WVN #388: Capital requests trimmed; no tax override seen
- Dear Wayland Voter,
The Finance Committee says taxpayers won't be asked for an operating budget override. Planned new debt has been reduced. Town spending is expected to rise by about 7.4% in the next fiscal year.
Also in this newsletter: The Board of Public Works and concerned citizens seem to agree on doing away with the flat surcharge for water users.
CAPITAL BUDGET PARED
Wayland's Finance Committee continued to cut the total of the capital budget for Fiscal 2012 at its Feb. 7 hearing -- to $4.615 million from $4.815 million -- and said the supply of free cash is very healthy. Initial capital requests exceeded $7 million.
The FinCom also divulged plans to plug an expected operating budget deficit of $980,000 and announced there will be no operational override this year.
Chair Cherry Karlson repeatedly emphasized the FinCom was aware of the economy and the impact of the new high school debt and had kept the cost of the FY 12 non-exempt debt at a lesser figure than that of expiring debt, resulting in a reduction of $20 for the average home (without, however, considering the just-bonded high school debt in that calculation). Residents urged FinCom to state the savings in terms of $1,000 of assessed property value so taxpayers could calculate. Non-exempt debt fits within Proposition 2-1/2 and does not raise the tax rate. But less debt could lower the tax rate.
The combined operating and capital budgets will raise spending by approximately 7.4%, according to the FinCom's calculation.
At the Feb. 7 meeting there was lengthy discussion on two issues: the funding mechanism for needed water main work, and whether to have a ballot menu for the two exempt capital items totaling $880,000. This consists of $530,000 for two new playing fields at the Middle School and $350,000 for school technology. The decision was to propose to the selectmen to have a single debt question on the April 5 ballot. Exempt debt is funded by an exclusion from Proposition 2-1/2 and normally results in a "temporary" increase in the tax rate.
During the hearing, after former road commissioner Anette Lewis pointed out that a thorough study of the specifications for a new DPW garage and an examination of possible locations had been done previously with town funds, the FinCom reduced the study of the garage to $50,000 from the prior $250,000.
Of the $4.615 million capital budget, the FinCom proposes to borrow $1.75 million within the Prop. 2-1/2 limits, and to borrow $880,000 via the debt exemption. In addition, the budget proposes the water department would be responsible for the debt on $610,000 for upgrades to pipes at the Route 27/30 intersection ($510,000) and the Happy Hollow pump station ($100,000). Thus, taxpayers would be incurring costs through taxes and water costs.
All borrowing has to be approved by a 2/3 majority vote at the annual Town Meeting. If past is prologue, attendees will have an opportunity to approve individual items rather than the aggregate. Despite the intentions of the FinCom and the selectmen, voters at the 2010 Town Meeting voted to reject some spending proposals.
For additional items, the FinCom elected to take $1 million from free cash for Public Safety Building repairs rather than put that to a 2/3 vote. This involves moving the electrical and HVAC equipment from the basement to the roof. The total cost is estimated at $1.3 million, with $300,000 from FEMA.
Water Main Funding Cash or Increased Debt?
There was extensive discussion on using free cash (proposed in a petitioners' Town Meeting article) or borrowing $510,000 for laying new, larger water pipes through the 27/30 intersection to begin to remedy problems in Cochituate. There are fears that current flows aren't enough to fight fires.
The town's free cash account has received more than $530,000 since 2008 from the settlement of a class action lawsuit as a result of the release of MtBE, a gasoline additive and known water supply contaminant. Some Massachusetts towns have voted at 2009 and 2010 town meetings to use their receipts from this suit for needed water system improvements. Absent such appropriation in Wayland, those funds were moved into free cash per state guidance. Use of the money to address what the Department of Public Works director has described as an emergency would not add to the water user surcharges. Protecting water supplies was the rationale for the monetary awards.
Currently the town has amassed $8.5 million in free cash, or 13% of expenditures -- up from $6.15 million at the start of FY 10.
After the FY 12 budget, the free cash will be about 12% in contrast to several years ago, when the town was struggling to build free cash. Moody's recommends free cash at 5-10% to maintain a high bond rating.
The breakdown of items and methods of payment may be found at http://www.wayland.ma.us/Pages/WaylandMA_Finance/FY12%20Capital%20Budget.pdf
The FinCom proposes to use $325,000 in cash for new vehicles for the fire/paramedic ($75,000) and school departments ($50,000), computer upgrades for the police and town ($90,000), stormwater mapping ($35,000), beach improvements ($75,000), and a generator from water funds ($50,000) that the Department of Environmental Protection says the town must have to maintain the water supply during power outages.
The water department, which is responsible for its own debt and operations costs, has reserves of $2.5 million but is proposing to use only $50,000 from cash, for a generator. The DPW's capital improvement plan submitted to the FinCom last October shows spending $500,000 each year for water main replacement or repairs. Some mains are more than a century old, undersized and/or clogged with iron and manganese deposits.
The recreation department operates on a revolving fund basis so that program fees cover costs. The only rec department item in the capital budget is $75,000 from cash for the beach -- $50,000 for sand and $25,000 for various game areas. With the transfer of the parks department to the DPW, the taxpayers are being asked to fund the expenses for new fields within the DPW budget.
Other than the repairs to the Public Safety Building, the DPW has the largest tab for projects/equipment, totaling $1.79 million. The total includes the two new grass fields for $530,000, two new trucks for $500,000 and $265,000 for a loader, a gang mower and an attachment for a proposed multi-use truck, plus $60,000 for water pumps to drain flooded areas. The need for the latter was obvious last spring. Continuing on the DPW list, there is $200,000 for drainage improvements, $125,000 for field renovations, and $120,000 to improve the Hannah Williams playground, including replacement of the worn-out playground equipment built with arsenic-treated wood.
The FinCom deleted the DPW director's request for $700,000 for a networked wireless meter reading system.
Other allocations to be voted at Town Meeting include $100,000 for Rice Road dam repairs, $290,000 for building repairs for the town building and its parking lot as well as wireless fire alarms, $50,000 for a truck used by the schools, and $100,000 in school building repairs (Claypit Hill parking lot and tile replacement).
The largest driver in the tax increase is the recently issued $42.37 million in bonds that covers the majority of the high school costs and the town's new waste water treatment plant. see WVN #386:
The payments on interest and principal are expected to rise from $4.9 million to $7.8 million, which alone will add about 4% to taxes next year. Health care costs are projected to rise by $200,000, which is significantly less than in prior years.
The state extended the deadline for meeting funding requirements for pensions, so the annual payment amount has been decreased.
Operating budget deficit
To cover the expected operating budget deficit of $980,000, the FinCom will use $360,000 from ambulance receipts, $120,000 the town received from issuing the bond, and $400,000 from free cash.
For FY 12, the FinCom allowed "step/lane" and "other required/contractual increases" including cost of living, adjusted utility accounts, but tried to keep other accounts flat. Last year, there was no cost of living adjustment, and a spending freeze was implemented after the reduction in state aid was known.
-- Molly Upton
WATER BILLS COULD DECREASE AT BOTH ENDS
At the Feb. 8 water rates hearing led by the Board of Public Works, the option to charge a fixed administrative fee, reduce the number of rate tiers, average multi-unit residence usage and combine the capital-debt surcharge into the usage structure seemed to be the preference of both the large audience of over 50 concerned citizens and the board. If this is adopted, the smallest volume users and a small number of very large volume users would get lower bills. Others would have the same or higher bills.
Tiers and high-end users
Perhaps the most surprising outcome is that very high-end users would have lower bills than currently. This is a consequence of reducing the number of tiers. By state law, those who use less water are supposed to pay less per gallon than those who use large amounts of water. Tiers accomplish that.
Joel Goodmonson, who was Water Commission chairman before it was absorbed into the Public Works board, said in an introductory speech that one goal of the Commission had been to retain the higher users in the system, rather than risk seeing them drill their own wells, because of their contribution to water department income. One way to do this, recommended by the recent study by consultant Mark Abrahams, is to combine the upper two tiers of the structure into one. The highest current tier currently applies to only three users. If this tier is combined with the next-highest tier then its rate per gallon will be lowered.
Several high-end users have already drilled wells. The DPW is considering drilling wells to irrigate playing fields. It was remarked that the town may wish to regulate wells because irrigation well water, while not requiring treatment, is depleting aquifers. Regulation might include water fees for private wells, presumably less than fees for treated water.
Admin Fees and Low-End Users
The very low-end users would pay less if the minimum fee is dropped and an administrative fee replaces it and debt service is included, doing away with the uniform capital surcharge. Currently households which use up to 1,500 units (a "unit" is a cubic foot) in a six-month billing cycle pay $50 whether or not they use all the units. Every user now also pays a $118 capital surcharge twice a year which pays for all water department debt service.
The administrative fee replacing the minimum fee would pay for administrative, billing and customer service and is now estimated to be about $56 per six-month billing cycle for each residential customer. The administrative fee does not include debt service. If the debt service is included in the water rate, then the water rate will go up for all but the small number of very high-end users. But the low-end user would pay only for water actually used, not for the minimum of 1500 units. Their total water bill could be less than it is now.
Board members said that they had previously agreed on using an averaging method for multi-unit dwellings (apartment buildings). Later in the meeting, after hearing public comment, the board discussed this further. How to define a multi-unit dwelling hasn't yet been resolved.
Multi-unit buildings have only one meter. Multi-unit dwellings that are not now billed on the averaging method have the one meter billed at the high-tier rate, which is high per gallon, but pay only one capital surcharge. In those multi-unit dwellings currently on the averaging method, the amount of water is assumed to be the same for each dwelling unit and each unit is billed according to that calculation, and each unit pays the capital surcharge. Revenue to the water department is estimated to be about the same as without averaging. The Abrahams report recommended averaging for multi-unit dwellings.
If the old rating structure remained in place, but averaging was used uniformly, each unit in such a dwelling would pay a capital surcharge and have a lower tier water rate. If the new rating structure takes place and averaging is used, each unit will pay the administrative fee and will have the lower tier water rate.
As an example, the housing units managed by the Wayland Housing Authority at Bent Park and at Cochituate Village have been on the averaging method since 2005. Since most of the apartment residents are elderly, until the capital surcharge was in place, each unit paid $50 as the average was less than the 1,500 cubic foot minimum. This made the combined total paid for both apartment complexes $11,200. When the capital surcharge went in, the total spiked to $37,632 as each unit was then also responsible for a separate capital surcharge. Brian Boggia, executive director of the Wayland Housing Authority, also reported that the current rating system provided a disincentive for installing low-flow toilets at the Cochituate Village apartments as had been planned---it would not change the water bill as the units are already below the minimum. This also illustrates the unintended consequences of a minimum fee.
New Water Rates
Water rates are calculated to bring in enough revenue to cover the water department budget, which in the new structure would include the debt service. Thus, if the plan to include debt service in water rates take place, administrative costs paid for by the income from the 4,823 users each paying $112 per year for an administrative fee ($540,000) is subtracted from the estimated total budget (Abrahams calculated about $3.9 million) to get the amount to be paid by water fees. The BoPW would set rates for each tier (probably four tiers with four rates) to get the sum needed, based on estimated usage.
A resident pointed out that the budget total included the $700,000 for a new wireless meter reading system, which the Finance Committee had cut out of the budget after the calculations had been made by Abrahams. Thus the total FY12 budget for the water department would be nearer to $3.2 million.
In general, users will pay more than they did before the debt for the $10.8 million Baldwin treatment plant was incurred, but the new rates will be more equitable since, except for the administrative fee, lower volume users will pay less per gallon in their water bill than higher volume users. This should encourage water conservation as the rating structure is meant to do.
The Department of Environmental Protection expects the town to continue educating the public about water conservation, with the goal of reaching the state-mandated goal of consuming 65 gallons per day per person. After DEP consent orders in 2002 and 2005, Wayland has made progress towards that goal, currently at 71 gallons/day/person. Wayland's DEP water withdrawal permit expires this year and must be renewed. A resident at the hearing encouraged the Board of Public Works to review the content of the Water Conservation Report filed with the state to ensure it is complete and accurate.
Three other rate-setting options were presented at the meeting, none of which include debt service in the water rate, but there were no advocates for them. These included (1) a baseline option of making no changes, (2) an option of making all changes except putting the debt service in the water rate, (thus retaining the current uniform capital surcharge for each user) and (3) making the uniform capital surcharge depend only on 60% of the Baldwin plant debt, with the rest of the water department debt service going into the water rate.
Property Tax Increase Rather Than Water Rate Increase
A suggestion was made that the debt service for water-related debt be transferred to town debt and be reflected in property taxes rather than in water rate increases. This way, residents could claim higher federal income tax deductions.
Although this could save citizens money in total, it would not be as equitable as building it into the water rate since there are some less expensive homes with high water usage, and some more expensive homes with low water usage. Additionally, some households aren't served by the water system. Citizens also pointed out that Wayland already has a high tax burden compared to other towns.
Other suggestions were made to add demand-based charges, such as by number of people in a household, number of plumbing fixtures, ratio of summer to winter bills, or size of house. Goodmonson said that the former Water Commission had looked at the last idea but rejected it because they thought that most Wayland houses were very similar. During public comment residents provided statistics about the number of one- and two-person households to dispel the notion that the average Wayland home has four bedrooms.
The Board said it would post four rate-setting options and other calculations on the town website soon. The rate-setting public hearing is scheduled for March 8.
-- Betty Salzberg
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Wayland Voters Network
Michael Short, Editor