Commonwealth of Massachusetts
Water Infrastructure Finance Commission Public Hearing
Monday, November 15, 2010
Pioneer Valley Planning Commission
60 Congress Street
Springfield, MA 01104-3419
The Commission convened at 10 am.
Commissioners present: Senator Jamie Eldridge; Representative Dykema, Tom Tilas, Mike Martin, Tom Walsh; Bruce Tobey, Phil Jasset
Senator Eldridge opened the hearing and welcomed everyone to the Commission’s hearing in Springfield. He listed a number of issues about which the Commission is seeking input. Thank you to the Pioneer Valley Regional Planning Commission for hosting us.
Notes from the Testimony (please note: what follows is not an official transcript.)
United States Department of Agriculture
451 West Street
Amherst, MA 01002
The USDA is a federal agency doing rural development. The agency has been in existence for 50 years. We have a low profile and a select clientele. We work only with rural areas, cities and towns less than 10,000 in population, but in Massachusetts that is important, because fully 2/3 of Massachusetts towns are under that population limit.
The USDA does invest in water and wastewater infrastructure. We are authorized to fund up to a 75% grant for treatment and transmission. The USDA recognizes that money going through the SRF tends to go towards larger communities. This makes some sense, because you can get a bigger bang for your buck in a larger community. But small communities don’t compete well in the SRF. Therefore, the USDA serves many of these smaller communities. Rather than a block grant we offer a deep subsidy. In part, this is a reflection that towns with a smaller population and/or rate base can’t pay for these kinds of improvements. But of course, small communities need infrastructure such as water, sewer, and cable to attract businesses. Some small towns have aging water systems and sewer systems and need to invest in their assets. We are concerned that soils are wearing out, and septic systems may start to fail. Communities can become derelict without investment.
The issue for our agency is that we worry that the federal contribution will get smaller as budgets get tighter. Already our program has been chipped away. Even though towns are eligible for a 75% loan, often we can give them only 20%, even when they have a “gun to their heads” by way of a consent order, and they have to be satisfied with the lower amount. The less money we have, the more our program will begin to resemble the SRF, with only small subsidies. We have lots of issues with systems that are deteriorating. But don’t forget that there is also a need for new systems in towns without infrastructure, but where there are fragile ecosystems. Our bottom line is that rural areas will languish without decent investments.
In an average year, we have had about 12 to 14 million to spend in Massachusetts. Last year in Massachusetts we had ARRA money that increased our abilities to invest to around $106 million. 75% of the ARRA money went to the Cape, where there are huge issues right now. We fund contracts on a rolling basis, and try to pick parts of the investments that are harder to finance. Our dollar amounts are not large. We help small towns with small needs, and we try to work with SRF where some of the project costs are eligible.
We do more than just invest in infrastructure. We also offer planning assistance. We help with other types of community services such as fire and health.
We are very interested in the potential for regionalized solutions, but we also worry about overdesigning or overbuilding of infrastructure to serve future growth. Sometimes the approach is to build a large regional facility and start with customers at about 40% capacity. If development doesn’t come, then how do we support that investment? Connecticut has had a lot of experience with this. You might want to look at their outcomes.
Springfield Water and Sewer Commission
PO Box 995
Springfield, MA 01101-00995
Thank you. I appreciate the opportunity to address the Commission on these issues. I’m the Executive Director of Springfield Water and Sewer, serving 1/4 million people. Springfield has a population of 150,000 and we also sell wholesale water and waste water treatment for seven other communities. We pump 42 million gallons per day of water, and we have 600 miles of sewer pipe and 600 miles of water pipe.
We’ve looked at our needs for the next ten year period. We have about 96 million in capital needs just in drinking water. We estimate over the next ten years we have at least 105 million in needs for wastewater and sewer to upgrade our plants and replace pipes and other assets. We need to address issues raised in our administrative consent order by EPA. We look at our sewer system and the system goes back to 1800’s. We’re looking at spending about 400 million on CSO abatements to meet EPA requirements. We are also looking at other possible EPA mandates that could impact us by as much as 300 million for water and wastewater. That excludes potential ms4 permits for storm water–DPW handles those costs.
These are staggering costs to confront.
Let me share with you a recent situation. We had a water main break where the main crosses the Connecticut River. As you can imagine, this was very expensive to fix. We used sonic testing to find the leaks, and we anticipate replacing the main this year, to a cost of some five to eight million dollars. We have a 1910 storage tank out of service. We will have to spend 4 million to upgrade that tank and fix structural issues. Damage to private property is always a part of these issues. We had a water main break in 2008 that cost half a million. In one spot, we spent 8 million dollars to fix 150 feet of an 1880’s structure that collapsed.
Springfield is a poor community. Median income is 34,000. Lots of families are below the poverty level. Our city just came out of receivership. Unemployment is 14%. What I just outlined adds up to a potential capital need of about a billion dollars.
- Provide a moratorium on new state or federal mandates until we get more financing. Stop unfunded mandates.
- Return to a system with state and federal matching dollars. The city can’t fund a billion dollars worth of projects. When we built our waste water treatment plant thirty years ago, we had 75% federal grants, 10 percent state. We need to get back to some rational funding mechanism so the burden isn’t completely on the communities. If the federal government doesn’t think it’s worth putting their money into it, why is it worth our money? We need to put things back into perspective.
- Use a cost benefit analysis and take a prioritized, holistic analysis before we are asked to build.
- Put a priority on projects with meaningful environmental benefits.
- Create a utility “bank” to access low interest loans
Representative Dykema: I’d like to understand how you can spend 8 million for a 150 ft. of pipe. Where were those costs? Labor? Could advanced investment have been cheaper?
Mr. Superneau: This was an 8 ft. diameter 1880 pipe that collapsed in a street. We had to rebuild a street with flood control. It was a complicated structural problem. We had to dig 35 feet deep for the length of the street. It took a while to figure out why soil was eroding. We ended up rebuilding 8 diameter pipes. We almost lost a flood control station. Our system is so old that we’re constantly going to have projects like that and we need to be in a condition where we can put funds on that immediately. I’m concerned that fixing our normal repairs will be impossible as we do new projects to meet new mandates.
Mr. Martin: I sympathize. In terms of maintenance and repair, what would happen to your water rates? What would your rates be in 5, ten, 15 years?
Mr. Superneau: Our rates could triple or worse in 10 years. We feel that we are taking on 400 million of new projects and may not have fixed anything that is broken. It will depend on what we’re required to do. If all I had to do was fix what breaks, we could keep it reasonable, but not if it’s all new projects.
Mr. Walsh: you mentioned these mandates need a cost benefit analysis. Example?
Mr. Superneau: One of the concerns I have is that we’re under mandates to do CSO mitigation and we’re going to spend 400 million over 10 years, at the end of the day we won’t necessarily meet river quality standards. Are there other areas where we should spend the money first to better help the river at the end of the day? We’re just advocating that if we spend 400 million we should get a better benefit. Our priority should be on preventing disasters, which could easily happen if we lose a major asset. If a pumping station goes, it’s very expensive:
It would be worthwhile for everyone to come together and set priorities instead of just dumping mandates one by one till we’re bankrupt.
Pioneer Valley Planning Commission
I would like to talk about a couple of problems that are regional in nature. The major challenge for the Connecticut River Valley is the Combined Sewer Outflow situation (CSO). The older urban centers have systems dating back to the 1800’s that were designed to carry both sewer and stormwater. As a region, we are trying to address this problem and correct a situation that leads to high bacteria counts, especially during rain events when stormwater combines with sewer effluent. The average bacteria concentrations during wet weather can be as much as 12000 percent higher than dry seasons, and are among the highest in New England. As was the case when Boston Harbor was cleaned up, there is the potential for major benefits as we address this problem. For the past 20 years we have worked with 7 communities under an intergovernmental agreement and have already addressed about half the problem. We have had some assistance from the federal government with the help of our federal delegation. But primarily, we have used local funds.
The remaining CSO’s are a daunting challenge. We have fiscally constrained communities, with low income and they are facing about $400 million in costs. In Chicopee, there have been six rate increases in six years. Rates are going up everywhere. Federal assistance has been extremely helpful but we’re seeking additional assistance from the state to face this problem.
In addition to these CSO problems, we are also concerned about the new federal stormwater permitting requirements. One of the concerns is the discharged from state highway systems. In many cases this storm water enters CSO systems and increases costs. We hope for assistance in dealing with detention and mitigation along highways and interstate.
Clean up of the Connecticut River is critical for the region. To the north of us, the river is a true recreational resource, and there is a potential for us to have that, too. Cleanup of the Connecticut River will help spur development, enhance recreation, and rehabilitate an important environmental resource.
Craig W. Jalbert
Town of Monson
Water and Sewer Department
198 Main Street
Monson MA 01057
Mr. Jalbert: The Town of Monson has a small system. We have worked to upgrade over the years, and have replaced 1200 feet of main, have built 2 new wells, and have upgraded our storage tanks. We try to piggyback our sources of funding, for example combining some private financing, the SRF ($1.8 million), RDA money, and money for road construction from Mass Highway. We have learned a lot and improved a lot. Right now, nearly a third of our budget is allocated to debt service. We have increased our water rates, and triggered conservation rates. Unfortunately, these higher rates led one company in town to abandon local service in favor of a private source, and we ended up losing an important revenue stream.
Our rates are higher than the state average, and the town is reluctant to raise them any higher, as these are difficult times for our residents. Rates average $440 /year for water. Our oldest pipes date to the time period of 1880-1920, but the pipes we have the most trouble with are those that were installed between 1920 and 1959. We are now spending money on “I and I”. The life expectancy of many of these pipes is being reached.
My recommendation is that you create a simple, sustainable stream of funding to all communities to address their needs; something like Chapter 90. Eliminate the paperwork, and don’t reward towns that don’t do capital planning.
In response to a question, Mr. Jalbert stated that regionalization would result in larger customer bases for a utililty, but wouldn’t change the basic equation of outdated and aging infrastructure. Might provide some administrative and personnel efficiencies, but the problems of many communities would be combined.
In response to another question, Mr. Jalbert stated that pension and health insurance costs are very high, and are detrimental to the bottom line of the operating accounts. But again, a third of the bottom line is debt service, and that may be unsustainable.
Mr. Tilas directed a question to both Mr. Jalbert and Mr. Superneau about the impact of water conservation and conservation rate structures on revenues. Mr. Superneau indicated that they have lost approximately 5 million dollars out of 45 million dollars in annual revenues.
Town of Longmeadow
In Longmeadow, we buy water from Springfield, and send our sewer to them for treatment. We have about 100 miles of water and sewer pipe, with a dense population and little industrial or commercial base. We have a water and sewer enterprise fund but it is new. In our community, we rely on Chapter 90 and the SRF for highway and drainage work. One of our biggest issues is the asbestos-cement pipes in our streets. Trying to deal with these is very difficult. There is often no place in the street to put new pipes. If you hit the asbestos pipe, you must remove it. Should it be left in the ground?
We did a rates study a few years ago, but have had difficulty implementing various recommendations due to resistance of the Selectmen or Town Meeting. For example, we recommended the replacement of water meters. This was voted down even though paying for it is included in our rate structure. In Longmeadow, the Board of Selectmen is the Board of water commissioners, but they face other demands and priorities. Schools are a priority, while pipes and other infrastructure seem easier to postpone. Out of sight, out of mind. We find it difficult to access the SRF. There are lots of requirements we are unable to meet. The stimulus funds were great, but only if you were already in the SRF queue. We would like to see some sort of program like Chapter 90, or the TIP process for determining priorities. We are now doing a 5 year capital plan.
I agree that there should be a cost benefit analysis for new mandates. Figure out how best to use the limited dollars we have. Regulation is good, and we need to face the issues, but we need money, and what money we get we need to spend wisely. Mandates need to be tailored to individual communities and money needs to be used to solve real problems.
The watershed approach used in the 1980’s and 1990’s had some good aspects and some bad.
We have bonding capacity and right now the rates are low, so it is easier for us to bond ourselves, and so we don’t work through the SRF. There is a lot of documentation in the application that we think is a waste of time. A Chapter 90-type system would be better, because then each town gets its share without paperwork.
Boston Society of Civil Engineers
Haverhill, MA 01832
I am Peter Richardson, with the Boston Society of Civil Engineers. I want to commend and support the work of the Commission. We need to educate the public as to the true cost of water service. Water infrastructure is costly, as is the ongoing operation and maintenance of the service. We estimate that at least two trillion dollars is needed nationally to address the issues. We have had a public campaign called “Raising the Grade” to call for dedicated funds, and to look at full life cycle costs when making decisions about design and building and operating facilities. The Clean Water Act was a great success in the 1980’s- a partnership of state and federal governments. Feel free to contact us. We would like to partner with you on an education campaign.
We are falling behind other nations in investing in our infrastructure.
Mr. Walsh: Does BSCE have an opinion on the accuracy of the Needs Surveys? Mr. Richardson: We don’t think they reflect the full needs of cities and towns.
Mr. Tilas: Would your organization support a broad tax on pharmaceuticals and/or fertilizers to support infrastructure? Mr. Richardson: I don’t know.
Chicopee Water Department
27 Tremont Street
Chicopee, MA 01013
Chicopee has a population of 56,000. Our water department dates back to 1892. We have a six million dollar annual budget including a 3 million dollar payment for water to the MWRA. The MWRA takes care of many of our mandates. Chicopee has 30 employees, including field engineers, clerical, admin, meter readers, and foreman. We share space with the Sewer Department. We have a number of water improvement projects, including a new connection with Srpingfield, water transmission lines, and smaller projects. Our rates are 2.70 per 100 cubic feet. We do small projects each year to replace water main. Larger projects are sent out to bid. We think we’ll have approximately $10 million in projects over the next ten years and that will be borne by the rate payer. We have no other revenue source, even loans get paid back by the rate payers. We have 276 miles of pipe, and we did 2 miles last year, which was a good year. We have 36 inch water mains. EPA has mandated separation of sewer and stormwater. All our costs are borne by the ratepayer or the taxpayer. Our bonds must be repaid. At our pace, we won’t keep up with deterioration or the mandates that come down on us.
On storm water and wastewater, the city of Chicopee has been mandated to make tremendous improvements with no outside help. We have gotten no grants since the 70’s. For these programs, we’ll spend at least 115 million over 20 yearsWe are an old community on the Chicoppe and Connecticut Rivers. We have these rivers as a blessing and a curse. The infrastructure is over 100 years old, and half of the CSO’s left in the valley are in Chicopee. We don’t argue against the improvements. There have been dramatic improvements in the rivers. Technically we can do the job, but we need financial assistance. Our debt is going to be unsustainable.
Rates have gone up annually. We have a storm water management fee. We are up in the 550 dollar range for waste water and storm water is about $1000 per year per average resident. Those numbers may double in 5 to 10 years if things go without help.
We’ve saved with SRF, and ARRA helped, but in the last ten years it’s been so much that loan forgiveness is a drop in the bucket. We need to get back to the federal and state governments investing in infrastructure. Residents are doing their fair share. We still have to pay loans back, so instead we need grant money. This country has to decide to invest in infrastructure. There has to be a focus on spending some money on infrastructure. There’s a lot of waste in government, we spend billions in waste that could be spent on infrastructure.
Belmont MA 02478
I am a civil engineer from Belmont. I was born in the Pioneer Valley. My expertise is in the assessment of replacing infrastructure. I very much appreciate the work of the Commission. I believe we can reduce the cost of providing water through better maintenance. What I’m presenting is a hypothetical, but it illustrates and important point. Infrastructure is often out of sight and mind. For example, until the giant Weston water main broke, people weren’t talking about infrastructure. Since that time, people have been more interested. When there is an emergency, we notice, but smaller situations don’t get called to folks’ attention. Unfortunately, reactive and emergency maintenance is a cost driver. What I’d propose is a high tech technical approach.
I propose that we use a condition assessment, using photos and notes. A town should collect information when there are breaks, to assess what is happening to that pipe and others. Using information collected at the time of break repair can reduce costs.
The Commission and some previous witnesses discussed Ms. Miller’s proposal and generally agreed that it would be valuable. Some towns replace pipes based solely on age. Others use a GIS to collect information. Is this approach expensive? Is there cost to software to keep track?
In some towns, old pipe was replaced that was actually in great shape. Was that worth the money spent? You could dig some test pits to ascertain pipe status.