Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland
Montgomery County Taxpayers League

The Voice of Taxpayers of Montgomery County, Maryland

Latest Posts

WSSC Rates: Testimony by MCTL Member Gordon Brenne

Testimony of MCTL Vice-President Gordie Brenne September 25, 2016, before a committee of the Montgomery County Council concerning an increase in water rates proposed by the Washington Suburban Sanitary Commission:

Rates rose in the last ten years at an annual rate of 6.63%, almost 3 times the CPI (Levchenko, 7/19/16, pg. 2).  This is because cost controls are weak. In addition, fees for customer service and infrastructure maintenance were added last year to fortify revenues, but will undermine any cost control incentives in these areas.

You would think the revenue picture is rosy at this point.  But it’s not, and it will always be desperate because weak cost controls and declining water demand create constant pressure on revenue sources.  (WSSC is now faced with a judgement to change its rate structure to address the equity of higher tier pricing beginning from the first gallon.)

Even if our residents had deep pockets and could subsidize WSSC indefinitely, our family rates are 34% higher than Fairfax County (combined water and sewer rates of $11.69/1,000 gals vs. $8.71, OLO 2016-7, pg. 22- this is for an average family of 3), and we estimate business rates are 69% higher ($15.02/1,000 gals at 500 gallons ADC vs. $8.89, Sue Lacourse. 11/15).  Fairfax is our primary economic development competitor.  Our families are disadvantaged and we could be losing business opportunities and jobs because of this.  What are Fairfax best practices that we can adopt to lower our costs?  Is their overhead rate as high as ours?  Do they manage fixed costs differently than variable costs? Do their cost controls link to their strategic plan?  Do they outsource activities we don’t to capture cost savings?  Does their supply chain management system generate greater cost savings?  Do their sewer rates subsidize water rates like ours? What have they done to achieve a lower unbilled water rate and increase revenues?

Our recent letter to Joe Beach (7/27/16) outlined three areas that are key to reliability of service, and highlighted in the benchmarking report as having weak practices: Utility Services, Fleet Management, and Asset Management/CIP.  We’re still waiting for a response.  These three areas contribute to productivity weaknesses, result in growing fixed costs, and are key to bringing costs and rates under control.

Basically, WSSC operates on a cost plus contract basis with the taxpayers.  They spend more, we pay more.  There is no incentive to control rates and costs will continue to rise indefinitely.  Why aren’t there incentives in the budgeting and rate setting process to improve performance?

Council Member Berliner has stressed the importance of reliability and we believe high costs impede reliable performance.  Until these cost control questions are resolved, no rate increases should be approved. No pay increases should be budgeted, and a hiring freeze should be imposed until WSSC has implemented new cost controls and realigned rates to compete with Fairfax County.

Finally, a state law requires both counties to agree on changes to both the operating and capital budget proposed by WSSC, or the proposed budget must be adopted.  This ridiculous rule resulted in excessive salary cost increases last year, and will guarantee the same result again this year.  The council must amend this rule to allow common sense to reign in cost and rate increases.  We also recommend that a citizen advisory panel be established to provide common sense criteria for the rate study.

(Effective organizations use compliance drills as an opportunity to advance strategic objectives.  What other objectives do WSSC pricing strategies serve beyond compliance and revenue generation? Conservation, economic development, medical research, farming and aquatic sports come to mind, and I’ve barely scratched the surface.  Does WSSC have these objectives and corresponding demand estimates and pricing strategies covered in its strategic plan?  If so, revising rates will be easy. If not, it will be little more than a random experiment).

WSSC Rates: Testimony by Susan LaCourse

Testimony of Susan LaCourse September 25, 2016, before a committee of the Montgomery County Council concerning an increase in water rates proposed by the Washington Suburban Sanitary Commission:

My name is Susan LaCourse, and I am a resident of West Laurel. I would like to speak on behalf of the many WSSC customers who send this message: DON’T RAISE OUR RATES!

Over the past three years, I have networked with over a thousand WSSC customers through my petitions on Change.org (649 signatures) and MoveOn.org (198 signatures) and through my Facebook page, “Marylanders for Affordable WSSC Water”. Dozens of customers have posted comments that specifically condemn the WSSC rate increases over the past 12 years and cry out for relief. (One comment was, “Help!”) Public perception is that WSSC spends money extravagantly and wastefully.

Here are some examples of what we see as customers:

  • WSSC’s newish fleet of spiffy 4WD SUVs that I personally have repeatedly observed WSSC employees use to drive to meetings (almost never with more than one occupant).
  • The $60 million expansion at the Patuxent Plant (WSSC has very publicly pointed out that total consumption is flat or declining and will remain so for the foreseeable future, and peak usage is far below capacity, so how necessary is this expansion?)
  • WSSC’s Annapolis office suite in a brand-new, state-of-the-art building (with an automated, robotic indoor parking garage) on some of the most expensive real estate in Annapolis (7 State Circle) that presumably allows WSSC lobbyists easy access to the State House (How many other utilities own office suites on State Circle?)
  • The spiffy Headquarters building in Laurel (this is mentioned a lot by customers)
  • The rumored 6-digit “birthday party” that WSSC plans to throw for itself to celebrate its 100th year

I have also repeatedly heard customers conjecture about executive compensation, salaries, benefit packages, pension and retirement benefits, etc. etc.

These are just the extravagances that we know about. How much more waste is there that we are not aware of?

The argument that excessive rate increases are needed every year to replace aging pipes is as old and tired as the pipes themselves. Pipe replacement is just a small part of WSSC spending.

It seems that everyone (including WSSC’s own consultant) acknowledges that WSSC has a customer relations problem. It can’t be solved by hiring more staff (WSSC’s plan). WSSC would do far, far more to improve customer satisfaction if they did some belt-tightening and passed the savings on to customers, than if they hired 100 more customer service staff. And hiring more staff just makes the spending problem – and the public perception of waste – worse.

I encourage you to serve your constituents responsibly by not raising WSSC rates for FY18.

Respectfully Submitted,

Susan LaCourse

 

WSSC Rates: Testimony by MCTL Member Ed Amatetti

Testimony of MCTL Member Ed Amatetti September 25, 2016, before a committee of the Montgomery County Council concerning an increase in water rates proposed by the Washington Suburban Sanitary Commission:

For nearly 15 years, I was an auditor and consultant to dozens of regulated utilities, and municipal and county  utilities, including as large as Cleveland, Providence, and the greater Oakland area.   My work has included rates.

The proposed rate increase should be denied unquestionably.  Rate increases far above inflation for 10 years running and a poorly designed rate structure are reasons enough.  But I want to focus on another compelling reason: that being, we still do not have a handle of WSSC’s cost structure, which determines the utility’s revenue requirements, and therefore, rates.  The Commission knows precious little about WSSC’s costs and whether WSSC is performing even the most basic utility activities at an acceptable level of efficiency.   This remains the case even after reading the recently completed, long overdue benchmarking study, which was poorly designed and did almost nothing to shine the light on costs or quantitative operational performance. 

Case in point: Montgomery Council member Leventhal is quoted as saying he and the Montgomery Council did not object to the rate increase “because of WSSC’s need to repair and replace aging infrastructure.”  But rather than an argument for a rate increase,this is a giant red flag and an argument for review of WSSC maintenance activities.  Infrastructure rehabilitation and maintenance should be part of a utility’s normal activities, and included as an ongoing line item in the operating budget each and every year for determining revenue requirements and rates.  Thus, we have a situation where WSSC is being rewarded with yet another rate increase and a new customer charge for not having kept up with maintenance and repair even while rates increased at three times the rate of inflation for 10 years running.

In the meantime, we know little about the miles of transmission mains inspected, rehabbed, or replaced each year or the costs of these activities, and how this compares to other utilities with similar size, age, and composition of pipe and corrosiveness of WSSC ’s water.  We know nothing about the number or percentage of valves in the system inspected or replaced each year, by size and age, or the costs per valve associated with these activities – and how these compare to other utilities.  Are there water treatment options that might protect the infrastructure better?   Same thing with activity after activity — none of which have been audited or reviewed properly. 

Then we have the $60M treatment plant expansion moving forward at a time water demand is absolutely stagnant.  The recent study did not even review cost-benefit justifications for the proposed scope of this project.   Why is this absolutely — because these facilities get added to the Rate Base and make future rate increases far more likely.

These are not specious or unwarranted complaints.  Without this type of cost data, a case for reducing costs cannot be effectively made and effective oversight of the utility is futile.   If the current rate request is approved, I question the value of even having a regulated utility at all.

 

Marvin Weinman

We are sorry to announce the death on September 19th of our former president, Marvin Weinman.  He was a stalwart in advocating for the taxpayers of Montgomery County.  His knowledge of the fiscal and budgetary issues facing the county was unsurpassed.  He was a seer in that he predicted the structural budget deficit of the county before it was acknowledged by our political leaders.  He will be missed for his wise counsel on financial matters and for his knowledgeable, non-confrontational approach to issues affecting taxpayers. 

Joan Fidler

President
Montgomery County Taxpayers League

 

“How to End the Monopoly and Recover the Money”

From Seventh State an article by Adam Pagnucco.about ending Montgomery County’s monopoly on liquor:

The County’s Department of Liquor Control “monopoly earns money for the county and the [County] Executive does not want to lose it…Through a combination of a few more stores, incremental revenue sharing with the state and restructuring of the liquor bonds, the county could free itself from its liquor monopoly with no significant financial consequences.  No new taxes or fees are necessary.  And the county would see the creation of new jobs, more income, more economic activity and greater competitiveness with its neighbors as a result.”

As always we invite your comments.

 

 

“A County’s Self-Inflicted Compensation Crisis”

From Governing.com:

“One reason why even a large tax increase can’t cover the county’s expenses is that over the last six years deals negotiated by County Executive Isiah Leggett raised the wages of police, firefighters and other county employees by between 25.4 and 31.5 percent. Leggett says one reason for the hefty raises was his desire to avoid arbitration; the county has lost 16 of 20 arbitration decisions since 1988.”

Your comments are welcomed.

Maryland Homeowners Property Tax Credit Calculator

From the Montgomery County Civic Federation:

The State of Maryland and Montgomery County offer credits against a homeowner’s property tax bill if the property taxes exceed a percentage of homeowners gross income.  If your income was $60,000 or less in 2015, there is a good chance that you can cut your property tax bill by hundreds or thousands of dollars by applying for the Homeowners Property Tax Credit.

Every year, many homeowners who are eligible for the credit fail to apply because they either don’t know about the credit or don’t realize that the small amount of paperwork required to apply can save them hundreds or thousands of dollars.  This calculator is intended to spur homeowners to apply for the credit.  The deadline to apply is September 1, 2016.

“Unions kill a smart arbitration proposal in Montgomery County”

From the Washington Post of July 29, 2016:

“OVER THE past six years, wages for Montgomery County’s about 9,000 public employees — police, firefighters, budget analysts, clerks, librarians, bus drivers, jail guards and others — have grown between 25 and 31 percent. That increase, nearly three times the inflation rate over the same period, is much greater than that enjoyed by most public- and private-sector workers, including federal workers. Montgomery taxpayers are on the hook for those raises, mainly through their property taxes, which will spike 9 percent this year.”

The proposal had its genesis in the Organizational Reform Commission report submitted to the County Council in 2011.  MCTL President Fidler was a member of the Commission.

As always we invite your comments.