Magnolia’s town council turned down a state loan to help repair its aging water supply system last week after learning the interest payments would require doubling residents’ water bills.
Magnolia’s current wells date back to the 1980s, and while the town’s population has not grown substantially, Magnolia’s most recent comprehensive plan calls for the water supply system to be upgraded or replaced.
The town turned to Delaware’s drinking water revolving fund to secure a loan, initially expecting to receive principal forgiveness. Instead, the Division of Public Health informed the town council that it would only be eligible for a standard loan, which would cost Magnolia roughly $51,000 per year to repay — a third of the town’s annual budget.
Magnolia Mayor James Frazier told the state’s Water Infrastructure Advisory Council last week that covering those payments would require raising water rates for customers — a move that would be unaffordable for town residents, whose median income is $11,000 below the Kent County median income and $17,000 below the statewide median income.
“The most obvious choice is to increase water rates significantly," he said. "Divide that by the number of accounts and we’re talking about an immediate increase of 100 percent – from $300 per year to $600.”
Frazier suggests the decision is based on a flawed formula that calculates the town’s eligibility for principal forgiveness based on the income data from a zip code that includes wealthier subdivisions outside of Magnolia’s water district; Magnolia makes up only five percent of the zip code's area.
“If the census data you used lumps us in with the 95 percent of the area not served by the town, it stands to reason that the data was skewed in some way," he said.
The Drinking Water Subcommittee of Delaware’s Water Infrastructure Advisory Council expressed interest in rethinking the eligibility formula so small, lower-income communities cab be better-positioned to repair their water systems.
"We do have a little more money, so we'll try to resurrect the project — all is not lost," says Frazier. "But it's a hit."
