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City doubles its debt limit to $4.5 billion for water and sewer upgrades

Increase in authorized debt guarantees that water bills for city residents will continue to rise

Above: Mechanical racks separate debris from sewage flowing into the Back River Treatment Plant, which is set to undergo $375 million in nutrient-removal improvements.

Without discussion or opposition, the City Council increased the debt limit for Baltimore’s water and sewer utility funds to finance a plethora of projects over the next six years.

Last night’s action means that the utility funds – financed separately from the city’s general budget – can issue up to $4.52 billion in revenue bonds, or more than double its current limit of $2.12 billion.

The vote guarantees that water rates will continue to climb in the foreseeable future to finance the debt load. Last year, the Board of Estimates increased water and sewer rates by 15%, with 11% rate increases set for both fiscal 2015 and 2016.

More than $1 billion of the $2.4 billion debt increase will be used to satisfy a 2002 consent decree with federal and state regulators aimed at reducing the overflow of untreated sewage into the harbor during heavy storms, according to city officials.

The rest of the new revenue bonds would pay for such improvements as a new water filtration plant, installing “smart” water meters for over 200,000 homes and businesses, and rebuilding about 40 miles of water mains a year.

Earlier this month, the Board of Estimates awarded a $285 million contract to Archer Western Contractors to upgrade the nutrient removal system at the sewage treatment plant at Back River.

The project is part of a budgeted $375 million project that will be jointly paid by city wastewater revenue bonds ($111 million), state funds ($153 million) and mostly Baltimore County funds ($111 million).

Rubber-stamped by Council

“We have 1,400 projects on our capital program,” Rudy Chow, director of Public Works, announced at a Council hearing last month defending the new debt ceiling.

The proposal was met by grumbling by City Council President Bernard C. “Jack” Young, who said the city should balance its capital needs with the burden of rate increases on elderly and poor residents.

In the end, though, the debt reauthorization bills sailed through the Council to final passage last night.

The programs, developed when Chow was chief of the water bureau, “would change the culture, change the way we do business,” he told the Council.

A Civil War-era water main burst under Madison Street below the Jones Falls Expressway last December. (Photo by Mark Reutter)

A Civil War-era water main burst under Madison Street below the Jones Falls Expressway last December. (Photo by Mark Reutter)

Chow particularly touted the utility asset management unit he has created to audit the condition of the city’s water mains and to develop an “integrated planning framework” (IPF) to inform future capital spending decisions.

Earlier this year, the Board of Estimates awarded $3 million to consultant KCI Technologies to set up the new unit.

Reducing System Failures

In addition to complying with federal and state regulations, Chow said the agency is restructuring its operation to minimize “system failures” that have resulted in such major disruptions as the Monument Street sinkhole and Charles Street flood.

Of critical importance, he said, was the inspection of about 88 miles of relatively modern prestressed concrete cylinder pipes that are susceptible to sudden catastrophic failure. By using “the latest technology,” the city detected and corrected a potential failure in a 54-inch water main in southwest Baltimore in 2012.

He said DPW has developed a 10-year plan to inspect all PCCP pipe in the city and will prioritize its replacement “by criticality and condition.”

Funds set up in 1970s

In 1978, the city established water and wastewater utility funds separate and distinct from the city’s general fund. The funds were established to take advantage of federal money coming to municipalities to help them meet the 1972 Clean Water Act.

Federal funds dried up as Baltimore, among other cities, failed to meet the act’s compliance standards, which resulted in the 2002 consent decree negotiated by then-mayor Martin O’Malley to avoid heavy fines from the Environmental Protection Agency (EPA) and Maryland Department of the Environment.

During the hearing on the new bonding authorization, citizen activist Joan Floyd faulted the city for not developing water conservation plans. “We never hear of conservation because there’s no financial incentive for the city” because it can raise rates through the Board of Estimates without going before voters, Floyd said.

Kim Trueheart recommended that the City Council set up a water commission to independently review the capital program put forth by DPW and assess rate increases proposed for future years.

Her idea was set aside as the committee, chaired by Councilman Carl Stokes, unanimously approved the revenue bond increases recommended by Chow.

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