Are you taxed enough already in Montgomery County? Most people, certainly most homeowners or property owners, would say “yes”.
In late May, the Montgomery County Council voted to approve a new fiscal year operating budget, and with it, yet another property tax rate hike. On top of hitting MoCo families and taking more money from their after-tax disposable incomes, much of this tax grab will be passed on in the form of higher rents and higher costs to local consumers.
But what if an entity other than the feckless, spendthrift MoCo Council could raise your property taxes to pay for debt incurred years ago and by prior people, with not even a formal “vote” needed? And what if this additional “ad valorem” property tax had no limits? No cap? How’s that sound?
Unfortunately, this depressing, bankrupting future scenario draws closer to a reality, because the Washington Suburban Sanitary Commission (WSSC), the water utility that provides tap water and sewer service to both MoCo and Prince George’s counties, is highly leveraged / deeply in debt. Fitch Ratings, a credit/bond ratings house based in NYC, had the details back in September, 2021, when they changed WSSC’s ‘outlook’ to negative from stable.
Per Fitch’s Ratings Action Commentary:
The Outlook revision to Negative from Stable reflects a sharp weakening in fiscal 2020 financial performance that is expected to be followed by a relatively slow and uncertain near-term recovery. Fiscal 2020 leverage, defined as net adjusted debt to adjusted funds available for debt service, escalated to 11.1x, up from 8.4x the prior year, driven primarily by pandemic-related pressures and additional debt to address capital needs.
…the district’s available revenues include not only utility charges but unlimited taxing capacity for debt service costs on a broad and economically diverse customer base that spans nearly 1,000 square miles and serves 1.8 million residents through approximately 460,000 customer accounts.
In plain English, Fitch notes that WSSC has lower revenues / paying customers due to the pandemic (and, unstated, the County pandemic response of lockdowns and lost business). More interest costs, because of more and more debt needed to “address capital needs” are now overwhelming the “adjusted funds available for debt service”.
This report was from almost two years ago, so has much improved?
Not really. According to Gordon Brenne of the Montgomery County Taxpayers League, the problem goes beyond poor performing assets and a big debt overhang.
In a response to our earlier piece on WSSC’s lax procurement controls, Brenne noted that “revenues from customers are flagging, and there currently is a $55 million billing delinquency problem, largely leftover from the lockdown payment waivers. WSSC has done a poor job of enrolling delinquent customers in payment programs, and recently closed it’s amnesty program which had a poor response.”
In the event of a recession, particularly a prolonged one, WSSC’s cash liquidity problems will get bigger, leading to an inability to pay the bills. This is where the fall back scenario outlined above would take place… because under state law, WSSC could initiate an ad valorem tax increase (property tax increase) against all residents of both MoCo and PG. Fitch Ratings claims that residents might just shrug and accept this additional tax, which is why they still rate WSSC’s bonds as “aaa”. But I get the feeling most people would be furious with yet another tax hike – particularly after continual property tax hikes by the County Council.
Are WSSC’s managers and board “whistling past the graveyard”? Should WSSC even have this taxing power under state law?
More to come.
Related posts:
Why Do WSSC Water Rates Keep Getting Hiked? And Why Does the MoCo Council Not Bat an Eye?
Is WSSC Serving the People of MoCo or Companies & Lobby Shops With Donor Ties to Local Democrat Politicians?
WSSC Office of Inspector General Reporting on In-House Procurement Office Performance Reveals Much to “Be Improved”