Federalsburg to increase water and sewer rates

FEDERALSBURG - Federalsburg Mayor and Council voted to consider an increase in the water and sewer rates immediately to help offset a structural deficit within the water and sewer budget at their Sept. 15 workshop. The formal question will be put into a resolution for consideration at its next meeting.

Ken Decker, a consultant providing town managerial services under contract, reported that the water and sewer budget shows a $435,000 deficit. The unbalanced budget puts the Town at risk on several fronts. First, the Town constitutionally must pass a balanced budget, and secondly, the FY2026 budget reflects a dire concern for cash flow and expenditures that could place the Town in an unsustainable financial situation. Decker said, “my best guess is that the Town will be insolvent by April or May of next year,” if revenues are not increased to level out the enterprise water and sewer budget.”

Mayor and Council have to discuss “(raising) rates or dissolution of the charter,” Decker said to emphasize the urgency of the need to address the budget deficit.

Both Mayor Kim Abner and Councilperson Brandy James noted that the $435,000 figure is high; there is a deficit, and the exact amount is not known, but based on experience and reviewing the budget more closely, the deficit is lower than the amount Decker stated.

Decker said that he is giving an estimation based on reviewing the numbers during his first two weeks in service, and that he will dig deeper. He still anticipates that with an influx of approximately $150,000 in revenue in property taxes that could be moved from the general fund, a 20% increase in water and sewer rates could “buy a year.” Councilperson Ian Ferguson clarified that the 20% increase would be on the rates paid for water and sewer usage, not on the overall bill that includes trash service and debt service.

Decker noted that the increase in rates and additional monies received from property taxes will help with the situation now. The Town remains in a precarious position with the condition of its infrastructure, as there have not been funds set aside in the budget for capital improvements. He suggested that beyond the initial rate hike for FY2026, the Mayor and Council will soon look into setting up reasonable rate hikes each year to prevent larger spikes every decade or so.

The Town currently has a $5 flat late fee for utilities that it has not charged or collected. Decker noted that $5 does not seem to incentivize payment, and certainly, non-enforcement does not incentivize late payments. He recommends updating the late fees to a percentage of the total or higher dollar amount ($10 for example), whichever is greater, and folding it into the resolution for increasing the water and sewer rates at the next meeting.

Staffing issue

High turnover and lack of institutional knowledge continues to impact the Town’s operations. Decker notes that out of 22 positions in the budget, including police officers, there are only eight people on staff, including himself as a consultant. Operational items such as providing minutes and documenting actions and votes on meetings seem lax, and knowledge of repair and maintenance at the wastewater treatment plant has been lost.

The Federalsburg Police Department has one employee as the Town, County, and Sheriff’s Department work out the details of the Memorandum of Understanding (MOU) for the Sheriff’s Department to provide public safety coverage in the Town.

Decker is working with current staff on the financials, but recognizes that they are inexperienced in local government financial management. This lack of experience may impact the completion of the required FY2024 and FY 2025 audits.

The FY2024 audit is nine months overdue, and the FY25 audit has not begun. Decker notes that the Town risks sanctions with the State of Maryland and a lower ability to get bank funding if necessary, due to the status of the audits.

Decker wants to bring in Donna Defino as a consultant to help with finalizing FY2024 audit prep and starting FY2025 audit prep. He requested spending authority to bring her on, but did not have details on the timeline or cost of Defino’s services. James requested an outline of services, with time ending and beginning and fees. Decker noted that there is an urgency to get the audits completed, and that the process for a formal proposal would further delay completion of the audits. The Mayor and Council instructed Town Attorney Lyndsey Jones Ryan to write an agreement to Defino with Mayor and Council approval.

Town Manager Consulting Services

Decker has been providing town manager consulting services for two weeks since the beginning of September, and the agreement for those services was brought before the Mayor and Council for discussion and acceptance. The agreement is for 30 days, not to exceed $20,000, with reimbursement for lodging, as a “try before you buy” arrangement. The scope of work generally is for Decker to understand the depth of issues in town operations, and to facilitate the town’s operations for a permanent town manager to be hired. James asked how the fee rate is determined and wants assurance that if another longer-term agreement with Decker is considered, the fees and scope of work details will be discussed at length. The Mayor and Council voted to formally execute the agreement with amendments.

Sheriff MOU to provide policing to the Town

James noted that County Commissioners have expressed concerns about the pending MOU to provide town police coverage with the Sheriff’s Department, the County, and the Town. Decker said that his take is that the Commissioners are concerned about the operational and financial instability of the Town of Federalsburg, and that the Commissioners are being prudent to ensure that there is someone, Decker or someone else, who is managing the town.

Decker said that there may be a sense that the Mayor and Council has been generally “low key” about the financial situation, and that in his opinion, the Commissioners are concerned that there isn’t a recognition in town leadership at the urgency of the “existential threat.”

Abner said that in her conversation with Sheriff Baker, he related that the Commissioners want a Town Manager in place, and that part of Decker’s agreement is to help facilitate the hiring of a manager.

The town will continue to work toward finalizing the MOU with the Sheriff’s office and County, and possibly coordinate a meeting with town leadership and the County Commissioners to help answer questions.