WSSC approves their 2026 Budget

Last week, Montgomery and Prince George’s County Councils approved WSSC Water’s Fiscal Year (FY) 2026 $1.8 billion operating and capital budget at their annual bi-county meeting. The FY 2026 Proposed Budget is supported by a 9.8% average water and sewer volumetric and fixed fees rate increase. It costs money to have clean water and sewage treatment. It is paid for by the rate payers. 

The FY 2026 budget for all operating and capital funds totals $1.8 billion or $21.7 million (1.2%) more than the FY 2025 Budget. The Proposed Operating Budget of $1.1 billion represents an increase of $116.2 million (11.4%) over FY 2025 Approved Operating Budget of $1.0 billion. WSSC cut the capital expenditures budget from 2025 levels to balance the budget.

The 2026 Capital Budget was $696.8 million -a decrease of $94.5 million (-11.9%) from the FY 2025 Capital Budget of $791.3 million. More than $440 million to upgrade aging pipes, pumps and plants was included:

• $79.5 million to replace 27 miles of water pipe in the Water Reconstruction Program.
• $51.6 million to replace 25 miles of sewer pipe in the Sewer Reconstruction Program.
• $54.6 million to replace 6 miles of large diameter water pipe in the Large Diameter Water Pipe & Large Valve Rehabilitation Program.
• $41.9 million to replace 10 miles of trunk sewer line in the Trunk Sewer Reconstruction Program.

Other Capital spending highlights include:

• $33.6 million to replace customer-owned lead water service lines, helping homeowners go lead-free
• Nearly $9 million in financial assistance to help income-constrained customers – a 14 % increase over last year
• $4.7 million to continue expansion of WSSC Water’s advanced laboratory and purchase equipment to conduct PFAS (forever chemicals) monitoring to meet the EPA MCL mandate
• Nearly $3 million to increase fire flow tests to ensure that fire hydrants can provide water at an acceptable pressure and flow rate for firefighting operations

The non-discretionary items such as debt service, PAYGO financing of capital projects, payments to the District of Columbia Water and Sewer Authority’s Blue Plains Advanced Wastewater Treatment Plant for regional sewage expenses along with rising chemical, biosolids hauling and energy costs represent 55% of the FY 2026 Operating Budget. The non-discretionary items make up 56% of the increase in FY 2026 Operating Budget. PAYGO" program, or Pay-As-You-Go, is a funding strategy used by the WSSC to set aside money for their capital improvements program (CIP) since they can not keep financing  system capital improvements from debt when those improvements do not result in new revenue streams.

As of July 01, 2025, WSSC Water had about 80,000 accounts that are past due, totaling about $50 million, the same as the previous year, despite efforts to reduce that. Though the 9.8% increase comes after an 8.5% increase last year, WSSC must maintain their system and pay their workers a reasonable wage. Not only inflation, but years of neglect and of expanding the system through debt rather than fees have brought us to this situation.

WSSC Water provides water and sewer services to nearly 2.0 million residents of Maryland’s Montgomery and Prince George’s Counties. Established by the Maryland General Assembly in 1918 as a regional (Bi-County) agency they were not enabled to impose a system expansion charge, though long term equipment is properly financed by long term debt, they should also have the resources to maintain and replace the equipment.

The General Assembly finally gave WSSC the explicit authority to impose a system expansion charge, but by that time WSSC had already inherited a legacy of debt-financed expansion costs and an operating culture that did not have preventive maintenance and viewed inappropriate cutting of system maintenance and upgrades as cost savings, rather than what they were. No investment in the infrastructure took place unless it broke or was a mandated upgrade by the regulators. The majority of the investment in the systems was spent at the central wastewater treatment plants and water treatment plants.

That had to eventually end and did about a decade ago, forced by the bond market to maintain their borrowing ability. To maintain the highest credit rating for municipal bonds, WSSC Water utilizes the standard bond rating financial metrics to keep debt from sinking their bond rating:

Water and Sewer Debt Service as a Percentage of Water and Sewer Expenditures - This ratio must be kept at less than 40.0% expenditures (excluding Bond Debt Service).

Debt Service Coverage Ratio (DSCR) – This ratio should be maintained greater than 1.5 times.

Leverage Ratio – This ratio (total debt outstanding less cash and cash equivalents) must be less than 8.0 times  adjusted funds available for debt service.