At an April 10th public hearing on the 2013 budget, the Stillwater Village Board of Trustees told residents it is considering increasing water rents as an option for paying off a long-term loan to fund recently installed water pipeline that draws water from the Saratoga County Water Authority.

The lines were installed after PCBs were discovered in the wells of the village treatment system near the Hudson River.

Nearly 40 people packed the meeting room for the hearing, which was required by law before enacting the new year’s budget, and spent two hours questioning the board and its engineering consultant on financing about the higher water rents option. Under the proposal, village property owners would pay more based on the number of dwelling units they own to erase the water debt.

“This has been a long process for all of us, something we were forced to do, and now the bills are coming due,” Mayor Ernest Martin told the crowd. “On top of that we still have a water budget to run.”

The problems began for the village in the summer of 2008

The problems began for the village back in the summer of 2008 when tests revealed PCBs were present in the water supply. From the 1940s to 1977, General Electric discharged PCBs into the Hudson River from two upstream plants and the company has since been ordered to dredge 40 miles of riverbed between Fort Edward and Troy.

The U.S. Environmental Protection Agency, which is monitoring the cleanup, installed a temporary filtration system at the village’s water treatment plant to ensure its residents would have safe drinking water, while the village began eyeing a permanent solution.

The most cost effective solution involved hooking up to the Saratoga County Water Authority, which pulls its water from the Hudson River through its Moreau treatment plant. Last January, the village completed a pipeline connection to SCWA at the county line near Cordero Boulevard and the Luther Forest Technology Campus. The village is purchasing a daily minimum of 300,000 gallons from SCWA at $2.08 per 1,000 gallons.

Deputy Mayor and Trustee John Basile told residents the total project will cost about $6 million to complete. While some of that cost will be paid through federal grant money, the village will still have to repay about $3.9 million through a loan from the U.S. Department of Agriculture Rural Development Agency at 3.25% interest.

This new loan debt will cost village taxpayers $179,597 a year for the next 38 years in addition to the water department’s annual operating budget for 2012-2013 fiscal year of $462,556.

Mayor Martin said he hopes all of the debt can be covered through a lawsuit the village has filed against General Electric. What the outcome of that lawsuit will be, no one knows.

Higher water rents based on EDU formula

In the meantime, to make up this new debt the village proposed raising water rents based on EDUs or Equivalent Dwelling Units. This is a formula other municipalities around the state facing similar financial circumstances have used, said Mary Beth Bianconi, the village’s engineering consultant on financing from Delaware Engineering, P.C., of Albany.

Here’s how the EDU system works: The village property tax roll is broken down into EDUs based on how many units a building contains. A single family home, which makes up 69% of village property, equals one EDU. A rental property, on the other hand, could equal multiple EDUs depending on how many apartments it has. A duplex would equal two EDUs, a third-unit, three EDUs, a four-unit, four EDUs and so on.

The village has calculated it has 802 total EDUs on the tax rolls. Under the new water rents formula, property owners would pay $224.07 per year, per EDU they own. 802 EDUs X $224.07 = $179,704 to cover the new loan payment debt. The remaining $462,556 of the water department’s annual operating budget would be funded as it is today, through a water usage fee which could increase in 2012-13 to $3.66 per 1,000 gallons used in the village (this year’s village rate is $3.45 per 1,000 gallons), and to $5.54 per 1,000 gallons for outside users (this year’s outside user rate is $5.33 per 1,000 gallons).

Landlords opposed to new EDU formula, call for raising water usage fees
Several hearing attendees, who own apartment dwellings, told the Village Board they oppose the new EDU formula because they would be paying for multiple EDUs versus a single-family homeowner and shouldering more of the financial responsibility of paying back the water debt. Some argued they would be forced to raised their rents and lose tenants.

“Then people would just move out of the village and go somewhere else,” one woman said. “There’s no way we can raise the rates that much and hold our client base.”

A “fairer” way to make up the debt, the landlords proposed, would be to raise the water usage rates for everyone including those who buy water in the town. The town has a contract to buy water from the village through 2016 for its Water District No. One.

The landlords contend that since by law, the village cannot tax town residents to help pay for the debt, forcing town residents to pay higher water usage rates would spread the cost to “everyone,” not just village taxpayers.

To fund the village’s 2012-13 water department budget of $642,153 (which includes $462,556 for general operations and maintenance and $179,597 to pay back the loan) through water usage fees only, water usage rates would have to increase in the village from $3.45 per 1,000 gallons to $6.15 per $1,000 gallons used, and increase for outside users from $5.33 per 1,000 gallons to $8.03 per 1,000 gallons used.

Trustees have major concerns about relying on water usage fees to pay debt
Village Trustees told residents they have some major concerns about using water usage fees versus a set formula to pay back the loan. Studies have shown when you raise water rates significantly from one year to the next then people cut back on usage, Basile said. And to top that off 16% of village water bills go unpaid, on average, every year.

“If that happens we wouldn’t be able to meet our debt,” said the Deputy Mayor. “The water usage fee option leaves us with a lot of question marks.”

Trustee Keith Collins agreed, saying counting on water usage fees to pay your debt is “unreliable.”

He also pointed out that the Town of Stillwater also only has a contract with the village to purchase water for the next four years, while the loan is for 38 years. At the same time the Town Board is considering its own direct connection to the Saratoga County Water Authority in future years. That could result in a significant reduction in revenue if the town no longer bought water from the village.

“With the water usage, the revenue stream just isn’t clear to me,” Collins said. “What happens if we don’t have the money to pay our loan? One of my primary responsibilities as Village Trustee is to make sure the village’s finances are in order. Right now we’re saying I hope water consumption stays the same and I hope the town continue to purchase water from us. I don’t personally want to base an important decision like this on ifs.”

Engineering consultant, Bianconi, who has worked with many municipalities over the years on situations similar to this, was asked by the audience what method do most other towns and villages use. Most municipalities use a EDU formula, she said, adding that the USDA-RD may have questions regarding water usage fees to pay back the debt when processing the village’s loan application.

“They may say, ‘What are you going to do in year 5 (when the Town of Stillwater’s contract to purchase water ends),’” Bianconi explained. “How are you going to make up your revenue losses if that should happen? Those are legitimate questions.”

Trustees Ellen Vomacka and Judith Wood-Shaw said they were still considering which option would be best for the village.

“We, as Trustees, have discussed many, many scenarios to correct this unfortunate situation,” Vomacka said. “And that’s why we are here tonight, to hear what you have to say. The bottom line is we are going to make the decision that best protects the village and its residents.”

Special meeting scheduled for April 24th vote

After the public hearing, the Village Board approved the 2013 General and Sewer budgets but it did not take action on the Water budget. Instead, Mayor Martin called a special meeting of the Village Board for Tuesday, April 24, at 7 p.m., in order to give Trustees more time to think about the public input it had received. A vote on the water budget will be held at that time. The meeting will be held in the Village Board meeting room, 1 School St.