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APPROPRIATION COMMITTEE-2019 ATM
<br /> Article 18
<br /> Appropriate for Wastewater System Improvements
<br /> Funds Requested Funding Source Committee Recommendation
<br /> $1,700,000 Wastewater EF debt Approve(9-0)
<br /> This article addresses proposed capital expenditures to be made during FY2020 as part of a continuing
<br /> program to upgrade and keep current the assets of the Wastewater Enterprise Fund.For general background
<br /> on the enterprise funds, and the relationship between the budget process and the water rate-setting process,
<br /> please see Appendix B and the discussion under Article 12.
<br /> A total of$1,700,000 is requested this year: $1,000,000 as part of a multi-year plan to rehabilitate sanitary
<br /> sewer infrastructure,particularly in remote areas,including brook channels,where poor soil conditions lead
<br /> to storm water infiltration; and $700,000 as part of an ongoing program to upgrade Lexington's ten sewer
<br /> pumping stations. The details of the projects including the expected work sites can be found in the Brown
<br /> Book (p. XI-13). Capital appropriations for similar purposes have been made in most years (except for
<br /> FY2006, when engineering studies were not ready, and FY2011, when only pump station upgrades were
<br /> performed). The request this year is $100,000 less than the $1,800,000 amount typically requested under
<br /> this article.
<br /> The costs of this year's wastewater system improvements are proposed to be funded entirely by borrowing.
<br /> The resulting debt service costs for the portion borrowed will be borne by the operating budget for the
<br /> Wastewater Enterprise Fund in FY2020 and for an additional ten years until the debt is retired(see Brown
<br /> Book, p. X1-13, Table III), and will be included each year as a component of the wastewater rates. Part of
<br /> the funding may come from MWRA grants or loans.
<br /> Prior to FY2006, capital expenditures for wastewater distribution system improvements were funded pri-
<br /> marily by enterprise fund cash capital, which was raised in the rates. Subsequently, there was a transition
<br /> to funding these ongoing improvements primarily with debt. While the transition to debt financing miti-
<br /> gated the need for rate increases early on,that change,together with the fund's allocated contribution to the
<br /> debt service for the new DPW facility, steadily increased the annual debt-service costs of the sewer enter-
<br /> prise fund, both in dollar and percentage terms, as illustrated below.12
<br /> Growth in Debt Service for the Wastewater Enterprise Fund
<br /> Fiscal Year Wastewater Total Budget Debt Service
<br /> Debt Service Ratio
<br /> 2006 $275,950 $7,084,802 3.9%
<br /> 2007 $333,899 $7,440,920 4.5%
<br /> 2008 $439,792 $7,355,479 6.0%
<br /> 2009 $488,135 $7,643,649 6.4%
<br /> 2010 $575,357 $8,083,478 7.1%
<br /> 2011 $791,777 $8,315,556 9.5%
<br /> 2012 $879,713 $8,934,624 9.8%
<br /> 2013 $956,855 $9,282,077 10.3%
<br /> 12 In the last several years,judicious use of some of the fund's accumulated retained earnings as cash capital has helped
<br /> to defray the impact of these growing debt service costs and maintain long-term rate stability. For a more complete
<br /> discussion of the status and use of water and sewer enterprise fund retained earnings, see the discussion of the
<br /> enterprise funds' operating budget under Article 12.
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