Water, sewer rates are gushing up: Average household water/sewer bill would climb $350

The City Council was asked yesterday to raise sewer rates by 39 percent and water rates by 29 percent, adding about $350 to the average Gloucester homeowner's water and sewer bill.

Officials who proposed the rates noted the increase in the sewer fees does not reflect debt service on the expected $32 million cost of the federally mandated combined sewer overflow project starting this year.

Those costs will kick in slowly beginning next year and will begin spiking in two years.

On top of the proposed rate for this year, future sewer rate hikes — largely attributable to the combined sewer overflow project — would progressively add 9 percent, 18 percent and 36 percent to the cost of flushing in the following three years, according to figures presented to the council's Budget and Finance Committee.

Then, according to the same projection, the sewer rate would climb only gently at no more than 4.1 percent five years from now.

Over seven years, combined water and sewer rates were projected to climb by more than 200 percent.

Councilor Bruce Tobey said he believed the proposed rate of $7.97 per 1,000 gallons of wastewater would make Gloucester's the most expensive system in the country.

"If we're not number one, I don't know who is," he said.

"I know it's rate shock," said Public Works Director Joseph Parisi, who is charged by charter to recommend the rates.

Councilor: It won't happen

A 29 percent increase in the cost of water taken from the city system results in a rate of $7.62 per 1,000 gallons. The state and Massachusetts Water Resources Authority assume a household uses 90,000 gallons of water a year — and is charged for the coming and going; this means at a 29 percent hike, it would cost a homeowner $686 per year for the water bill, up from $533.

The sewer rate would rise to $7.97 per 1,000 gallons of wastewater or climb to $717 for the yearly bill. Two years ago, the rate was $5.05. It climbed 17 percent to the current rate of $5.92, or $532 for the yearly bill.

Using that estimate, the average household that now is charged $1,051 in water and sewer fees would face charges of $1,400 under the proposed new rates.

"Three hundred fifty bucks in a whirl," said Councilor Michael McLeod.

Tobey said the MWRA's state and national survey shows only Seattle as a more expensive system under present rates.

"People complain about paying for city schools," added Ward 1's Jason Grow.

Behind the parallel spikes are different drivers.

The sewer rate for the first time gets no relief from a special stabilization fund or free cash. Last year, $700,000 was taken from these accounts to hold down rates.

Steven Magoon, administrative assistant to Mayor John Bell, said his boss "is aware of the rates. He doesn't like them, but doesn't see any way to avoid them."

"It isn't going to happen," said McLeod, but lowering the rate would require another — or other — funding sources.

The rates for both water and sewer use must produce revenues equal to the costs of the two systems, which operate as nonprofit businesses.

Sewer rate hikes were kept more modest in recent years with transfers from the sewer stabilization fund, to which the towns of Essex and Rockport had contributed to compensate Gloucester for joining them to the city system.

Sewer free cash also was used to moderate rate hikes.

Not as much help this time

Last year, the rate was moderated with $700,000 from the two nonuser sources, "one-time money," as City Auditor Joseph Pratt noted.

"We were subsidizing by design," he said. "Ultimately, you have to face the fiddler."

No money from those sources was projected for rate relief next year.

Parisi said only $269,000 remains from the Essex and Rockport fees, and it might be needed to help offset the more than $300,000 in emergency costs incurred last week to have private tank trucks relieve sewer pumping stations along the east side of the city overloaded by the torrential rains.

There is no certainty that the city will have sewer or water free cash.

There's an outside chance of some relief from the Legislature. State Sen. Bruce Tarr, R-Gloucester, has written a $1 million Gloucester-Essex rider to a rate-relief bill targeted to MWRA customers, but he said, "it's really a long shot."

Magoon told the Budget and Finance Committee the administration was cautious in not assuming any state relief. Tarr called that approach wise.

While the CSO project will continue to propel rates upward, water rates are expected to level off quickly. The administration's forecast has the water rate climbing another 14 percent next year but afterward not rising by more than 3 percent a year for seven years.

The impact on the sewer rate from the loss of contributions from free cash and the stabilization fund is dramatic. The proposed 39 percent rate increase was requested even though actual costs of operating the system were projected to increase by only 12.5 percent, or $585,000.

The rest of the 39 percent increase traces to the absence of the $700,000 contribution from the sewer stabilization and free cash accounts — essentially, the nonprofit enterprise's savings account.

Efforts to reduce the hikes would entail cutting costs in operating the sewer and water systems or dedicating revenues from other sources, such as the municipal budget.

Rates must be set by the time the fiscal 2007 budget is finalized by mid-June but can be adjusted until October, when spending and revenue estimates are sent to the state for certification.

Down the road hikes

By administration projections, water and sewer users who this year on average are paying $1,051 would be paying $2,208 in seven years — an increase of 210 percent, much of it due to the combined sewer overflow project.

In three years, by June 2009, this year's $1,051 for water and sewer usage would balloon to $1,738, leaving Tobey to muse that "if I'm a sewer user, I'd have until June 2009 to decide where to move to."

Chief Financial Officer Thomas Moses said he thought the DPW director's figures were conservative, based on the assumption that personnel costs will rise by less than 3 percent this year. The cost of health insurance is projected citywide to jump by 4.4 percent.

Proposed hikes

Water rates (per 1,000 gallons)

Current Proposed Percent increase

$5.92  - $7.62 -  29%

Sewer rates (per 1,000 gallons)

Current Proposed Percent increase

$5.75  - $7.97  - 39%

Average annual water bill

Current Proposed

$533  - $686

Average annual sewer bill

Current Proposed

$518  - $717