Water Wars

2009 August 7
by Chuck Shotton

The tug of war over facts and figures related to the town’s water rates continues. I was pleased to see that my letter to the editor on the subject got posted. There’s a very interesting exchange in the comments section of that letter on Leesburg Today’s web site, where one very common misconception is laid to rest.

For the record, tax payer dollars are not used in the operation or maintenance of the town’s water and sewer plants. Apparently many people have been misled into believing that is the case and that it justifies the mayor’s drum-pounding call for up to 225% of punitive surcharges on out of town customers. Not so.

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2 Responses
  1. 9:27am August 8 2009
    swisshegemonist permalink

    Please talk to the following “whereas” in Ordinance 2005-O-17 (2005_12_13_O017, paragraph 5):

    WHEREAS, prior to 1992, all bond indebtedness on behalf of the Utility Fund was issued as “general obligation bonds” which are pledged on the “full faith and credit” of the Town of Leesburg government (ed. “we the people, citizens of the Town of Leesburg”), whereby, in the event of default by the Utility Fund, the burden of repayment falls on the general government (ed., again “we the people, citizens of the Town of Leesburg”), to which the out-of-town customers have no obligation; and

    and the second sentence of paragraph 6:

    Providing utilities to out-of-town customers, may, at some future point in time, impact the town’s ability to provide utility services to in-town customers, there-by, potentially impeding economic development and impacting resident’s real tax rates; and

    Perhaps the whole thing comes down to a simple moral hazard (town as agent, out-of-town customers as principals), free rider (out-of-town customers not beholden to bond obligation consequences) scenario. The town should post the 2005 Municipal and Financial Services Group rate study to Laserfiche WebLink, to allow full transparency and access of study information to all stakeholders. Without this report being readily available, all current arguments for or against, are moot.

    • 10:25am August 8 2009

      Once the Utility Fund was created as an enterprise fund, the first quote above ceased to be an issue. With the exception of the most recent (two?) bond issues, all of the Utility fund bonds are pledged to the Utility fund and underwritten (essentially) by the rate payers. The town was asked to “co-sign” the last (two?) bond issues for water and sewer plant capital projects because it gave the Utility fund a preferential rate on the bonds. It saved a significant amount in debt service by doing this at the expense of having town tax payers ultimately assume the risk should the Utility fund default on the bond payments. However, we all know the likelihood of that is near zero, so this issue is a bit of a red herring.

      At the end of the day, the reason the town has out of town customers is primarily because the mayor has vehemently opposed the annexation of the areas served by town utilities outside of town limits. If you read the town’s master planning documents, dating from the early 80s until now, you would see that the town and the county had always planned for communities east of River Creek Parkway to be incorporated into Leesburg. You would also see that the town has had a long-standing requirement that utilities would only be extended outside town limits into areas that are defined as part of the urban growth areas identified jointly by town and county. You can thank Kristen Umstattd 100% for the fact that we A) have out of town utility customers and B) have them suing us.

      Had the planned annexations happened as the town and county stipulated, rather than being obstructed by her fear-mongering, we would have no out of town customers with the exception of county facilities (schools, etc.) bordering Leesburg.

      I suggested in my personal comments appended to the Utility Rate Advisory Committee report that the town simply sell water and sewer service to the county at fixed rates and allow the county to re-sell and handle all billing, etc. with out of town customers attached to the Leesburg utilities. This is absolutely no different than what LCSA does in eastern Loudoun, buying water and sewer service from Fairfax county and reselling to county customers. It solves all sorts of problems, first and foremost making disgruntled out of town customers the problem of the county and not the town, as it should be.

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