HAGERSTOWN – The Hagerstown City Council tackled tough questions about the city’s enterprise funds, which are for services expected to pay for themselves through rates and fees rather than taxpayer dollars in a work session last week.
In a detailed review of the proposed FY 2026 budget, officials focused on four key departments: parking, electric, water and wastewater. City Finance Director Michelle Hepburn and Budget Manager Brooke Graver walked council members through financial projections, cost pressures and looming deficits.
Parking fund: Holding together, but barely
The city’s parking fund is expected to run a $314,000 deficit next year, relying on cash reserves to stay afloat. Revenues from parking decks, lots and enforcement remain steady but not strong enough to cover operations and capital needs.
The new Hub Parking Deck opened last year but has not yet seen year-round usage high enough to bring in needed income. While the decks are in “decent shape,” maintenance reports on two aging garages are pending. Officials admitted the fund is “paying its mortgage with savings,” hoping unexpected costs don’t arise.
Electric fund: Big bills, bigger deficit
The electric fund faces a projected $3.2 million cash shortfall. Nearly 80 percent of revenue goes to buying electricity from third-party suppliers, leaving only 22 percent to cover wages, maintenance and storm response.
Storms this year, including the Easter storm, caused extensive damage and forced the city to spend hundreds of thousands on emergency power restoration. As of May 20, the fund was $1.9 million in the red.
The city will avoid ending the fiscal year with a negative balance by executing a temporary internal cash advance. However, officials warned that this fix would be temporary and pointed out that electric rates haven’t been fully adjusted in decades, a key factor in the current crisis.
Water fund: Still the region’s cheapest
Despite a 14 percent increase, Hagerstown’s water rates remain the lowest at $37.05 per quarter for residential customers. Neighboring municipalities charge anywhere from $90 to more than $140 for the same usage.
The city provides water to surrounding towns, but those towns often resell it to their residents at five to seven times the original price, sparking discussion about fairness and contract structures.
With over $200 million in system upgrades needed over the next decade, city staff members are working with consultants to overhaul the rate model. Options include billing by usage, charging larger users more and adjusting inside-versus-outside-city rates.
Wastewater fund: Changes coming for county customers
Roughly 1,400 customers in the Maugansville area will be transferred from city to county wastewater service in August, following a capital project by Washington County. Those residents will begin receiving separate bills for water (from the city) and sewer (from the county), with different schedules and rates.
Although the city expects to lose revenue from this shift, it also anticipates growth from several large housing developments already underway. These include Arbor View, Reese Farm and Bowater, which will total hundreds of new units.
Consultants will propose new wastewater billing options later this year. Officials confirmed that residential, commercial and wholesale customers will all be considered in the upcoming restructuring discussions.
What’s Next?
Rate studies are underway for water and wastewater funds, with draft recommendations due later this summer. The council plans to use those results to guide long-term rate structures and ensure the funds remain solvent as infrastructure ages.
The FY 2026 budget is scheduled for formal introduction next week, with a final vote expected in June. Officials say more public engagement will follow, especially as rate discussions continue into the fall.
