HomeMy Public PortalAbout2016-06-14 Fiscal Year 2017 Water Sewer Rates TOWN OF
1630 WATERTOWN
Office of the To-ton Manager
' Administration Building
149 Main Street
-
' Watertown,MA 02472
Phone:617-972-6465
Michael J. Driscoll www,watertown-ma.gov
townmgr@ vatertown-ma.gov
Town Manager
To: Honorable Town Council
From: Michael J. Driscoll, Town Manager
Date: June 9, 2016
RE: Fiscal Year 2017 Water& Sewer Rates
As you know, the Fiscal Year 2017 Water and Sewer Enterprise Budgets were discussed at the May
24, 2016 Committee of the Whole Meeting. Mr. Christopher P.N. Woodcock, President, Woodcock
and Associates, Inc. provided an Informational Presentation on the Proposed Water and Sewer rates
and charges for Fiscal Year 2017 (see attached Review document). Additionally, Mr. Thomas J.
Tracy, Town Auditor/Assistant Town Manager for Finance previously forwarded the attached May
19th email which included a report from Woodcock and Associates regarding the Fiscal Year 2017
Water and Sewer Rates analysis and recommendation.
The Honorable Town Council took formal action on the Fiscal Year 2017 Budget at a Special Town
Council Meeting on Tuesday,June 7, 2016.
Therefore, I respectfully request a First Reading on an Order establishing water and sewer rates and
charges for Fiscal Year 2017 be placed on the June 14, 2016 Town Council Agenda. The Public
Hearing and consideration of rate schedules and fees designed to raise sufficient revenues to support
the Fiscal Year 2017 operation of the services provided to customers of the Town's Water/Sewer
System would be scheduled for the June 28, 2016 Town Council Meeting.
Thank you for your consideration in this matter.
cc: Gerald S. Mee, Jr., Superintendent of Public Works
Dennis J. Sheehan, Director of Administration and Finance,Department of Public Works
Matthew Shuman, Town Engineer
Thomas J. Tracy,Town Auditor/Assistant Town Manager for Finance
Steven Magoon, Director of Community Development and Planning/Assistant Town Manager
Joseph A. DiVito,Jr. Treasurer/Collector
LEGAL NOTICE
OF PUBLIC HEARING
The Town Council of the City known as the Town of Watertown hereby gives notice of a public
hearing on Tuesday, June 28, 2016, at 7:15 PM, in the Richard E. Mastrangelo Council Chamber,at
which time the Town Council will consider rate schedules and fees, designed to raise sufficient
revenues to support the Fiscal Year 2017 operation of the services provided to customers of the
Town's water/sewer system.
All rates are based on a multi-step rate structure in which the rate per 100 cubic feet of water
increases with consumption. The water rate schedule would maintain the current structure of usage
tiers for consumption.
PROPOSED WATER & SEWER RATES
(Use at 107.64 million cu ft./yr.)
WATER
Current Proposed 2017 % Change
Use/auarter Rate($/100cuft) Rate($/100cuftl
0 - 3000 cu ft $4.48 $4.48 0.0%
3001 - 30,000 cu ft $6.96 $6.96 0.0%
All Over 30,000 cu ft $10.99 $10.99 0.0%
Irrigation $10.99 $10.99 0.0%
Service Charee
Meter Size $/ uarter / uarter
5/8 $6.87 $6.87 0.0%
3/4 $7.30 $7.30 0.0%
1 $8.62 $8.62 0.0%
1 1/4 $10.37 $10.37 0.0%
1 1/2 $10.37 $10.37 0.0%
2 $15.16 $15.16 0.0%
3 $50.45 $50.45 0.0%
4 $63.52 $63.52 0.0%
6 $94.03 $94.03 0.0%
Fire Charges $/ uarter $/ uarter
2 $10.00 $10.00 0.0%
3 $35.00 $35.00 0.0%
4 $70.00 $70.00 0.0%
6 $205.00 $205.00 0.0%
8 $435.00 $435.00 0.0%
10 $785.00 $785.00 0.0%
SEWER
Current Proposed 2017 % Change
Use/quarter Rate ($/100cuft) Rate ($/100cuft)
0 - 3000 cu ft $8.06 $8.28 2.7%
3001 -30,000 cu ft $10.42 $10.70 2.7%
All Over 30,000 cu ft $13.95 $14.33 2.7%
Consumption from a second water meter for irrigation purposes would be charged at the highest tier
rate.
As with the current water/sewer rate structure, sewer rates are based on water consumption.
A copy of the proposed Fiscal Year 2017 Water/Sewer Rates and Fees, including the proposed rate
for each tier of consumption and the percentage of increase over the current rate to be considered by
the Town Council is available for inspection at the Administration Building, 149 Main Street,
Watertown,MA 02472 in the Town Council Office, Monday through Friday, 10:00 am to 2:00 pm,
and at the Town Clerk's Office, Monday through Thursday, 8:30 am through 5:OOpm, on Tuesday
evening up to 7:00 pm, and Friday, 830am through 2:00pm.
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Driscoll, Michael
From: Tracy,Thomas
Sent: Thursday, May 19, 2016 5:40 PM
To: Town Councilors
Cc: Driscoll, Michael; Magoon, Steven; Mee, Gerald; Sheehan, Dennis; Divito,Joseph;
Norton, Karen; Gallagher, Sharon; Mahoney,Joseph
Subject: Emailing: 20160519170857194
Attachments: 20160519170857194.pdf
Councilors,
Attached please find a report from Chris Woodcock of Woodcock and Associates regarding the Proposed FY 17 Water
and Sewer Rates. I am sending this in advance to Tuesday's night Budget Hearing on the Proposed FY 17 Water and
Sewer Enterprise Fund budgets.
I will have hard copies available tonight.
Please contact me if you have any questions.
Thanks
Tom
Your message is ready to be sent with the following file or link attachments:
20160519170857194
Note:To protect against computer viruses, e-mail programs may prevent sending or receiving certain types of file
attachments. Check your e-mail security settings to determine how attachments are handled.
1
WOODCOCK & ASSOCIATESo INC.
Utility Rates Finance
May 17, 2016
Mr. Michael J. Driscoll
Town Manager
Watertown Administration Building
149 Main Street
Watertown, MA 02472
FY 2017 Water and Sewer Rates
Dear Mr. Driscoll:
We have been working with officials from Watertown over the past few
months to review the current water and sewer rates in light of the proposed
water and sewer budgets for FY 2017 and the most recent water sales.
Our findings and conclusions regarding the water and sewer rates for next
fiscal year are embodied in this report.
BACKGROUND/HISTORY
In 2002 we prepared our first rate study for the Town that addressed
several issues and concerns. Over the past decade and a half, we have
analyzed a number of issues related to Watertown's water and sewer rates
and the billing practices. Recognizing that Council members change over
time and this year's newest members may not be aware of those studies, I
have provided some background on the analysis we have performed on the
Town's water and sewer rates.
Among the issues we have examined were historic water use trends, the
second or deduct' meter policy, an analysis of indirect charges, fire service
charges, minimum and service charges, rate tier alternatives, a life-line
In some cases a meter is added after the primary meter to measure water use that is not returned to the
sewers. The use on that additional meter is deducted from the total meter use of the primary meter to
determine the sewer bill.
WOODCOCK& AssocfATEs, INC.
Mr. Michael J. Driscoll
Town of Watertown
Page 2
discount, miscellaneous fees and charges, quarterly billing, and per unit
billing for owner occupied apartments and condominiums. These various
matters have been analyzed and reported on over the past 15 years and
form the basis for Watertown's current water and sewer rate policies,
In adopting new water and sewer rates, the Town Council typically makes
the rates effective on all water use after July 1. Any bills that included
meter readings with water use before the effective date of the new rates
are pro-rated to charge for earlier use at the prior rates. Customers are
only charged the new rates for usage after the effective date of the new
rates.
ESTIMATED EXPENSES AND REVENUES
Proposed budgets for the water and sewer enterprise funds have been
developed by the Town for FY 2017 and were provided to us for this study.
The budgets reflect the latest estimated assessments from the MWRA for
water and sewer. The FY 2017 water budget is $7,204,6482. In addition to
the water rates and charges, the Town receives some revenues from
interest earnings, liens, interest and penalty charges, municipal charges,
and other miscellaneous water fees. After deducting the estimated
revenues from these miscellaneous charges, some $6.8 million must be
derived from the water rates, meter service charges, and private fire
protection charges. We estimate the current water rates, meter service
charges, and fire protection charges will produce annual revenues of about
$7.0 million, resulting in an estimated surplus of about $200,000 for the
water fund.
The proposed sewer budget for FY 2017 is $9,849,289 2. After deducting
the estimated revenues from miscellaneous charges some $9.7 million
must be derived from the Town's sewer rates. The current sewer rates are
estimated to produce annual revenues of $9.45 million, leaving an
estimated sewer deficit in FY 2017 of slightly more than $250,000.
Y Note that the water and sewer budget numbers presented hereln include proposed transfers of
$250,000 from reserves for water and sewer capital projects; this is a reduction from the$500,000 this
current year. The Impact of this is discussed later in the report.
WOODCOCK & AssoclATEs, INc.
Mr. Michael J. Driscoll
Town of Watertown
Page 3•
The MWRA assessments comprise the largest single expense for both the
water and sewer enterprise funds. In the case of the water enterprise, the
MWRA assessment is 46% of the total cost, While the projected overall
increases in water assessments for all MWRA communities is about 3.4%
for 2017, the 2017 MWRA water assessment for Watertown is projected to
decrease by 2.6% over the final 2016 water assessment.
The MWRA's water assessments are generally based on each
community's relative share of total MWRA water purchases from the prior
year. Over the past few years, Watertown's shares of the MWRA water
assessments have been:
• FY 2011: 1.49%
• FY 2012: 1,45%
• FY 2013: 1.49%
• FY 2014: 1,45%
• FY 2015: 1.47%
• FY 2016: 1.50%
• FY 2017: 1.41% (preliminary)
As this historic comparison shows, the Town's share of the MWRA water
assessments has dropped considerably from its historic range between
1.45 and 1 .50%. It should be noted that the year to year changes do not
necessarily reflect changes in the Town's overall water purchases, but the
share compared to all other communities. Watertown's CY 2015
purchases were about 2,5% less than CY 2014; however, the overall
MWRA sales were up about 4% over CY 2014.
The Town's MWRA sewer assessment for 2017 is projected to increase by
4.3% in comparison to an overall increase in the MWRA sewer
assessments of 3.6%. Unlike the water assessment, the sewer
assessment is not based strictly on volume. The sewer assessment is
based on three historic years of wastewater discharge, peak flows, septage
discharge, the relative strength of the sewage pollutants, and population
served. The MWRA sewer assessment represents some 61% of the
WOODCOCK&ASSOCIATES. INC..
Mr. Michael J. Driscoll
Town of Watertown
Page 4
overall sewer enterprise budget. The Town's recent share of the total
MWRA sewer assessments are as follows:
• FY 2011: 1.36%
• FY 2012: 1 .37%
• FY 2013: 1.33%
• FY 2014: 1.33%
• FY 2015: 1.31%
• FY 2016: 1.29%
• FY 2017: 1.30% (preliminary)
As this shows, Watertown's share of the MWRA sewer assessments has
been slowing dropping, but seems to have leveled off.
USAGE ESTIMATES
In the early 2000s, the Town experienced revenue shortfalls due to
unattained usage estimates. The Town Council had to adopt increases to
make up these revenue shortfalls plus pay for the annual increases in
MWRA assessments and local operational and debt costs, As a result, the
estimates of usage have been closely watched to try and avoid deficits and
large rate increases the following years.
For more than 15 years, Watertown has generally been able to cover its
water and sewer expenses with rate increases and has rebuilt the retained
earnings in the two enterprise funds. This has provided the Town with the
flexibility to use reserves to fund needed capital projects3, and if needed, to
minimize the impact of large rate increases. The presence of the retained
earnings has allowed us to use less conservative estimates of water sales
and be less concerned with incurring an annual shortfall. The Department
of Revenue has issued guidance that allows communities to use their
retained earnings to make up any revenue deficits in that year. Because
the Town Council has adopted water and sewer rates that were sufficient to
rebuild the reserves, Watertown is now in a position to take advantage of
this ruling, if needed.
3 Over the past two years Watertown has used$600,000 from the water and from the sewer retained
earnings to fund Important capital projects without having to increase the rates more,
WOODCOCK& ASSOCIATES, INC.
Mr. Michael J. Driscoll
-Town of Watertown
Page 5
The estimate of water consumption is critical to the estimation of future
revenues. If consumption exceeds projections, the Town generates
surpluses that are held as retained earnings; funds that can be applied to
future capital needs and/or be used to offset future rates. If consumption
falls short of estimates, communities typically must look to reductions in
their operating expenses or deferring capital programs. Because
Watertown has been able to maintain positive retained earnings, they can
avoid these measures and use their retained earnings to offset projected
deficits.
The following graph presents total calendar sales by the MWRA since
2003. While there has been a slight increase in sales over the past year or
two^, over the past decade, there has been an overall trend of reduced
water sales in New England.
MWRA Sales (IVIGD)
260 - —
250 --- — —
240 ----
230 -
220 -—— —
210 - --
200 - -- - ---.__—
190 - -- —
180 -
170 i
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
4 Several cornmunities have been added to the MWRA system in recent years accounting for some of this
increase.
Mr. Michael J. Driscoll _Woo®cocic& Assocmms, INc.
Town of Watertown
Page 6
The next chart shows water consumption in Watertown since FY 1994.
145,000,000 - -- -- ---
140,000,000 •- ---- -
1.35,000,000 -
130,000,000 - — ---'--- ----
125,000,000 ---- --`—
120,000,000 —-- -----
115,000,000 --- - ---'
110,000,000 - -
105,000,000 - -------- ----- ---
100,000,000 - ,�-r-- --,-i- ---r- --r-r-���T�---r--r--i-i-�-r�
:Y94 FY96 FY98 FY00 FY02 FY04 FY06 ADJ08 FY10 FY12 FY 14 FY 16
Est
The Town converted to quarterly billing in FY 2008, resulting in an increase
in billed revenues as water use was billed earlier. As a result, the actual
water sales in FY 2008 are not representative of annual sales. We have
included an estimate of"annualized" use for FY 2008 on the graph above.
For the FY 2017 rates, we have looked at the sales through the last full
fiscal year (FY 2015), where annual sales were just above 105.7 million
cubic feet. Based on data for the current year through April, we are
projecting that consumption by the current customers will remain at 105.7
million cubic feet'. However, because of several new developments that
will add to the sales, we are forecasting an increase in sales to 107.64
million cubic feet in FY 2017. This increase is based on a new hotel and
about 200 - 400 new residential units coming online during the year,
6 Last year we had estimated sales for FY 2016 to be 105.6 million cubic feet.
WOODCOCK &A_ssoclATEs, INC.
Mr. Michael J. Driscoll
Town of Watertown
Page 7
PROPOSED RATES AND CHARGES
Watertown will not need to increase the water rates and charges for FY
2017. Although we project that the Town could slightly decrease the water
rates, we do not recommend any change. There are several reasons why
we do not recommend a reduction to the water rates:
• The Town has been using the water reserves for capital
improvements. We understand that there are a number of capital
projects planned in the coming years for which the reserves should
be maintained.
• As we have discussed in the past, water sales are quite dependent
on the weather and customers' irrigation needs. A cool dry summer
would likely result in reduced sales from those we have projected and
a concurrent drop in projected revenues.
• While the preliminary MWRA assessment for FY 2017 has dropped
from last year, the final numbers may change and Watertown should
not count on this for next year.
• Our sales projections assume a number of new developments will
come on line early in FY 2017 that add substantially to our projected
sales. If these projects are delayed or sales do not reach the levels
we project, the projected revenues would fall short.
• As discussed below, a minimal sewer rate increase is projected for
FY 2017. The impact of this small increase with no change to the
water rates is quite modest.
For the sewer fund, we recommend a 2.7% increase in the rates to balance
the FY 2017 budget.
The quarterly water bill for a typical resident will remain at $118,87. The
quarterly sewer bill for a typical resident will increase about $5.50 per
quarter, from $201.50 to $207.00.
The overall or combined water and sewer bill for a typical resident would
increase from $320.37 per quarter to $325.87 per quarter; for an overall
increase of $5,50 per quarter, or about 1,7%. This increase is about half
last year's overall increase of 3.7%. The daily cost of both water and sewer
service in Watertown would increase from $3.52 per day to $3.58 per day,
i
WOODcoca&AssovAres, INc.
Mr. Michael J. Driscoll
Town of Watertown
Page 8
or approximately $0,06 per day. If a household can reduce its daily water
use by about 3.5 gallons per day, it would offset the full cost of this
increase,
The following tables present the current and proposed water and sewer
rates.
PROPOSED WATER& SEWER RATES
(Use at 107.64 million cu ft/yr)
WATER Current Pronosed 2017
Use/quarter Rate($/100cuft) Rate($/100cuft) %change
0-3000 cu it $4.48 $4,48 0.0%
3001 -30,000 cu ft $6.96 $6.96 0.0%
All Over 30,000 cu ft $10,99 $10.99 0.0%
Irrigation $10.99 $10.99 0.0%
Service Charae
Meter Size / uarter /Quarter
6/8 $6.87 $6.87 0.0%
3/4 $7.30 $7.30 0.0%
1 $8.62 $8.62 0.0%
1114 $10.37 $10.37 0.0%
11/2 $10.37 $10.37 0.0%
2 $15.16 $15.16 0.0%
3 $50.45 $50.45 0.0%
4 $63.52 $63.52 0.0%
6 $94.03 $94.03 0,0%
Fire Charges / uarte Vquarter
2 $10.00 $10.00 0.0%
3 $35.00 $35.00 0.0%
4 $70.00 $70.00 0.0%
6 $205.00 $205.00 0.0%
8 $435.00 $435.00 0.0%
10 $785.00 $786.00 0.0%
SEWER_ Current Pronosed 2017
Use/quarter Rate($/100cuftl, Rate($/100cuft) %chanae
0-3000 cu it $8.06 $8.28 2.7%
3001 -30,000 cu it $10.42 $10.70 2.7°%
All Over 30,000 cu ft $13.95 $14,33 2.7%
r
WOODCOCK & ASSOCIATES, INC.
Mr. Michael J. Driscoll
Town of Watertown
Page 9
The following table presents the impact on bills for some typical customers.
Customef hnpacts-Quarterl/Bills
Proposed
Customer with 5/8-Inch meter Current New Chan e %Change
using 2,600 cuft/grt(200 gal/day)
Water $118.87 $118.87 $0.00 0.0%
Sewer $201.50 2$ 07.00 5.50 2.7%
Total $320.37 $325.87 $5.50 1.7%
$3.52 per day $3.68 per day
using 4,000 cuft/qrt(325 gal/day)
Water $210.87 $210.87 $0.00 0.0%
Sewer $346.00 3$ 55.4 $9.40 2.7%
Total $566.87 $566.27 $9,40 1.7%
using 5,000 cuft/grt(410 gal/day)
Water $280.47 $280.47 $0,00 0.0%
Sewer $450.20 $462,40 $12.20 2.7%°
Total $730.67 $742.87 $12.20 1.7%
Customer with 1-inch meter
using 26,000 cuft/grt(2300 gal/day)
Water $1,674.22 $1,674.22 $0.00 0.0%
Sewer 2$ 534.20 $2,602A0 6$ 8.20 2.7%
Total $4,208.42 $4,276,62 $68.20 1.6%
Customerwilh 4-inch meter
using 75,000 cuft/grt(6900 gal/day)
Water $7,022.62 $7,022.62 $0.00 0.0%
Sewer $9,332.70 $9,586.90 $253.20 2.7%
Total $16,365.32 $16,608.52 $253.20 1.5%
SENSITIVITY TO WATER SALES
As we indicated earlier, the rates we have proposed are based on sales of
107.64 million cubic feet year, Different assumptions regarding future
water sales will impact the resulting rates and charges. The following table
WowcocK&ASSOCIATES, INc.
Mr. Michael J. Driscoll
Town of Watertown
Page 10
shows the impact on the rate increase of various assumptions for water
sales.
Impact on Rate Increase of Alternative Sales
Water Sewer Overall
Volume (mill cu ft/vr) Increase Increase Increase
105,000,000 -0.9% 5.3% 3.0%
106,000,000 -1.8% 4.3% 2.1%
107,640,000 -2.9%6 2.7% 0.6%6
108,000,000 -2.9°% 2.4% 0.4%
109,000,000 -3.8% 1.5% -0.5%
SENSITIVITY TO USE OF RESERVES
Earlier it was noted that $250,000 of reserves are proposed to be used to
help fund both water and sewer capital improvements. If the Town does
NOT use the $250,000 of water and sewer reserves, and instead pays for
the budgeted capital projects through rates, the water rates would need to
be increased by 1.1% and the sewer rates by 6.6%. The overall increase
would be 3.9% instead of the 1.7% we recommend.
Once again it has been a pleasure to work with the Town of Watertown.
We are pleased to see the progress in multiple areas since we began
working with the Town.
• The Town restored and is maintaining its retained earnings in the
enterprise funds providing flexibility to the Council in future rate
deliberations and for funding capital projects.
• Condominium owners with master meters are now charged the same
as single family homes.
• New rate blocks were adopted that better reflect Watertown's water
use patterns by different customer classes.
e Note that this table shows the decrease in water rates that we do not recommend.
WOODCOCK&AssociAT_Es, INC.
Mr. Michael J. Driscoll
Town of Watertown
Page 11
• New rates for irrigation meters were adopted to reflect the higher cost
of providing irrigation water.
• Quarterly water billing has been successfully implemented.
• The annual increases in water and sewer rates have leveled off over
the past seven years, averaging about 3.5%/year the past three years
after increases of more than 6% in 2010 and 2011 .
Please feel free to call us if you have any questions on this report.
Very truly yours;
Woodcock & Associates, Inc.
3"W-
Christopher PX Woodcock
President
FY2017 BUDGET AND PROJECTED FY 2015 EXPENSES
FY 2016 FY 2017
Water Sewer Water Sewer
Personnel Budget Bud et Budget Budget
Full time $693,942 $273,624 $697,333 $289,879
Part Time $7,500 $7,500
Overtime $141,325 $109,038 $148,325 $119,960
Shift Differential $1,462 ! $6,445 $1,462 $5,116
Longevity $24,550 $7,500 $24,650 $8,000
Clothing Allowance $4,950 $2,250 $4,950 $2,250
Meals Allowance $2,000 $2,000 $2,000 $2,000
Subtotal $875,729 $400,857 $886,120 $427,204
Enterprise Expenses
Comp. MainUEquip Rental $16,500 $35,000 $16,500 $35,000
Street Repair $80,000 $66,000 $80,000 $65,000
Sidewalk Repair $30,000 $35,000 $30,000 $35,000
Contracted Services $20,000 $214,719 $20,000 $214,719
Printing & Forms $23,000 $0 $23,000 $0
Tools $16,000 $7,600 $15,000 $7,500
Materials &Supplies $143,739 $75,000 $165,300 $90,000
MWRA $3,392,382 $5,818,931 $3,303,955 $6,006,615
Reserve Fund $35,000 $20,000 $35,000 $20,000
Subtotal $3,756,621 $6,271,150 $3,688,765 $6,473,834
Capital Expenditures
Building Renovations $175,000 $715,000 $175,000 $716,000
Additional Equip $0 $175,000 $0 $176,000
Equip. Replacement $36,000 $80,000 $36,000 $80,000
Debt Principal $496,136 $194,200 $511,136 $287,500
Debt Interest 30 815 $23,615 $27,638 4$ 1,085
Subtotal $737,951 $1,187,815 $749,774 $1,298,585
Transfers
Capital Projects $500,000 $600,000 $250,000 $250,000
General Fund $1 594,219 $1,333,644 $1,629,999 $1,399,666
Subtotal 2 4219 $1 $1.879.999 $1.649.666
GRAND TOTAL $7,463,520 $9,693,466 $7,204,648 $9,849,289