Sharp Rise in Water, Sewer Rates Projected Next Fiscal Year
The Board of Public Works is considering setting aside $1 million a year in water and sewer enterprise funds to tackle infrastrucure repairs and upgrades that have been ignored over the years.
NORTHAMPTON – Water and sewer rates for the next fiscal year could rise from 7 to 12 percent – or even more – depending on how much money the Board of Public Works (BPW) sets aside for major capital projects coming down the pike in the next few years.
The costs of a planned upgrade of the Department of Public Works (DPW) headquarters on Locust Street is a primary reason for the rate hikes over the next two fiscal years.
But public works officials tell Northampton Media that they need to tackle massive infrastructure repair needs, from aging water and sewer pipes, a wastewater treatment plant that’s on the verge of non-compliance, to roads and stormwater drains — and that no funds have been set aside to pay for the work.
DPW Director Edward “Ned” Huntley has pushed in recent years to set up long-range plans for roads, water, sewer and stormwater systems that have been long-neglected. A comprehensive street plan is already done, and Huntley has asked for $22.5 million over five years to catch up to the work; a stormwater system study is underway and due out in May; and last week the BPW voted to award an $899,994 contract to Kleinfelder/SEA Consultants Inc. to perform a “Comprehensive Wastewater Management Plan.”
BPW Chairman Terry Culhane said Monday that, not only does the DPW need money for upcoming projects, but it needs capital funds to maintain and fix the existing system, which includes 100 miles of sewer pipes, 150 miles of water pipes, 150 miles of paved streets, 3,000 catch basins and the 30-year-old wastewater treatment plant. (To see a brief list of the DPW’s infrastructure responsibilities, click here.)
“Everywhere I look, we’re not spending enough money to take care of what we’ve got,” Culhane told Northampton Media. “Everything is decades old, if not a century old.” The city, he said, has put off maintaining these assets for decades, and now it’s paying a price.
“As a city, we cannot continue to coast like that,” Culhane said.
The Budget Picture and Proposed Rate Hikes
Although it will be weeks before final budgets are adopted, BPW members got a financial briefing last week from DPW Financial Administrator Anne Marie Schauer.
At the request of Huntley, she presented two scenarios: one with no money put aside for capital projects, and the other placing $500,000 a year into a capital projects account.
With no money saved for future construction projects, Schauer projected water rates will rise 9 percent over each of the next two fiscal years before leveling off to 1-3 percent a year for Fiscal Years 2014 and 2015.
The water rate is now $4.54 per 100 cubic feet. Under that scenario, water rates could rise to $4.95 in Fiscal 2012, and as high as $5.72 for Fiscal 2015.
If the BPW agrees to set aside $500,000 a year for anticipated capital projects, Schauer projected, water rates would increase by 10 percent a year for each of the next four years. That scenario would see the water rate rise to $4.99 per 100 cubic feet in FY 2012, to $5.49 in FY 2013 and to $6.64 in FY 2015.
Sewer rates will undergo similar pressures, Schauer said.
With no cash set aside for capital projects, Schauer told the board, sewer rates would likely rise by 7 percent in Fiscal 2012 (which starts this July 1), 6 percent the following year, 1.5 percent in FY 2014 and .5 percent in FY 2015. The sewer rate – now set at $4.84 per 100 cubic feet – would rise to $5.59 in FY 2015.
With $500,000 a year set aside, she said, the sewer rate would grow by about 10 percent a year to $7.08 in Fiscal 2015.
(To see a list of 2010 water and sewer rates throughout Massachusetts prepared by Tighe & Bond Engineers, click here.)
In addition to paying for infrastructure repairs, water and sewer ratepayers will pay a combined $8 million over the next two fiscal years, forking over half the cost of a proposed $16 million, Phase One modernization of the DPW’s central Locust Street facility. City Finance Director Christopher Pile said he’s planning to borrow the rest of the project cost.
(To see detailed coverage of that project, as well as a list of DPW’s five-year wish list from the Capital Improvements Program Committee, see “New DPW Facility Price Tag Triples, While Road Repair Costs Soar.”)
Schauer emphasized her numbers are preliminary projections. More solid budget numbers will be available when the comprehensive studies are complete, providing a complete inventory of the DPW’s assets and recommendations for future spending.
But there’s little chance the rate hikes will be less than projected, officials said.
How Much Is Enough to Fund Future Projects?
For Huntley, the goal is to compile digitalized maps of the water, sewer and stormwater systems and develop a savings plan to fund the needed repairs “rather than borrow for this over the next 20 years,” he said.
But Culhane said he is worried that $500,000 a year is much too small a figure, and said he has asked Huntley and Schauer to provide another rate schedule, one based on setting aside $1 million annually to prepare for upcoming construction projects.
The need for such funding, Culhane said, is dire.
“We know it’s going to be way more than $500,000 a year,” he said. “My thought is we need to be way more aggressive than that.”
In fact, Culhane said Huntley originally proposed setting aside $2 million a year, but was shocked at the effect such a capital savings account had on the rate schedule, and cut the set-aside by 75 percent.
While he believes the $2 million-a-year figure is closer to what is actually needed, Culhane said he’s willing to jump-start the infrastructure funding by looking at half that amount – $1 million a year – set aside for maintenance and construction.
Culhane told Northampton Media that water and sewer ratepayers should appreciate the need for massive spending projects, such as the scheduled rebuilding of North Street and Ryan Road over the next few years, $6 million in required reservoir system improvements, and an upgrade of the wastewater treatment plant off Hockanum Road needed to deal with pending federal permit requirements that will limit nitrogen discharges into the Connecticut River.
The smart move, which ultimately saves ratepayers money, Culhane said, is setting aside cash to pay for projects before they become emergencies. Waiting until systems break down to borrow funds, and paying six-figure interests costs every year in interest, Culhane said, “I don’t think makes any sense.”
Sticker Shock and Low-Interest Loans
While some customers may get sticker shock, Culhane said, it’s long past due to take a realistic approach to maintenance, replacing underground pipes before they fail, repaving roads before they need complete rebuilding, and planning for big construction projects before state and federal regulators demand they get done.
Water and sewer rates, Culhane said, “are artificially low because there’s no maintenance to speak of.. . .I would like to see the enterprise funds paying as we go in terms of maintenance.”
Huntley has made it his mission to get comprehensive studies done for all aspects of the city’s infrastructure, and to establish dedicated funding sources and long-term capital plans.
One advantage to securing detailed system inventories and plans of action, Huntley told the BPW last week, is that the city will then qualify for no- or low-interest loans from the state for needed construction projects.
And while the proposed FY 2012 budgets for his department and the enterprise funds are still in flux, and while the water and sewer rate projections are preliminary, Huntley said the pieces of the puzzle will come together when the consultants’ reports – with their hard data and expert recommendations – are in hand.
For instance, he said, the stormwater system study will also look at the city’s Connecticut River dikes; if the state doesn’t certify the dikes are safe, residents and businesses in and around downtown would be required to purchase expensive flood insurance. And that will cost a lot more than a 10-percent rate hike.
Just how much money the city must spend to fix its wastewater treatment plant will remain an unknown until the DPW applies for its five-year federal water discharge permit next year.
Huntley said that, for the first time, nitrogen discharge limits will be part of the permitting process, and that an expensive upgrade of the Hockanum Road plant will likely be required.
Will the upgrade cost $1 million, or $10 million, or a much higher figure, Huntley asked rhetorically.
“That’s what we don’t know,” he said.
© 2011 Northampton Media
David Reid can be reached at firstname.lastname@example.org