(2/15) The much-anticipated special workshops, instigated at the request of newly elected Mayor Frank Davis and designed to help him and the Town Council get their hands around the Town’s finances, failed to deliver the results residents and commissioners had hoped for from the so-called "deep dive" into the Town’s financial affairs.

Led by Town Council President Amy Boeham, the workshops were intended to discuss what funds the Town has on hand, the Town’s various income and expense streams, how money has been historically allocated to what projects and services, and if those allocations still make sense in today’s environment. The meeting, however, quickly pivoted to rehashing the state of the depleted funding of the Town’s water system.

The depletion of the Water Fund, the Council has learned, was brought about by a host of issues, including the decision of the prior administration to shift the charging of office staff salaries and benefits from the Town’s General Fund to the Water Fund. The decision in May of 2023 for a series of 36% water rate increases to ‘rebuild’ the Water Fund has drawn the ire of residents.

The ire did not go unnoticed by Mayor Davis or the Town Council, who immediately began to seek other solutions to replenish the Water Fund with the hope of eventually scaling down, or rolling back, the planned rate increases.

Several commissioners have publicly stated that they will not support the ongoing increases previously recommended by the Town Manager and approved by the former Town Council under Mayor Briggs's tenure. Commissioner Jim Hoover went so far as to ask that action be taken to stop the water rate increases unless the Town Council approves them every year.

In an effort to jump-start the replenishment of the Water Fund, in December, the Town transferred $300,000 of its American Rescue Plan Act (ARPA) funds into the Water Fund. Davis said that while the ARPA funds provided a little increase to the Water Fund’s balance sheet, "the Town is still a long way off from reaching the necessary levels needed to handle the cost of unexpected breakdowns in the system."

Davis told the Council that the Water Fund increased by almost $60,000 in the first quarter of FY-24 alone as a result of the first 36% rate increase, which went into effect in July. "Of course, it’s not the whole year's picture, but that sure helped to get the Fund’s balance up a little bit," he stated.

But according to one commissioner, the Town had not gone far enough to address the "elephant in the room," that being the charging of non-water plant staff hours to the Water Fund based upon something as simple as answering a phone call on a water question from a resident.

As a preliminary step to address the issue, Town staff proposed moving the cost of the benefits, i.e., health insurance, pension payments, and Social Security taxes, from the Water Fund to the General Fund for one office staffer. When asked why two other office staff members’ benefits were being charged to the Sewer Fund when their work was not related to sewer system operations, Willets stated that the Sewer Fund had the largest cash reserve – and thus could afford it.

This left some commissioners scratching their heads. "All we are doing is setting ourselves up to deplete the Sewer Fund just like we did the Water Fund, which will set us up to have to raise the sewer rates down the road," said Bowman.

Turnquist also questioned the appropriateness of charging employees’ benefits to the Sewer Fund "simply because we have the budget available. I think the funds that are charged staff members’ benefits should reflect where the majority of their work is done," she said.

While the decision to no longer charge the benefits of the three staff members to the Water and Sewer Funds reduces yearly expenses of these two funds by $96,600, the Town staff failed to address the principle concern of the Town Council over the charging of non-water plant office staff hours to the Water Fund. "If corrected," said one commissioner, "the potential savings to the Water Fund would be huge, dwarfing the income the Water Fund is getting from the rate increases, and possibly negating the need for it."

When pressed on the actual status of the Water Fund, Willetts did not answer the question directly, but instead pointed out that at the end of FY-23 (June 2023), the Water Fund had a balance of $10,864. Pressing for a clarification, Turnquist noted that the FY-24 budget contained an entry projecting a deficit of -$173,433 in the Water Fund for FY-23. "How do you reconcile a projected ending balance of -$173K with an actual net ending income of $11K?" Turnquist asked.

The lack of consistency in numbers had commissioners questing what figures were used to come up with the recommended five years of 36% water rate increases.

Turnquist also stated that the Town needed to conduct a careful review of the water rate increase, as some users with connections to the water system greater than the standard 3/4 inch connection saw their water rates increase as much as 217%, instead of the 36% that had been approved.

Picking up on a line of questing firsts raised by former Commissioner Joe Ritz, Turnquist asked for a study to determine how many residents actually used 6,000 gallons per quarter. Unlike other Towns who charge residents based solely upon gallons used, Emmitsburg charges residents using a tiered system; residents are charged for using at least 6,000 gallons a quarter, whether they use that amount or not. If they go over 6,000 gallons, they are charged in 1,000-gallon increments, regardless if the overage is by one gallon or 999 gallons.

Davis suggested a study with the Maryland Municipal League to see where the Town would be if it didn’t charge by tiers, but rather by actual numbers of gallons of water used, and to see if that approach would be feasible.

After digesting the results of the financial workshop, each commissioner put forth a wish list of actions they wanted to see the Town act on. The commissioners agreed to work together to prioritize the actions at the March Town meeting to create a master list of projects.