Water rate increase likely, due to deficit

Sayreville officials will consider increasing borough water rates next year in order to tackle revenue losses resulting from a rainy summer and a bad economy.

The municipal water utility has experienced a nearly $1.7 million decrease in revenue from last year to this year due to the climate and faulty economy. To help close a nearly $900,000 deficit, the borough may raise water rates by as much as 40 percent.

"We experienced a reduction in water billings all the way around," the borough's chief financial officer, Wayne Kronowski, said.

Residential water use dropped mainly due to a rainy and cooler-than-normal summer, since many residents did not fill up swimming pools or water their lawns as much as in previous summers, according to Kronowski.

Water use was also affected by the economy. The borough's three largest users, Gerdau Ameristeel, Florida Power and Light, and AES-Red Oak, all decreased their water use, which together brought a $531,038.39 loss to the borough compared to last year. A majority of the revenue lost was due to the temporary closing of the Ameristeel mill, which shut down for a period in late spring after experiencing a decrease in product demand.

The problem, Kronowski said, is that despite the slowed water use and resulting loss of revenues, the borough still faces the same expenditures related to the water plant.

"The expenditures are still there because the water plant is built to provide water for a normal year's demand, and this year the demand was historically low," he said.

Kronowski said the borough tries to run the water plant as a break-even operation, but the unusually large drop in demand led to large drops in revenue.

In order to make up for the projected operating deficit of $851,000 for this year and to maintain operations, the borough may act to increase water rates by up to 40 percent. However, since it is not known what the demand will be next year, officials may choose to only increase rates by 20 percent to start, Kronowski said.

"So we need at least a 20 percent increase to cover that deficit, plus expected costs for next year," Kronowski said.

For the lowest users the rate would increase from $21 to $25.45 per 1,000 cubic feet per quarter. For the average residential family, the rate would go from $135 to $162 per 1,000 cubic feet per quarter, or $52 dollars a month, Kronowski said.

"So if you think about it, that's cheaper than buying a bottle of water every day," he said.

In order for the rate increase to be effective by January, the Borough Council — which introduced the ordinance on Nov. 23 — will have to adopt it at its Dec. 14 council meeting. It will hold a public hearing the same night.

When Kronowski presented the financial report on water revenues during the council's Nov. 16 meeting, Councilman David Kaiserman expressed concerns, saying he did not understand why the governing body wasn't informed of the significant loss in revenue and need for a rate increase until that point. He noted that much of the demand dropped months earlier, during the summer.

Borough Business Administrator Jeff Bertrand said the council was not informed earlier because officials were expecting the revenue to rebound in October, as it has in the past. Not only did the revenue remain low in October, it actually dropped nearly $600,000 from the previous year.

"We first saw a decrease in August, but the real tractor trailer hit in October when we lost $600,000 in one month," Bertrand said.

If the new rates are adopted Dec. 14, the increase will be effective Jan. 1.

"Hopefully the first couple months of 2010 will show an increase in water revenue," Kronowski said.