Commonwealth of Massachusetts

Water Infrastructure Finance Commission

Working Group Two

Municipal Utility and Water District Financing

Approved Minutes:  August 23, 2010

In a meeting duly posted, Working Group Two (Municipal Utility and Water District Financing) convened at nine am in the Boardroom of the Woodbury Administration Building; Upper Blackstone Pollution Abatement District Office, Millbury MA.

Members Attending:  Thomas Walsh, Michael Martin, David Terry (attending for Commissioner Burt), David  Hanlon, Bill Callahan, Sally Schnitzer (attending for Senator Eldridge).

Also attending:  Jennifer Pederson; Jessica Strunkin

The members selected Mr. Walsh to chair the group.  Mr. Martin was designated as vice chair/secretary.

Mr. Walsh opened the discussion, asking for feedback and comments on the charge to the group.  The Working Group is to make recommendations back to the Water Infrastructure Finance Commission on matters relating to municipal utility and water district financing, including a look at the current situation and common practices, pricing structure and practices, enterprise funds, municipal debt, identifying cost centers for utilities, and proposing ways to reduce those costs, water rates, public/private partnerships, and models for asset management.

The members identified a number of issues they would like to pursue over the coming months, including:

State Revolving Fund

• What, if any, requirements for SRF loans might be relieved or modified?
• Whether to require a capital improvement plan and an enterprise fund (that would take into account Operation and Maintenance, debt reduction, and capital requirements) as prerequisite for all SRF loans
• Whether to tie the SRF interest rate to the market rate, with a cap.  Right now, with low interest rates available to cities and towns, the difference between those rates and the 2% SRF rate is much less than it was in recent years.

Status of Municipal Utilities and Water Districts

• What can we learn from the Tighe and Bond rating system about status of municipal water utilities and districts?
• What innovative ways are towns currently using to fund water infrastructure?  (for example, charge of a water quality protection fee)
• Take a look at the DEP permitting process – is there any way to make the process less costly?

Pricing

• Look at whether it is advantageous to decouple water rates:  fixed rate for fixed costs, variable rate for water use
• Pricing structures and practices
• Should towns be authorized to have an annual escalator on rates?

Storm water utility

• New storm water requirements
• What part of the solution could storm water utilities be? May be key to reducing phosphorous for many sewer systems.
• What are the current models for financing storm water utilities and how is that working out?
• Other states have had storm water utilities, what can we learn from them?

Other

• What are other states doing?
• Education and outreach – importance of having customers understand the true cost of providing clean water and sewer services.  “Tap Water Delivers”
• How to encourage Capital Improvement Planning?  DEP is proposing new grant program for this purpose.  Should all towns and districts be required to do capital planning?  How to pay for that?
• What about a statewide infrastructure tax?  How would that be collected, and how would it be distributed?
• Primacy of permitting – Massachusetts is one of only a few states that does not administer the Federal Clean Water Act. We do administer the Federal Safe Drinking Water Act, and fund it through an assessment fee paid by all water districts and matched by federal government. Are there any efficiencies or opportunities if the state were to do it?  How big a fee would be assessed to sewer districts?
• How can we utilize river basin planning – science based – to make the best decisions on how to invest limited dollars?  What is role of regionalizing?

It was agreed that the next meeting of the Working Group would be held on September 14 at 9 am, also at the Woodbury Building at Upper Blackstone Water Pollution Abatement District.

It is hoped that a representative of Tighe and Bond can attend, as well as someone from Reading to talk about their pricing structure for their stormwater utility.