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Home My WebLink About2007-TDES-Water and Sewer Discount Progam for Low Income Households-rpt Recommendations for Formalizing The Town of Lexington Water and Sewer Discount Program for Low Income Households The Selectmen's Tax Deferral and Exemption Study Committee Vicki Blier, Pat Costello, Co-Chairs Joel Adler, William Kennedy, Thomas Taylor Norman Cohen, Board of Selectmen Liaison Lauren McSweeney, Director of Social Services John Bartenstein, Appropriation Committee Liaison Many thanks to Rob Addelson, Assistant Town Manager for Finance for providing data and analysis for this report December 27, 2007 In 1999, a year in which Lexington's water and sewer rates saw a steep increase, the Board of Selectmen adopted a policy of giving a discount on water and sewer charges to residents who can demonstrate that they qualify for rate assistance from local utility companies. Since that time, a 30% discount has been given to customers receiving "fuel assistance," a term which was never specifically defined. The Town Manager, the Social Services Director and the Board of Selectmen have requested that our committee examine Lexington's current Water and Sewer Discount Program (WSDP) for residents in financial need in order to formalize the details, administration, and outreach efforts of the program. The questions we sought to answer were: • What criteria should we use for our program? • Who should administer the program? • What should the benefit be? • How can we optimize utilization of our program? • How will optimizing utilization of the program affect water and sewer rates? What criteria should we use for our program? There are numerous town programs that provide property tax relief to certain qualifying citizens. These programs serve almost exclusively senior citizens and veterans. Each of these programs has a different set of qualifying income and asset limits, creating a confusion of rules and regulations which are difficult for citizens to understand and which create extra work for town administrative staff The Committee resolved that the WSDP should base its qualifying criteria on some already-existing program so as to limit administrative burden and citizen confusion. In addition, we felt that the criteria should be based on a program that already verifies recipient income so that our town employees will not be required to engage in review of income tax returns. We found such a program in LIHEAP, the federally funded, but locally administered Low Income Home Energy Assistance Program. We felt that the LIHEAP set of criteria was appropriate for a number of reasons. • LIHEAP is designed to help low income citizens afford utility payments. Water and sewer are utilities. • LIHEAP benefits households in all age categories. • LIHEAP income limits increase with household size. 2 • LIHEAP actively verifies applicant income, which eliminates the need for Lexington employees to assume that administrative burden. In addition, it saves duplication of effort for the applicant who will not have to prove eligibility twice. The LIHEAP program has an income eligibility threshold of twice the federal poverty level. There are no asset limitations. In FY08 the LIHEAP income threshold will be $41,300 for a family of four The LIHEAP program is administered by Community Teamwork Inc. (CTI), a state-wide agency with local offices in Arlington and Lowell. See Appendix I for LIHEAP income limits. Who should administer the program? Since exemptions administered by the Assessor's office go almost exclusively to senior citizens and veterans, our committee felt that the Department of Social Services would be in closer touch with the needy citizens of Lexington, young and old, and would be in the best position to find and enroll qualifying citizens. In addition, unlike the Assessors, the Social Workers would be familiar with other assistance programs and are therefore the appropriate entry point for helping residents in need. What should the benefit be? We saw no reason to increase or decrease the benefit amount. Older citizens, whose water use is typically modest, usually pay the lowest tier rate in our three-tier water rate system. This rate is below the cost of delivering water and is therefore already subsidized. Younger and larger families generally use more water and therefore pay for it at a higher tier rate. While a 30% benefit will be large enough to be helpful to larger families, it is not so large as to create a disincentive to conserve water The LIHEAP program starts to accept fuel assistance applications in November The application review process can take many months to complete and recipients may not get approval until the winter is over, when the benefit is applied retroactively Lexington Water and Sewer Bills do not follow the LIHEAP application schedule and retroactive benefits are neither desirable nor easily issued under our town financial system. We therefore recommend that proof of LIHEAP eligibility be good for 30% discounts on the two water bills issued subsequent to presentation of LIHEAP documentation to the town by the applicant. This is a simple approach that relieves town employees of the complications of making adjustments to bills already issued, but it creates a future financial benefit for what is certainly a resident's current financial need. Town financial staff will have to develop guidelines for submission of applications including cut-off dates and determination of what time period a LIHEAP acceptance applies to If an administrative structure can be devised that would allow the discount to be applied retroactively while not overly burdening Town administrative staff, the Committee would encourage its adoption. 3 Lexington has a property tax deferral program to allow homeowners aged 65 and older with incomes of less than $40,000 to formally postpone the payment of any year's property tax until their home is sold or otherwise conveyed. Seniors who elect to defer their property taxes are statutorily allowed to also defer their water and sewer charges. Under this State-enabled deferral program, participants may utilize any exemption (such as the $1,000 4I C local property tax exemption for low income seniors) for which they qualify before they defer the remainder of their property tax. While the Tax Deferral Program is State-enabled and subject to State rules, the Water and Sewer Discount Program is entirely local and subject only to any rules set by the rate-setting authority, which is the Board of Selectmen. Whether to allow qualifying seniors who defer their water and sewer charges to first receive a 30% discount is a question that the rate-setting authority must decide. The Selectmen may consider that there is a value to minimizing rule disparities among the many town programs for qualified citizens and opt to use the State's model of allowing Seniors to benefit from bill reductions before entering into deferral agreements. How can we optimize utilization of our program? In FY07, 117 Lexington households received LIHEAP fuel assistance, but only about 15 households benefited from the WSDP While LIHEAP administrators do not normally provide information to local towns regarding which of their residents has qualified for fuel assistance, the Director of Social Services can make an arrangement with CTI, the local organization that administers the LIHEAP program, to obtain a confidential list of Lexington fuel assistance recipients from the previous winter LIHEAP administrators are not able to provide ongoing current- season enrollment information. With this list, the Department of Social Services or the Water and Sewer Department can inform the previous year's fuel assistance recipients that they may qualify for the WSDP In addition, WSDP information can be included in a tax-bill enclosure that the Department of Social Services is planning to disseminate. If possible, information should also be included in water and sewer bills. Tax preparation volunteers at the Senior Center can be recruited to be on the look-out for citizens who qualify and our committee can include WSDP information in our ongoing educational efforts. How will optimizing utilization of the program affect water and sewer rates? In FY07 117 Lexington households qualified for fuel assistance under the LIHEAP program. The FY07 WSDP benefit received by the 15 participating households averaged $144 In FY08, it would cost an additional 2 to 3 cents on the water and sewer rate to cover 100 similar beneficiary households in FY08, for an incremental cost to the average ratepayer of $1 60 per year 4 It would cost an additional 4 to 5 cents on the water and sewer rate to cover 200 similar beneficiary households in FY08, for an incremental cost to the average ratepayer of $3 34 per year See Appendix II for fiscal impacts at various utilization levels. Conclusion The Committee recommends that the Water and Sewer Discount Program be administered by the Social Services Department. To qualify, a resident would first apply for and receive fuel assistance through the federal Low Income Home Energy Assistance Program administered locally by Community Teamwork, Inc. Residents presenting evidence of acceptance into the LIHEAP program would receive a 30% discount on the next two subsequently issued water and sewer bills. If an administrative structure can be developed to apply the discount to already-issued bills without creating an undue staff burden, that would be desirable. The Selectmen must consider whether qualifying Seniors who defer their Water and Sewer bills may also receive the 30% discount. Efforts should be made to contact recipients of LIHEAP fuel assistance directly to inform them that they qualify for the Water and Sewer Discount Program. In addition, other forms of outreach can be made through tax bills, water and sewer bills, the Senior Center tax return assistance program and other educational programs. The incremental cost to other ratepayers is a modest amount, likely to be less than $3 34 per year 5 APPENDIX I FY 2008 Income limits under the Low Income Home Energy Assistance Program Guidelines Based on 200% of the Federal Poverty Level Size of Family Income Unit Limit 1 $20,420 2 $27,380 3 $34,340 4 $41,300 5 $48,260 6 $55,220 7 $62,180 8 $69,140 6 APPENDIX II Fiscal Impact of Expanding Eligibility for Water and Sewer Discount Program Difference Cost to home with (incremental cost average usage of to the average 120 HCF per year ratepayer to based on 2008 subsidize Cost to home with rates and discount program average usage of reflecting subsidy assuming 120 HCF per year from ratepayers to different levels of based on 2008 support discount program Water Sewer Total Comment rates as adopted program participation) $ 14.E u6 $ 33u 56 $ 479 62 Average annual water sewer bill for rer ipients of water and sewer discount in FY0- (based nn average usage of 55 hundred cubic feet(HCF) 3u% 30% 3U% Vater and Sewer Discount Program discount rate $ 44 -'2 $ 99 1-' $ 143 89 Average annual water and sewer discount $ 4 4-'2 $ 9 917 $ 14 289 estimated cost of discount for 100 accounts $ 1,252 80 $ 1 254 40 $ 1 CO $ 8 944 $ 19 634 $ 26 777 estimated cost of discount for 200 accounts $ 1,252 80 ' 1 256 14 $ 3 34 $ 13 415 $ 29 -50 $ 43 106 estimated cost of discount for 300 accounts $ 1,252 80 $ 1 257 52 $ 5 02 $ 17 587 $ 39 657 $ 57 554 estimated cost of discount for 400 accounts $ 1,252 80 $ 1 259 45 $ 6 68 $ 22 359 $ 49 5�•4 $ 71 943 estimated cost of discount for 500 accounts $ 1,252 kip $ 1 201 14 $ 9 34 Comparison of FY08 Water and Sewer Rates as Adopted versus Rates Required To Support a B," • t Program for 100, 200, 300, 400 and 500 Households (HH) FY08 FY08 Sewer water water sewer water sewer Water Rates water sewer water sewer rates sewer rates rates rates rates Rates as as rates rates rates (20C1 rates (200 (300 rates (400 (400 (500 (500 adopted adopted (100 HH) (100 HH) HH1 HH) HH) (300 HH1 HH) HH) HH) HH) $ 271 $ 601 $ 271 602 $ 272 $ 6C13 $ 272 $ 603 $273 $ 604 $273 $ 605 $ 4 06 $ 9 82 $ 4 07 9 83 $ 4 07 $ 9 95 $ 4 08 $ 9 96 $4 08 $ 9 87 $4 09 $ 9 88 $ 535 $1560 $ 526 1562 $ 536 $ 1564 $ 527 $ 1566 $522 $1568 $529 $ 1570 7