Baywood residents question steep sewer-rate increase
Residents of Baywood have a lot of questions for the development’s owner in the wake of a proposed 136 percent increase in annual sewer fees. At the top of the list is why so much?
The owner, Robert W. Tunnell Jr., told a group gathered for a public hearing Tuesday, Nov. 3, at the Pot-Nets Lakeside community center, the community’s wastewater service has been operating at a loss. “We’ve lost money the last couple of years, and we need the increase or service will deteriorate,” Tunnell said. “We are sensitive to this, but we can’t price ourselves out of the market.”
Inland Bays Preservation Company, owned by the Tunnell Co., has filed with the state Public Service Commission (PSC) for a rate increase for the Baywood and Pot-Nets communities. Tunnell wants to increase rates from $160 to $240 a year in Pot-Nets Bayside and Lakeside and from $368 to $868 a year in Baywood. Because residents in the Pot-Nets communities are hooked into the county central sewer system and only the collector system is owned by the Inland Bays Preservation Co., the rate increase is less, said Robert Ambrose, an engineer and rate consultant with Herbert, Rowland and Grubic in Harrisburg, Pa.
Connections fees would also increase from $2,950 to $3,250.
According to documents filed with the PSC, the rates are designed to produce additional annual operating revenue of approximately $263,000, which is 96 percent higher than current wastewater sales revenues. According to PSC documents, the rate increase would offset operating losses in 2007 and 2008 and earn a modest return on the rate base.
In addition, Ambrose wrote in the documents, the company spent $540,000 in 2008 on capital expenses and has plans for more capital investment to expand the system.
Upgrades included a pump station, main extensions, improvements to the supervisory control and data acquisition (SCADA) system and purchase of grinder pumps.
Also, Ambrose wrote, a contributing factor to operating losses and the need for increased rates is the slowdown in the economy.
Residents question increase
Nancy Cullen, secretary of the Baywood Homeowners Association, summarized what many in the community are saying. She said she understands residents pay lower rates for sewer service than some communities in the area.
“But this is so huge, so dramatic. It makes us ask what is next,” she said.
She wondered if there were any limitations on landowners’ powers. Baywood residents pay quarterly land-lease fees and do not own the land their homes sit on.
Judy Wilson said a separate, independent audit of Tunnell Co. accounts should take place before the case is acted on.
“We need an outside audit to see if the finances are truly reflected on Inland Bays and not other Tunnell entities,” she said.
For example, she said, effluent from the treatment process at Baywood is used to irrigate Baywood Greens golf course. “Part of the expense of the system belongs to the golf course,” she said.
George Wagner, who has lived at Baywood since 2000, said other increases have been modest. Over the past nine years, he said, his annual charge has increased from $160 to $368. “Other increases have been reasonable, but this doesn’t fit the pattern,” he said.
Jim Horn said, if approved, the cost for wastewater services would be four times that of water services. “Is that reasonable?” he asked.
“The Tunnell Company puts in more money for Inland Bays,” Tunnell said. “Inland Bays can’t pay its bills – it’s as simple as that.”
Hearing officer Ruth Ann Price told residents Tunnell has a right to propose an increase. “What they request and what they receive could be a whole other story,” she said.
She said she would make a recommendation after the public hearings and the commission would take what the applicant claims and what is justified and make a determination on the final rate.
Two evidentiary hearings are tentatively scheduled at the PSC in Dover on Feb. 16 and 17. “The meetings are open to the public, but are not for public comment,” Price said.
William Pyrek said some advance warning should be given about such a large increase because residents pay the entire year’s charges at one time each year before April 15. “I don’t understand why we pay sewer and trash charges a whole year in advance,” he said.
Ambrose pointed out that, even with the increase, Baywood residents would still pay less than many sewer customers of other companies in the area.
He said annual charges in neighboring communities range from $900 to $1,100. He said the company is projecting a 3 percent rate of return, which is low compared to other utilities.
Cullen noted that there are also communities in the area that pay much less than the projected increase. She provided a list of annual rates that included seven area communities with rates of $450 or less per year.
Tunnell owns five Pot-Nets communities along Long Neck Road with more than 3,000 lots on 1,435 acres.
The Baywood community, now in its 10th building phase, has 325 residential customers and 56 commercial customers on the sewer system.
Written comment on the proposed rate increase will be accepted until Monday, Dec. 14. Comments can be mailed to: Delaware Public Service Commission, 861 Silver Lake Blvd., Cannon Building, Suite 100, Dover, DE 19904.
