Testimony presented by Gordie Brenne, Montgomery County Taxpayers League
We know you hear from a lot of customers about increased water bills. This plan gives you a chance to step back, understand what causes high bills when it’s not the customers fault, and do something about it.
The Taxpayers League wants WSSC to succeed by delivering quality water and services, efficiently to customers. But, this plan is not strategic and doesn’t say how it will do that. Instead, it’s a laundry list of things engineers want the WSSC monopoly to do based on contractor estimates. What justifies a 13% increase in spending next year in the face of high interest rates? We are reminded of the misleading information management provided the Commission about development costs and risks for the $121M billing system. (According to the investigation report released last month, management wasn’t corrupt, but they sure wasted a lot of rate payer money on a system that doesn’t make customer service agents more productive or expedite customer assistance plan enrollments).
The Taxpayers League has three objectives and wants to see strategies in the plan with corresponding projects to achieve them.
Competitive rates- WSSC rates are double Fairfax Counties’ rates for a family of 4 or more persons. Management makes a deceptive comparison that uses a subsidized 3-person family rate. The annual ritual of above market rate increases which generate cash that disappears quickly and requires more increases the next year has to end. Capital and operating costs are going to have to be cut significantly to do this. A good start would be a specific strategy that justifies selected projects to reduce lost water from 20% to 10% at a cost less than increased revenues (by replacing large customer’s meters that underbill).
Prudent Financial Management- Management says Fitch maintains a negative outlook on WSSC bonds because of WSSCs high leverage ratio. So, where in this plan are the financial management strategies to fix it? There are many poorly managed risks that will result in WSSC running out of cash to pay its bills, including: low cash reserves, high interest rates, high delinquency rates for customer bill payments, high debt service costs because projects aren’t prioritized based on return on investment savings, and consistently low Paygo payments (needed to prepay debt service, but just $65M in FY’25, and jumping in the outyears to cover this low construction prepayment, same coverup as in previous year capital budgets). What’s the minimum cash reserve that will trigger an orderly state intervention to cut costs?
Lower Service Disruption Risks- Water and sewer pipe breaks result in high emergency costs, lost economic opportunities for residents and organizations, and environmental disasters. Proactive repair and replacement is needed. But the proposed projects do not specify how many of WSSC’s 11,500 miles of pipe and trunk lines will be repaired or replaced next year, or how this will reduce risks to an acceptable level. (This year according to management it’s 34 miles for water and 35 for sewer, but the plan reduces allocated resources for sewer trunk lines next year; also, we understand WSSC averages one break for every 3 miles of buried water mains).
Spending on growth makes no economic sense with high interest rates and should be deferred, especially since System Development Charges are projected by management to go into a deficit balance. (Appendix D shows $318M in SDC eligible costs in the future, of which $68M is for FY’25- nearly double FY’24 growth costs. Most planned growth spending benefits Prince Georges county, resulting in a subsidy by Montgomery County ratepayers, while increasing financial insolvency risks for all). Don’t approve this plan, and don’t let management bamboozle you or Taxpayers- again.
You can also view a video of the testimony here: https://www.youtube.com/live/1SE6wWSX4pg?si=iG6n6awBDhnXEzYU&t=2149