsboro’s rate increase from $3 to $5.40 per 1,000 gallons – a hike that put the town in a deficit position projected at more than $117,000.

Dagsboro leaders opted to address this dilemma through a usage rate increase, coupled with internal revenue transfer from water impact fees that total about $19,000.

The option approved was one of several presented to council at its September meeting by Jean Holloway, state program manager for Delaware/Maryland Eastern Shore Southeast Rural Community Assistance Project (SERCAP).

“They (Dagsboro) couldn’t absorb that kind of loss for every thousand gallons because it was putting them in a deficit position projected over $117,000 for this budget year — if they hadn’t done something to change the water rates,” said Ms. Holloway prior to the public hearing during Monday’s meeting. “It does give them a much smaller margin. But they are trying to make up the difference in that deficit from reserves, so the customer won’t have to bear the entire cost.”

“The methods that I use are supported by the AWWA (American Water Works Association),” said Ms. Holloway, who has undertaken numerous water rate studies/comparisons during her career.

At $6 per 1,000 gallons, the average water user will pay about $65 a month, about $10 more than under the previous $4.15 per 1,000 gallon rate/$35 base rate that went into effect Jan. 1 of this year.

“I don’t want to say I like this thing that we are talking about, but I think it’s the best way to deal with the situation,” said Dagsboro resident Bob Flowers, who was among three people who spoke during the public hearing. “Our water system underground is getting so aged … if we don’t make money on our water system, we’re going to be in deep trouble in the next few years.”

Late last year, Ms. Holloway assisted the town of Dagsboro in adjusting its water rates. That included a decrease in the monthly fixed rate ($40 to $35) and a usage rate increase from $4 to $4.15 for every 1,000 gallons.

In July, Dagsboro, which purchases its water from Millsboro in a 20-year agreement that runs to 2022, learned its rate from Millsboro had increased 80 percent from $3 per 1,000 gallons to $5.40 upon receipt of its monthly bill. That increase was packaged in Millsboro’s fiscal year budget.

The public hearing drew some opposition.

Resident Jim Thompson, who has addressed council on the water rate issue several times, shared a spreadsheet punctuated with his proposal: The Thompson Plan, which would call for a $10 per month fixed rate and one cent for every gallon used.

He challenged the proposal that council ultimately approved.

“To give you an idea how bizarre this proposal is in my eyes, what if there is one gas station in every town in Sussex County, and every gas says you can have all the gas you want for 60 cents a gallon – pretty cheap, right?” said Mr. Thompson. “One caveat: you’ve got to pay $350 a month base rate in order to get you gas for 60 cents a gallon. Nobody would go for that except a big trucking company or a contractor with a fleet of trucks …”

“What I am driving at here is that the way this system is being proposed. It shifts the burden of the cost of the water system on the small volume users, under 5,000, 6,000 gallons a month, and lets the big volume users … basically get away with damn near nothing,” said Mr. Thompson.

Ms. Holloway addressed Mr. Thompson’s proposal.

“The one problem with that is it makes the town very vulnerable to usage fluctuations and there is not a revenue stream stable enough to cover their debt service and so forth,” said Ms. Holloway. “If you raise the rates from $4.15 to $10, people are going to conserve — your revenue is going to go down.”

Ms. Holloway noted in her presentation that “variable charges are used to recover the cost of actually producing the water itself, whereas the fix charge is installing the system to do so.”

It was noted at the hearing that only a couple of water users among the town’s 430 customers qualify as a high-volume user with upward of 30,000-plus gallons per month.

Town councilman William Chandler III inquired about high-volume users, noting the town of Georgetown, where there is a $35 availability charge per 30,000 gallons to recover long-term debt.

“If you charge per EDU (Equivalent Dwelling Unit), you probably already are,” said Ms. Holloway.

In the future, Dagsboro may have another water supply option in the Artesian Water Company.

In June, town council approved an interconnect agreement with Artesian after approving in May Artesian’s plans for a new operation project off Del. 20 near the Del. 26 intersection that includes three new wells, a maintenance building and a 1 million gallon elevated water tower.

It is projected that it will likely be at least a year, possibly more, before Artesian is in operation at the Dagsboro site.

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