The Scotch Plains Mayor and Township Council debated Tuesday night how to spend a surprise $820,000 surplus in the town's sanitary sewer utility, which experienced a surge in income due to an increased bill collection rate, Chief Financial Officer Lori Majeski said. The utility was set-up in 2009 to help prevent Scotch Plains from exceeding a state-mandated 2-percent cap on property tax increases.
"People were billed 10 percent more in 2010 because the town only collected 90 percent in 2009," Majeski said. "The collection rate at end of 2010 was 95 percent. People were paying more; I think they realized it was an actual charge and it started to come in.”
Majeski and Assistant Engineer Joseph Timko said that $40,000 will be used to defray the cost of the 2011 sewer utility bill. The rest, however, remains up to Mayor Nancy Malool and the Township Council.
Councilman Kevin Glover argued that the surplus presents a prime opportunity for the township to reintegrate the sewer utility into its budget. Whereas sewer fees alone are not tax-deductible, he stated, residents might realize some tax benefit if the fees were once again made part of the larger municipal budget.
"This is lost money coming back to average homeowner," he said.
Malool, by contrast, advocated refunding the surplus to those who paid the sewer utility bill, adding that use of the funds is legally restricted to "sewer-related costs."
Majeski also noted that utility bill, even if it were folded back into the budget, likely would not be tax deductible. “The problem is the minute you bring it back into the current fund and you bill them for their usage, they still cannot deduct it," she said. "It’s still a user fee, it is not part of their taxes." She added that the utility would also experience a sudden decline in revenue because non-profit organizations, which are tax exempt, would no longer be paying for their sewer usage if it were made part of the tax levy.
Malool said that she and the council will continue to discuss how to use the surplus, but stated that she was pleased with the sewer utility overall.
“When we established this we were pretty clear to the residents that their rates were going to go up and down as their usage went up and down,” she said. “I think this is working the way we envisioned it to work. When there is an increase people are going pay more, and when we have money to give back we’ll give back.”