CHESAPEAKE BEACH, Md. – The Town of Chesapeake Beach issues important notices and clarifications related to water and sewer services per the Town of Chesapeake Beach Utility Fund for the fiscal year of July 1, 2024, to June 30, 2025 (“FY25 UF”).
The Town’s FY25 Utility Fund demarcates legislative actions to eliminate general taxpayers’ fiscal support of high-density development and commercial users’ cost of demand on critical infrastructure. The Town’s Utility Fund has consistently operated at a fund deficit, with no reserves to offset losses, which creates a high risk and liability to the General Fund and, therefore, the general taxpayers. Efforts over the course of this administration have incrementally adjusted these burdens to stabilize the Utility Fund. These adjustments require that user fees cover user costs, that commercial users pay the true cost of their demand, and that partnering jurisdictions of the Chesapeake Beach Water Reclamation Treatment Plant are not supplemented by Town taxpayers. These measures are required to stabilize the utility fund to ensure the reliability of critical infrastructure and to provide that the Town can qualify for grant and low interest critical infrastructure loans.
Why is it important for the Utility Fund to operate as an Enterprise Fund? The Utility Fund is an enterprise fund, meaning user fees are required to support user costs. Enterprise fund accounting requirements ensure financial stability of the Utility Fund and is a requirement for the Town to be eligible for critical infrastructure funding through grants and low-interest loans. If user fees are unsupported by the utility users’ use and demand on critical infrastructure, general taxpayers will be liable to fund those fees. This liability increases significantly with high-demand commercial users and our partnering jurisdictions of the Chesapeake Beach Water Reclamation Treatment Plant (Calvert County, Anne Arundel County, and the Town of North Beach). Historically, the General Fund has supplemented the Utility Fund to keep the utility rates artificially low through direct transfers, not accounting for staff time and the appropriate percentage of shared cost to administer utility services (including utilities, contracted services, insurance, and professional fees).
The Town’s Utility Fund critical infrastructure includes over fifty miles (50) of water and sewer lines, three (3) water towers, and twelve (12) sewer pumping stations. Ninety five percent (95%) of all Utility Fund infrastructure is maintained and repaired in house, which occupies a minimum of fifty percent (50%) of all Public Works staff time. In addition, Town staff administers utility billing, human resources (HR), general oversight, and contracts third-party auditing of the utility fund as approved by the Town Council. Overall, the allocation of staff wages and benefits accounts for approximately 25% of the FY25 Utility Fund operating expenses, which remains well below the standard for many other jurisdictions that average at least 50% in salaries and wages to administer services. Of the total salaries and wages in the Utility Fund, seventy percent (70%) is made up of Town of Chesapeake Beach Public Works employees and thirty percent (30%) consists of Town of Chesapeake Beach administrative staff and oversight of critical infrastructure. These staff costs include all Maryland Department of Environment (MDE) mandated licensures and continued education training requirements to operate and maintain critical infrastructure.
How is the FY25 Utility Fund supported? Fixed fees and variable fees support the Utility Fund. Ninety-seven percent (97%) of the total budgeted Utility Fund expenses consist of fixed costs that do not fluctuate with changes in consumption. These costs account for turning on your water and flushing your toilet, with revenues supporting expenses primarily from fixed fees. Fixed fees are billed by the Equivalent Dwelling Unit (EDU), ensuring that burdens by high-demand commercial users are accounted for appropriately. In accordance with the Town’s water and sewer manual, an EDU averages 190 gallons of water and sewer daily. To account for Commercial users’ total water and sewer use by EDU, the usage volume is divided by 190 gallons to determine the total number of EDUs. Effective July 1, 2024, the sewer fixed fee per EDU is $100, an increase of $50 per EDU per quarter. Fixed fee revenue creates predictability to ensure effective long-range budgeting and planning for future infrastructure needs and balances cost by demand with the rate applied by EDU, scaling up for commercial users.
The remaining 3% of the Utility Fund expenses come from variable fees. Effective July 1, 2024, increases to variable water and sewer rates were adopted to incentivize water conversation and capture costs increased by high-volume consumption users (see Table 1). Variable rates cover costs that fluctuate with total consumption volume and are charged based on metered consumption. The tiered structure, designed to promote water conservation, ensures higher consumption yields higher variable rates to account for the impact of high-volume users. For example, a property owner will experience a lower utility bill due to using less water quarterly (a lower rate per 1,000 gallons and lower total variable usage cost).
What is the Town doing to minimize future cost increases of the Utility Fund? To account for expenses as they occur, the Town is conducting audits of commercial users and reviewing multi-family rental properties to ensure payment of capital connections. In addition, the Town has purchased and installed approximately six hundred (600) new meters in the last two (2) years reducing the occurrence of estimated usage bills.
To ensure users pay the appropriate amount for their demand, the Town of Chesapeake Beach is conducting audits of all commercial users in accordance with the Town’s water and sewer manual. The audits conducted by Town staff have resulted in the identification of several commercial properties with higher water and sewer usage than they have paid through capital connections to the Town by EDU. To bring these locations into compliance, the Town is collecting the associated outstanding debts owed to the Utility Fund, having collected approximately $500,000 in capital connection fees and estimates roughly $4,000,000 in additional revenues due to the Town’s Utility Fund.
Additionally, the Town is auditing our partnering jurisdictions (Calvert County Government, Town of North Beach, and Anne Arundel County) that send wastewater to the Chesapeake Beach Water Reclamation Treatment Plant (“CBWRTP”). This audit has shown that the Town of North Beach has more EDU’s connected to the CBWRTP than permitted by inter-jurisdictional agreement, estimated at approximately $900,000 in costs due to the Town of Chesapeake Beach. All revenues received by the Town as a result of the audits will go be deposited to the Town of Chesapeake Beach Utility Fund.
Table 1 FY25 UF Rate Schedule with Comparisons
To review further information on the Town of Chesapeake Beach FY25 Utility Fund please click here. To view the full FY25 budget ordinances by fund, please click here.
