Commonwealth of Massachusetts
Water Infrastructure Finance Commission Meeting
Approved Minutes April 12, 2011

In a meeting duly posted, the Massachusetts Water Infrastructure Finance Commission convened at ten am on April 12, 2011 in the Senate Reading Room at the State House.

Members Attending:

Senator Jamie Eldridge, Representative Carolyn Dykema, Bruce Tobey, Thomas Walsh, William Callahan, David Terry (DEP Commissioner’s designee), Martin Pillsbury; Michael Martin; Becky Smith; Thomas Tilas; David Riedell, Peter Shelley, Philip Jassett

Guests:

Representative Paul Schmid, David Cole (Westport Estuaries Commission);  Nate Keenan (WPAT); Pederson (MWWA); Ann Rhinelander; Leah Robins, Sally Schnitzer; Beth Miller; Marianne Connolly (MWRA), John Clarkeson (EOEEA);  Bruce  Maki, Who Decides Gloucester;  Marcia Perkins, Who Decides Gloucester; Marcia Hart, Who Decides Gloucester;  Jack Yunitz (Aquarion Water Company, former Mayor of Brockton

Senator Eldridge called the meeting to order.

Notes:

Phil Jassett passed around a handout reporting on a random survey of 26 municipalities in Massachusetts.  The average amount that these 26 communities spent on drinking water improvements per year over the past five years is approximately $1.5 million.  The funding sources vary.  All 26 communities appropriate money for expected maintenance and repair to their water systems; 16 borrowed for projects in the $600,000 to $800,000 range, and 10 communities used the SRF program for projects of $1 million or more.   Several cities and towns had utilized DEP grants in the amount of $7500-$9000 to start a Capital Improvement Program of to do a GIS survey of their system.

Senator Eldridge mentioned that Congress seems headed toward reductions in the current Clean Water and Drinking Water SRF accounts.

Senator Eldridge mentioned that Terry Gross of the Fresh Air show on NPR had  interviewed Charles Fishman, author if The Big Thirst on April 11. The book is about worldwide water infrastructure and use.

Senator Eldridge stated that the meeting was being videotaped by some citizens from “Who Decides” in Gloucester.

Minutes

The Commission voted to approve the minutes of March 22, 2011.

Schedule

Senator Eldridge reminded the Commission that at the March 22 meeting, there had been a discussion of progress toward meeting the June deadline for a report of the Commission to the Legislature, and support by members of the Commission to continue the productive work this summer with a final report in the fall.

The Senator passed out a revised schedule for the Commission, proposing that:

• The May 3 meeting be canceled
• Working Groups submit current drafts to the staff as soon as possible
• The staff will pull together a draft report for the May 17 meeting based on the Narrative Table that the Commission has been reviewing and submittals from the Working Groups.  It is acknowledged that the May draft will not be complete.   Specifically, the GAP analysis and specific recommendations are unlikely to be ready by that time.
• The Commission will plan to vote on a draft “interim” report on June 14 to be submitted to the legislature.
• The Commission will continue to work on the final report and specific recommendations over the summer with a final vote in October.

The Commission agreed to this amended schedule.

Seeking consensus on a Recommendation for sustained funding:

Mr. Pillsbury led a discussion centered on one of the likely recommendations of the Water Infrastructure Finance Commission: that the Commonwealth establish and fund a dedicated, sustained revenue stream to assist cities and towns in their water infrastructure investments.

Mr. Pillsbury noted that we don’t have a final figure for the “gap” analysis but we already know that it is a big number.  We know that we will need to consider new revenues to address the need.

We have received written and oral testimony asking for such a “Blue Act”.  Each of the working groups has discussed the concept to some extent. Working Group Four, with considerable assistance from Robert Ciolek and David Cole, have considered the question in some depth.

Suggestions have been put forward to model the “Blue Act” after various existing programs, including:

Chapter 90

• Community Preservation Act
• The Green Communities Act Green Communities Act

Mr. Pillsbury noted the differences in these approaches.  Chapter 90 flows rather automatically, by formula, and neither rewards nor penalizes for best practices.  The CPA and Green Communities Act set standards for participation, and require substantial commitment by the locality.  These provide models for us to look at – or, alternately, the “Blue Act” might be crafted with a new or unique approach to meet the needs of water, waste water, and/or storm water infrastructure.

While there are a number of ways the program could be put together and be funded, there are some general principles that have been suggested:

1. general principles

The “Blue Act” should:

• Provide incentives for municipalities to adopt best management practices

• Provide a framework that will reward communities who have already adopted these practices, as well as ones that do so in the future.

• Provide incentives/rewards for municipalities that address their water, storm water, and waste water infrastructure on a regional or watershed basis through cooperation with other communities

• Use, as the revenue source, broad-based sources of funding that have a nexus to the problem.

• Encourage/reward utilities to charge rates that better reflect the true cost of service, including the costs associated with environmental regulation, asset management, capital planning, operation, maintenance, debt service, emergencies, etc.

• Utilize a watershed approach to evaluate the most effective use of funding

• Spread more of the costs of water infrastructure to the entire community, not just bettered properties. The whole community benefits from clean water

1. Possible Revenue Sources have been suggested as follows:

• Water Use Charges (such as a “millage” surcharge of 1 to 3 Mils on water  and/or sewer rates for all public water supply and/or sewer service customers in the Commonwealth).
  • How would towns without public systems participate?  Would we create an alternate way for them to contribute into the fund?  Would they be need to do so in order to be eligible to receive funding?
  • Need to leave a gateway for communities that are creating new utilities to participate.

• Taxes and other charges on products related to water use (such as gasoline, aviation fuel, pharmaceuticals, fertilizers

• Enhanced Bottle bill

1. Incentives, Minimal Requirements, Scores have been suggested.  Some ideas include:

• All municipalities who participate must:

• Have or undertake a capital plan
• Have or undertake Best Management Practices for Asset Management
• Have or create an enterprise fund
• Practice full cost accounting for water and sewer rates
• other

• Municipalities once eligible, COULD be given additional points for things such as:
  • SWMI items such as
    • Development of an integrated water resources management plan
    • Go with the Flow status
    • Removal of a dam with DCR approval
    • Improve aquatic habitat
    • Abandon use of an existing streamside well
    • Open space protection
    • Other

• Municipalities that enter into intermunicipal or district agreements for regional solutions to water and waste water infrastructure capital improvements could be given a larger share or additional points

• Municipalities that enter into intermunicipal or district agreements or chose to implement innovative systems could be eligible for grants rather than loans

• Should a local financial contribution also be required?
  • Pro:  Shares the financial burden at both muni and state level
  • Cons:  if we are already asking communities to do other things, should they also have to contribute financially?

If so, Local contribution could come from one or more of these sources:                 

• Property tax surcharge (1 to 3%) (with hardship exemptions)
• Local rooms or meals tax
• General revenues or other local sources

We might want to consider allowing several sources, to take into account the differences in communities across the commonwealth.

1. How should the state funds be distributed?

Several options were discussed for how the revenues raised should be distributed to communities for water infrastructure projects.  The options include:

• Provide grants to communities
• Provide zero percent SRF loans, with interest rates subsidized by the state matching revenues
• Allow a portion of the revenue to be retained by the community
• The Water Pollution Abatement Trust could use a portion of the revenues to administer programs that complement the existing SRF program, including:

• Subsidize the interest rate for SRF loans in order to provide zero percent loans

• Establish a direct grant program for planning, analysis, and design for WPA communities considering regional or watershed approaches

• Match program  for WPA communities (50/50 state and local share) for the following purposes:
  • Preparing comprehensive water and wastewater management plans
  • Plan, design, and construction of water supply facilities and wastewater collection, transportation, treatment and disposal facilities

There are numerous alternatives for how the proportion of revenues could be allocated to each of these three funding options.  For example it could be as simple split of one-third of the revenues to each option.  Better, there could be a sliding scale that creates incentives for regionalization, planning, and best practices.

Mr. Pillsbury asked for comments about the various ideas on the table.

Mr. Martin likes this approach, but also cautioned that we need to take a good hard look at equity on stormwater.  The stormwater component is crucial, and no one is generating any revenue there.  The nice thing about the property tax base as a local revenue source is that it is a surrogate for stormwater impact.

Mr. Shelley stated that it is important in making the case that we improve over the current situation.  Too many towns are borrowing on their own.  Make the fiscal case:  why is this better?

Ms. Pederson also felt that the fiscal argument has to make sense at the local level.  Do you get back at least what you put in?

Rep. Dykema noted that one of the established guidelines is the Median Household Income index.  The recommendation is that each household should be paying 1.5% of its MHI on water and on sewer service.  Perhaps we could build the program to get enhanced access to the SRF if a town reaches that level in its rates.   MHI is a more progressive approach.  Also, have we looked at any other fees?  Port entry fees, a MEPA filing surcharge?  Something that has a nexus to the impact on water?

Mr. Jasset noted that one thing unique to Massachusetts is how large a proportion of the state is serviced by either the MWRA or a district water supplier.  Of the communities that are left, is there any room for efficiencies if they were to regionalize?

Mr. Tilas noted that the system will inevitably lead to some municipalities putting in more than they get out.  The system has to support parts of the state with real issues, like Cape Cod and Cape Ann.   He also urged the Commission to include taxes on chemicals and fertilizers.  There would be a lot of support for that.

Mr. Callahan has used the Tighe and Bond spreadsheet to look at MHI using county data for 2009.  (He will utilize town-by-town MHI data and redo his work if that can be supplied to him).  Basically, Mr. Callahan argues that we propose financial support based on MHI. This will have the effect of tilting support to those communities that need it the most.

Mr. Pillsbury noted that another alternative would be to use a variable rate, based on the MHI.

Senator Eldridge noted that it will be important to him to have environmental justice in the provision – when it comes to economic and environmental impact, be sure that poorer communities are not discriminated against.

Mr. Riedell and Mr. Jasset both noted that the real problem is that the rates do not reflect the true cost of providing water to customers.  One of the biggest issues is rural areas.

Mr. Tobey noted that if towns raise their rates to reflect the MHI, it should also be required that the rates go into enterprise funds.

Ms. Smith suggested looking at the CRWA Blue Cities guide for principles.

Mr. Cole restated that it is very important that local communities have buy-in.  Property tax seems to be the most equitable way to apportion that local support.  The mil is easy and efficient, but how about towns that don’t have their own systems?  Perhaps those towns could impute a fee for the community, and collect from the property tax to that amount.   So the proposal might be – apply the mil to the communities that have a water supply or sewage rate, and for communities with neither one, raise he imputed amount to the equivalent based on a per capita per day consumption.

Senator Eldridge said that it is important that whatever we do, we include a participation element and strong benefits for small communities as well as larger ones.

Several citizens from Gloucester (“Who Decides”) made a presentation to the Commission about privatization.  They are concerned that recommendations about regionalization might facilitate additional privatization.  Issues they are concerned about include lack of local control, price gouging, escalating rates, diminished quality, and loss of assets built with tax payer dollars.   They presented a notebook to the Commission with background information.  At a minimum, “Who decides” wants to ensure that local communities always be required to vote prior to any privatization of water and sewer utilities.  This should not be left up to elected mayors or city councils.

Ms. Rhinelander, from Gloucester, stated that Gloucester narrowly missed being privatized.  We are alarmed enough to ask that you put us on the record as opposed to privatization.  We were impressed with the innovative partnerships that were discussed at an earlier meeting, but we worry about covert actions.

Various Commission members noted that the Commission has had a presentation about ways to share the risks of innovation in water treatment, water reuse, and green technology, which highlighted certain innovative partnerships and cost-sharing arrangements with private companies, but that in general, the Commission has not been inclined toward privatization as a solution to the water infrastructure issue.  Several Commissioners noted that on a case by case basis, private contracts and private arrangements can be in the best interests of some towns, such as to run a town-owned treatment plant, or to lease certain innovative equipment to a municipality to share in the risk.

Senator Eldridge stated that part of the responsibility of organizations like “Who Decides” is to report back to its members that the Commission is not pushing privatization as a solution.

The rest of the meeting was spent working on the narrative outline for the final report.   The Commission adjourned at around noon.