2015-03-AC-ATM-rpt - Laserfiche WebLink

Browse Search

AC–2015ATM PPROPRIATIONOMMITTEE MWRA Assessments FY2014FY2015% Fund 3 AppropriatedPrelim. Assmt.Change Water $6,037,972$6,695,14410.88% Sewer $7,183,735$7,041,716-1.98% Combined $13,221,707$13,736,8603.90% The combined MWRA assessment increase of 3.9% is roughly in line with MWRA’s system-wide rate increase of 4.1%. This suggests that a recent trend of substantial increases in Lexington water usage com- pared with the rest of the MWRA community, attributable in part to an extraordinary remedial flushing program undertaken by the Town of Bedford in 2012 and 2013 to remove contamination in certain parts 4 of its water system, has now stabilized. Direct Town Costs. In addition to the MWRA assessments, the expenses of the Water and Wastewater Fund budgets include direct costs incurred by the Town, primarily for: (1) the wages and salaries of the employees in the DPW’s Water and Sewer Divisions, (2) the expenses of the water and sewer mainte- nance activities and equipment, and (3) debt service on prior borrowings for water and sewer enterprise capital improvements. All of these direct costs are increasing at moderate levels or decreasing (see Brown Book, pp. V-26, V-30). This year, as noted in the discussion of Articles 14 and 15, it is proposed to finance the entire $900,000 program of water system improvements and $1,350,000 of a total $2,550,000 in sewer improvements, from retained earnings. This is reasonable because retained earnings are presently above their target lev- els, and, as noted below, the use of surplus retained earnings for capital projects mitigates future debt ser- vice costs and promotes rate stability. Indirect Town Costs. The Water and Sewer Enterprise Fund budgets also include indirect costs for ser- vices provided by other Town departments to support water and sewer operations, such as insurance costs (health and liability), retirement funding, engineering costs, and the cost of services provided by the Comptroller, the Management Information Systems (MIS) Department, and the Revenue Department. Since 2006, the Town has conducted periodic studies of the appropriate level of indirect costs and has adjusted the charges to the enterprise funds accordingly. This year, indirect costs paid by the water fund are increasing by 13.85% to reflect an increase in construction-related services performed by the DPW Highway Division and indirect costs of the sewer fund are increasing at a more modest level of 2.87%. Rate-Setting and Reserves As discussed in Appendix B, the state statute governing enterprise funds, G.L. c. 44, § 53F½, requires that accumulated surpluses resulting from the operations of an enterprise fund, referred to as retained earnings, remain with the fund as a reserve, and that they be used only for capital expenditures of the enterprise, subject to appropriation, or to reduce user charges. Deficits must be funded with existing reserves or, in the absence of such reserves, made up in the following year’s rates. During the early 2000s, difficulties in forecasting usage and other accounting issues resulted in rates be- ing set at less than adequate levels in several rate years. This, in turn, reduced the retained earnings in the Water and Sewer Enterprise Funds to levels that caused concern. Since 2005, the Town’s ability to meas- ure and forecast water and sewer usage, and thereby to anticipate revenues and reserve levels, has im- 3 Last year’s final MWRA assessments came in slightly below the appropriated amounts at $6,035,866 (water) and $7,177,414 (wastewater) but as there was no fall special town meeting in 2014, the budget was not adjusted. 4 Lexington re-sells MWRA water to the Town of Bedford on a pass-through basis. Extra revenue received from the Town of Bedford in 2013 and 2014 as a result of the flushing program was set aside as a reserve to mitigate the resulting rate increases for FY2014 and FY2015. 14