© The Stoneham Independent
STONEHAM, MA - Frustrated Water & Sewer Review Board members recently sanctioned a big hike in current year water and sewer rates in order to collect sufficient revenue to offset a $200,000 end-of-year deficit in FY'18 enterprise fund coffers.
During a gathering in Town Hall's Hearing Room earlier this month, when the advisory panel learned water and sewer revenues are substantially short of budgetary forecasts from last March, the appointed officials voted unanimously to temporarily hike combined water and sewer rates by nearly $4.30 for the last quarter of FY'18.
According to Town Administrator Thomas Younger, who under mounting pressure from the Board of Selectmen last year agreed to tap a portion of $2.3 million in water and sewer reserves to lower rates for the second consecutive year, that impulsive use of savings is coming back to haunt Stoneham.
"If we had done this over a one-year period, the average would be about $18 to $19 per quarter," said Younger, acknowledging the error.
Per the vote, water charges for the last quarter of this fiscal year will jump from $5.95 to $8.95 in order to recoup an estimated $77,895, while sewer rates will spike from $7.95 to $11.15 in order to plug a projected $117,000 shortfall.
The huge increase in rates, which Younger characterized as being exacerbated by the need to collect the missed revenue marks in such a short time span, will leave Stoneham's reserves all but depleted heading into FY'19.
According to new Town Accountant David Castellarin, the consequences of this year's miscalculation will carry over until FY'19, as his recommendation is that the town drain virtually all of its reserve funding in the water and sewer enterprise funds in order to stabilize rates for the ensuing year.
Town officials are recommended rates be cut back beginning with FY'19, but they will still remain higher than the original FY'18 charges in being set at $6.25 for water and $9.34 for sewer use.
Last winter, Younger had proposed building up reserves in the water and sewer enterprise accounts, which had amassed some $2.3 million in combined surplus funding, but that conservative budgeting approach was quickly met with the disapproval of Board of Selectmen veterans Caroline Colarusso, Thomas Boussy, and since retired board member Ann Marie O'Neill.
With a clear mandate from a majority of board members, Younger last April agreed to recommend a combined 20 cent reduction in rates, which he estimated would generate roughly $55 in annual savings for the average consumer.
Younger did refuse to offer that discount unless town citizens consented to some $800,000 in capital expenditures for making upgrades to the local distribution system.
The decision to drop rates for the second consecutive year brought with it the lowest water rates for Stoneham ratepayers since 2010, while sewer charges dropped to levels not seen since 2014.
New bills, new budgeting method
According to figures provided by the DPW, the average Stoneham family-of-three uses approximately 70 gallons of water a day, meaning roughly 10,000 cubic feet of water is coming in and out of those households on a daily basis.
A cubic foot of water is equivalent to 7.48 gallons, and the town’s water and sewer rates are based on 100 cubic feet of consumption.
It's difficult to predict quarterly water bills, not only because household charges depend upon seasonal changes in consumption, but also because local officials base the first two billing statements off of estimated usage.
However, a basic revised estimate of resident’s water and sewer charges for the last quarter of FY’18, based off the idea that a household's consumption is roughly the same each quarter, is as follows:
Yearly consumption Old Rates New Rates
6,000 Cu. Ft. $219 $284
8,000 Cu. Ft. $292 $378
10,000 Cu. Ft. $365 $473
12,000 Cu. Ft. $438 $568
The Water and Sewer Review Board has historically met with DPW Director Robert Grover to discuss operating costs in the departments, which are funded directly by residents’ bills. The five-member committee then recommends to the town administrator a rate structure for the ensuing year.
The town administrator retains the sole authority to set water and sewer rates, and in the past, some of Younger’s predecessors have imposed a different payment schedule than proposed by the advisory group.
According to Castellarin, who is just entering his second month as Stoneham's town accountant, he discovered the end-of-year revenue gaps after making preparations for next year's water and sewer budgets.
The shortfall has apparently been created by a significant increase in unpaid water and sewer bills this year.
"The reason it's short is because the next liens come in May with real-estate bills. So this amount is based on everything we have collected. We're now just trying to get through this fiscal year," the town accountant explained.
In his view, the discrepancy stems from the town's historical practice of basing rates off of annual townwide consumption trends, rather than what he termed as "collected consumption".
Under a collected consumption approach, which the town accountant described as his preferred model for projecting annual water and sewer revenues, local officials will base the departmental operating budget off of actual annual payments for the services, rather than total billing amounts sent to customers.
Some Water and Sewer Review Board members, pointing out Stoneham has a decades long history of calculating departmental budgets based on projected total annual consumption, scoffed at that accounting change and questioned whether other factors were playing into the shortfall.
But Castellarin, who in his few weeks on the job has quickly broadcast his no-nonsense and uncompromising approach to municipal accounting, was unfazed by that criticism.
"You're missing the whole point. If the FY'18 rates were set the way they should have been, the FY'19 rates would be going down," he said.
"[Our water and sewer budget forecasts] are [now] being done the correct way. I'm sorry people don't agree with that. But the things that were being done in the past [were wrong]," he responded. "We have to get everything back on track. My role here is to fix things…It's going to take a while, but once it's fixed, the town will start moving forward again."
Next year's budget will begin to rebuild reserves, also known as retained earnings, by including a $261,855 revenue cushion in the water enterprise fund and a $430,426 surplus in sewer accounts.