Are Sussex sewer rates unfair?

In a small ranch home just west of Fenwick Island, Salvatore and Carmelita Liberto live on a strict fixed income they have abided by since retiring to the Delaware coast from Baltimore five years ago. Carmelita Liberto said recently that they have just enough money to pay the bills and just enough savings to cover eventual funeral expenses for her and her husband. They had it planned perfectly.

But what they did not plan for were sewer fees.

Residents near Roxana recently voted 243-87 to create the Johnson’s Corner Sewer District, the newest addition to the Sussex County Central sewer system. It will cost the Libertos and many others thousands up front and year after year. The Libertos will pay $3,600 for the mandatory connection to the system and almost $1,200 each year — some of the steepest prices in a county where many question the fairness of the sewer pricing system.

“I don’t know what to do,” said Carmelita Liberto, who breathes through an oxygen tube after years of smoking cigarettes. The Libertos have considered selling their home to escape the costs. “Where do they think retired people are getting this kind of money?” Carmelita Liberto asked. “We have no way to make our income go up. They’ve got us between a rock and a hard place.”

A paucity of governmental grant money and rising costs have left some Sussex residents, such as the Libertos, bearing fees that are incomparable with even their nearest neighbors.

Just a few miles east of their home, in Fenwick Island, Vicki Carmean lives in a three-bedroom beach cottage where she pays less than $400 per year in sewer fees. The disparity in cost results from fewer governmental dollars and a Sussex pricing system many believe is questionable.

Residents in each of the county’s 26 sewer districts pay an annual service charge and a tax to repay loans taken out to build the district. Those with wider yards pay a higher tax to cover the cost of extending the sewer pipe farther. Because costs are not based on usage, but rather the debt the county accepted to build the district, county residents even a couple miles apart are burdened with drastically different bills.

Residents of the new district expect to pay a front footage assessment of $8.77, for instance, compared to an assessment of $1.37 in Fenwick and 69 cents in Bethany Beach, where federal grants covered more than half of the cost of construction in the 1970s and 1980s.

Sussex officials studying uniform rate structure

Recognizing the imbalance — and what some have called nightmarish administrative duties — Sussex officials have hired a consultant to study the pricing system and potentially help the county move toward a uniform rate structure. It’s a solution Councilman George Cole (R-5th) has championed for years as county officials have aggressively extended the sewer system to help protect the surrounding environment from failing individual septic systems.

County officials have replaced roughly 40,000 septic systems countywide with central sewer in the last 19 years. Since 1990, officials have replaced more than 14,000 failing septic systems with central sewer around the Inland Bays alone, a move lauded by environmental oversight agencies. With growth, though, comes more opportunity to spread higher costs across the users, Cole has argued.

“I think that uniform rates would be the most equitable fairest way to go in this stage,” said Cole, who owns a business in the Bethany Beach district. “They’re all over the board.”

Many Sussex officials and residents, though, are wary about balancing sewer rates because of the implications of such a move. While some prices would fall, others would rise. And that wariness is perhaps well-founded. Carmean, who acknowledged she is also retired and living on a fixed-income, said she would be willing to study the issue but was not immediately in favor of accepting higher fees.

“I guess I could accept a small percentage of increase, but I don’t think it would be fair to accept a higher rate to pay off someone else’s rate,” she said. “Sewer and water came into here when the cost was cheaper. We took advantage of it. We could have ignored it. There should be another way of offsetting the cost.”

State and federal funds dry up

In 1981, Sussex officials built the Fenwick Island sewer district, which serves the town and its immediate surroundings, for $7.4 million. More than $4 million was funded through governmental grants, including a $3.6 million Clean Water grant from the Environmental Protection Agency, according to county records. Districts in Bethany and South Bethany built in the late-1970s were similarly funded, with at least 60 percent of the construction costs funded for free through federal and state government grant programs. Grant funding on those projects has kept prices there down for three decades.

Funding for the Johnson’s Corner project — which is expected to total $13.7 million — only includes roughly 15 percent in governmental grant funding. Some $1.2 million in grants is expected from the federal government, with a $500,000 county contribution. A $34.5 million project in Millville received only 14 percent of its funding from governmental grants.

“If you look at the new projects, for the most part, they are all higher in terms of rate and user costs because of the lack of grant funding for the projects,” said Dave Baker, Sussex County administrator.

Clean Water grants now, instead of funding individual projects, fund a low-interest loan program administered by officials at the Delaware Department of Natural Resources and Environmental Control. Delaware received $5.2 million from Congress in the last budgetary cycle to fund the program, according to Greg Pope, the DNREC official who runs the program in Dover. State legislators supplement the loan program with a 20 percent match, but other state funds have dried out in the last two budgetary cycles.

From 2004 to 2006, state officials provided an additional $22.5 million used to provide grants and low-interest loans to help with sewer construction. That line item has been struck in the 2007 and 2008 cycles. Pope called the loss of funds — especially in a time when federal funding is dwindling — unfortunate, but perhaps inevitable, in a competitive state budget.

“The bond bill money is very competitive,” Pope said. “We’re just one agency fighting. There are a lot of interest groups trying to lobby the bond bill committee for those funds.”

Funding from the United States Department of Agriculture used to offset the cost of sewer and water system construction — now the primary source of federal grant availability — has taken a hit almost simultaneously. The $11.8 million allocated in the 2005 federal cycle was down to $8.4 million in 2007. Only $2.1 million was available to be used as grants in 2007, according to USDA Rural Development officials.

While Rural Development funding here has actually increased over that period, programs such as those to provide loans to help cove rental and electric bills have taken precedence over the once-strong wastewater program.

“I just think things are tighter,” said Lisa Fitzgerald, a rural development official working in Delaware.

Governmental grant programs outdated

Through the agricultural departments’ grant program, the Johnson’s Corner project was eligible to receive 45 percent governmental grant funding to help offset the costs for low-income area residents. With construction prices up and federal allocations down, federal officials noted recently that such contributions are simply not possible. In fact, Delaware’s rural development water and wastewater grant allocations in the last two years would not have covered 45 percent of the $13.7 million Johnson’s corner project.

“Even at that (the 45 percent) level, we don’t have that kind of grant money available,” said Denise MacLeish, a rural development official out of Georgetown.

Federal and state officials recognize that the current funding climate effectively renders some funding programs, including the rural development grant and state revolving loan programs, obsolete. To qualify to receive low-interest loans through the state program, fees in a district must not surpass 1.5 percent of the median household income there. Pope said that state officials have discussed relaxing the qualification because falling contributions and rising prices make it nearly impossible to keep annual fees below the 1.5 percent threshold. No projects have yet been disqualified, Pope said.

“There is a strong possibility I could review a (district) where I couldn’t bring a price down and I couldn’t get any grant money so I can’t offer you any loan package. That is possible,” Pope said.

If a project was disqualified, a lack of low-interest loans would likely drive the user price higher; essentially adding to the problem the loan program was set up to help fix.

Other counties escape polarization

In Kent County, where a central sewer system was created throughout most of the county in the late-1960s and 1970s, the most expensive sewer rate tops out about $500 annually, a number that includes a $257 service charge.

“If you start to saddle people with $1,000 a year sewer costs and they can’t afford it, what have you really accomplished?” asked Hans Medlarz, Kent County’s public works director. Medlarz said Kent officials do not build projects that aren’t “economically feasible,” a luxury not afforded to officials in Delaware’s southernmost county, where pressure to clean up the polluted Inland Bays has taken precedence over high costs.

Experts say that replacing septic systems with more closely-monitored central sewer systems can reduce the amount of nutrient pollution that enters the bays by pounds daily. The rapid recent replacement of sewer systems in Sussex, though, has undoubtedly contributed to the polarized rate structure that leaves some paying thousands out of pocket to help cover the costs. In New Castle County, the sewer rate is uniform and bills are based on water usage. Residents there pay $4.64 per every thousand gallons of water used.

In 2004, the most expensive rate in New Castle topped out at $292 annually, compared to the lowest rate of $202, according to state records. Like Kent County, extensive sewer expansion decades ago helped keep prices low. Upcoming expansion in southern New Castle County might require a different system, though, perhaps similar to that in Sussex and Kent counties, where fees are based on debt service owed.

Sussex uniformity a contentious issue

Sussex County officials have taken steps to keep prices down by capping the front footage assessment at 100 feet and using real estate-related taxes to provide central sewer enhancement grants. Contributions from developers are also help — $13.5 million was contributed alone on the Millville project.

Still, polarization in rates across the county are the most dramatic in the state. Bethany Beach’s 69-cents-per-foot assessment is the lowest in the county, compared to the highest of $11.99 in the connecting North Bethany expansion — a difference in fees of $1,300 annually for homeowners with the maximum assessment. In The Greens at Indian River, residents pay $921 annually for the front footage assessment alone and in the Cedar Neck area, residents pay $414.

North Bethany resident William Coffey complained about the rate structure at a county budget meeting last year.

“Sussex County prides itself in being user-fee based,” he said. “They have a responsibility that their fees and charges are distributed equitably. It just seems a little unfair.”

Attempting to uniform rates, though, would be a contentious issue that would likely face opposition on Sussex County’s five-man council and among county residents. Sussex County Administrator Baker commented on the issue recently.

“If we charge people in Johnson’s Corner less, we have to charge someone else more. That’s the kind of tough nuts,” Baker said.

Carmean, a Fenwick Island town councilwoman, agreed that upping rates will be hard to justify.

“There are people here in Fenwick, even though they are living in beach houses, living on fixed income. I think there has to be some other way of helping these people,” Carmean said. “I agree, in principle, that these people in Johnson’s Corner need the sewer. It impacts on the watershed area. I guess it’s something we all need to look at.”

Bethany Beach resident Russell Shaw agreed that it should be studied.

“If you were going to move in this direction, you would have to move slowly. You can’t just drop a whopping big increase on property owners like myself, out of the clear blue sky,” said Shaw, who agreed with county officials who have said the structure was not unfair. “It’s just the way, historically, it happened. Nobody decided that it was going to be (unfair). It just happened.”

Sewer rates

Johnson’s Corner – Expected completion in 2010
Total (estimated) cost: $13.7 million
Total governmental grants: $1.7 million
*Statistics from Sussex County