HomeMy WebLinkAbout2007-TDES-Water and Sewer Discount Progam for Low Income Households-rptRecommendations 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?
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Who should administer the program?
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What should the benefit be?
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How can we optimize utilization of our program?
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How will optimizing utilization of the program affect water and sewer rates?
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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
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and sewer are utilities.
LIHEAP benefits households in all age categories.
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LIHEAP income limits increase with household size.
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LIHEAP actively verifies applicant income, which eliminates the need for
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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.
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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 41C 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.
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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.
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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
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APPENDIX II
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