NARRAGANSETT — The town council met with Town Engineer Jeffry Ceasrine Monday evening to discuss the newly completed water and sewer rate study, which proposes rate increases for usage in the future. Douglas W. Gardner, President of Pioneer Consulting Group, Inc., presented his findings about the long-term sustainability of the Water and Sewer Funds, as well as providing recommendations to strengthen the finances of the town.
“Last year, when we were looking at strategic issues, one was returning the Water Fund to a more healthy state,” said Ceasrine.” For a number of years, we have been using reserves and the Water Fund balance has been declining.”
“The Sewer Fund is fine where it is, but is starting to show its age, so to speak,” he added. “This is the first independent look we’ve done for 20 years, at least for as long as I have been here.”
Gardner found through his study that the town’s Water expenditures exceed revenues, and although Sewer expenditures are at a breakeven level, the minimum charge for users of both Water and Sewer is heavily subsidized. In fiscal year 2010-11, for example, the Water Fund generated approximately $1.3 million in revenues, while paying out approximately $1.7 million in expenditures.
Rising operating costs for water and sewer facilities and United Water’s 2012 rate increase of 18.4 percent have largely contributed to rate increases. The town’s Water Fund has been operating at a deficit for several years, and the town has not raised rates since 1995, further compounding both funds’ ability to generate revenues and remain healthy.
Gardner also analyzed the town’s Base Charge for water and sewer services, which does not adequately recover total costs for those funds.
The majority of customers do not consume the minimum water allowed in the base charge estimates of water and sewer usage. 2,843 of 5,196 water customers fall within the 6,000 cubic feet or less category, the lowest allowance bracket in the water base charge. Of 7,711 customers who use sewers in Narragansett, 6,299, or 82 percent, are under the 10,000 cubic feet or less allowance bracket for sewer. Gardner thus provided suggestions for making the water and sewer funds healthy and equitable for all users in order to secure their long-term financial stability.
“If the town council does not approve new rates, the town will be in a deficit pretty quickly,” said Gardner. “There was a 40 percent increase this year and a five percent increase the year before. This would have been a lot worse without those increases.”
“Right now, if you keep you consumption below 6,000 cubic feet, you know your bill is $197 per year,” said Gardner. “That is your incentive, which is pretty cheap. 6,000 cubic feet of water allowed, that is a fair amount of water, which is enough for basic needs.”
Sewer base charges are currently at $345 yearly per user, which applies to all meter sizes. The sewer charge is based on water consumption, and the base allowance is currently up to 10,000 cubic feet, an estimate which both Ceasrine and Gardner think is unnecessary and proposed to set the allowance at 8,000 cubic feet. The proposed sewer base charge for fiscal year 2013 is $400, a rise of $55, or 15.94 percent.
Although the town council stressed the importance of rate increases to keep the Water and Sewer Funds healthy into the future, members expressed concern of the burden a 40 percent rate increase might place onto local residents.
“I think if we can hold [rate increases] off a year and delay it at least, we can give enough time to let the public know what we are doing,” said Councilman David Crook. “You can raise rates when things are good, but I don’t want to jump in 40 percent and have to sell that.”
Both Ceasrine and Gardner reiterated the importance of rate increases in keeping both funds financially healthy, even if the increases may hurt some residents in terms of payment.
“Narragansett has been artificially keeping its rates low, which is a common occurrence, but at some point, that comes back to bite you,” said Gardner. “Water is the critical one, and if you don’t raise those rates this year, the town breaks even next year. In fiscal year 2014, it will be in the red and you will have to go to the general fund to fix it. I am sure the town’s finances can’t handle that.”
“[The town] needs to get this in the right direction, and right now its moving in the wrong direction,” he added.
The proposed rate increases are subject to change and the town council plans on continuing the discussion with Gardner and Ceasrine in order to come up with the most equitable solution, which may include spreading the 40 percent increase over a two-year period instead of one. Ultimately, the maintenance of a viable rate increase structure for the Water and Sewer Funds is crucial to the town’s ability to provide quality public services, and these are the first steps towards achieving that goal.
“Once we get recalibrated, we have to look at this as part of the budget process every year so we can just do tweaks and not have to do 40 percent again,” said Miller. “No matter what we do, rate-payers will be impacted, but we are in a perilous condition with the Water Fund. We need to make a decision in the near future.”