(Aug. 9, 2019) As much as Ocean City likes being known for things — “White Marlin Capital,” and “America’s Favorite Family Resort,” come to mind — it probably wouldn’t want to hoist a banner proclaiming its position as one of the top sewer and water infrastructure towns around.
It could if it wanted to, according to a report last week from NewGen Strategies and Solutions LLC, a management and economic consulting firm that will be studying water and wastewater rates for Ocean City government.
In a report to the council last Tuesday, NewGen vice president of environmental practice Ed Donohue said the problem most municipalities face, as they consider their rates, is how to cover the cost of aging infrastructure.
“Other than schools … water and sewer systems are the most expensive investment that a community makes in terms of dollars and cents,” Donahue said.
It’s worse when communities don’t keep up with maintenance needs on systems that were installed many decades ago, as many were in the immediate post-World War II years, he said.
Fortunately for Ocean City, it doesn’t have that problem, Donohue said, as it would rank much higher than other communities as gauged by the American Society of Civil Engineers (ASCE).
Since 1998, ASCE has been releasing an infrastructure condition report card every two or three years, and in that time, it has never given a grade higher than a D plus for nationwide drinking and wastewater infrastructure, NewGen Senior Manager Eric Callocchia told the council.
Even so, Donohue said it’s his opinion that Ocean City would rate a B-plus or an A-minus, which puts it in a better financial situation than many other communities.
That’s especially important considering that water and sewer service costs rose almost three times as much as household income and inflation between 2000 and 2017, Callocchia said.
It’s solid infrastructure notwithstanding, Ocean City’s water and wastewater services do have specific issues that will need to be addressed, according to the company’s findings.
As a resort town, Ocean City must deal with the challenge of implementing rates that will accommodate the general decrease in water usage, but also the spike in usage seen during the summer season.
NewGen laid out a set of basic principles for water and sewer rate setting.
First, these systems must be financially self-sufficient. This means that those who cause the expenses must pay for the expenses, and these costs are based on demand and usage.
Next, the town must have adequate funds for water and sewer facilities and for reserves. This is essentially based on the “prevention is the best cure” ideology, and prevents sudden spikes in rates and fees.
For quite some years, municipalities have relied on federal and state funding, but this money is drying up and soon they will have to figure out how to front the costs.
“Someone must pay,” Callocchia said. “Most of your costs are fixed … any discounts or rebates to one group of customers has to result in an increase in a charge to another group of customers.”
Because of the shifting nature of Ocean City’s water usage, it will be key for the city to create a rate that will put the cost of water onto those who use it the most, tourists, rather than local residents, Donahue said.
NewGen’s a utility rates study will figure out how much everything currently costs in order to create rates, fees and charges that will benefit both the municipal government and resort residents.
NewGen hopes to use this study to build a five-year rate plan that will be used to build upon a longer, 10-to 20-year rate plan.
The estimated cost of NewGen’s proposal is $44,580. These costs would account for all professional fees, out-of-pocket expenses and infrastructure work itself.
The city has already set aside the funding for this initiative in this year’s budget.
“Hopefully at the end … it is easy to understand. We can tell the story of your systems and what they cost and why your rates are what they are. That’s our ultimate goal,” Callocchia said.