Purcellville Council Dedicates Nutrient Credit Funds to Temper Rate Hikes | Towns

The Purcellville Town Council on Tuesday voted to use the entirety of the town’s nutrient credit revenues, over $900,000, to offset wastewater rate increases over three fiscal years.

The money was raised by creating a nutrient credit bank on 93.4 acres of the town’s 189-acre Aberdeen property and selling credits to developers required to offset the environmental impacts of their construction projects.

Typically, such one-time revenues are dedicated to capital projects or other non-reoccurring expenses and the town staff offered a list of needed upgrades that could be completed with the money.

However, with significant utility rate hikes planned in coming years to meet increasing bond payments, the council opted to use the money to subsidize operational costs. Some members indicated they were willing to go further, even tapping the utility fund reserves to keep rates lower.

The motion passed unanimously during the council’s monthly work session and will dedicate $500,000 to fiscal year 2025, $300,000 to fiscal year 2026, and the remaining amount to fiscal year 2027.

Director of Finance Elizabeth Krens said that, while the town has not accrued any new debt since 2012 and it has taken advantage of lower interest rates over the past few years by refinancing, bonds will be due beginning in fiscal year 2025.

Krens and Accounting Manager Paula Hicks at the Jan. 24 meeting presented the council with an overview of how the amounts will affect wastewater rate increases in the future.

They said while devoting the nutrient credit funds against the debt would lessen the burden on the town to raise rates as dramatically, a rate increase in fiscal year 2025 was unavoidable. They recommended more moderate rate raises over the course of a few years to avoid a rate shock.

Krens said if the town did not raise the wastewater rates in fiscal years 2024 and 2025 the rate in 2026 would need to increase by 51 percent.

Mayor Stanley J. Milan said he did not think Purcellville residents could withstand a significant rate increase.

“We need to look at some way to lower this debt to where we will not have to increase the rates substantially,” he said adding, “The future debt won’t be an issue if we take care of the current debt.”

“The hard truth is, yes you don’t need to raise, you could avoid a rate increase in FY 2024. But you can’t avoid a rate increase once that debt service comes fully on board,” Krens said.

Milan asked if using the revenue from the nutrient credits as well as money from the town’s reserve fund would eliminate the need for water and sewer rate increases.

“Not really, and the reason why is because it stacks up behind you,” Krens said. “So yes, you can utilize your reserves for a couple of years. But your reserves, once you look at what’s required for fiscal policy as well as your liquidity, you don’t have as much as you think you have.”

Krens said considering what the town’s fiscal policy states need to be in the town’s reserves, the excess came to about $3 million.

“Whether you use the one-time revenue in some years to subsidize your rates or not, utility rates still need to increase significantly to bridge that additional gap that we have,” Krens said.

Milan asked if the Town Council could change the fiscal policy, to which Krens responded yes.

Council member Erin Rayner asked if pulling heavily from the town’s reserve fund would damage the town’s bond rating. The town holds triple-A rating from each of the three rating agencies.

Krens said it would, adding, “That’s going to be more your credit rating when you borrow new debt for new projects.”

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