The Commonwealth of Massachusetts UMASS/AMHERST £ OFFICE OF THE INSPECTOR GENERAL C ONE ASHBURTON PLACE • BOSTON 02108 MWRA 3iE0bb0ib7755c]c:) Future Rates: an Analysis & Ernst youngJs.iEnvironmental Consulting Group's 1992 national water and sewer rate ^survey,t^t6fl Eostojh^s the most expensive city in the nation for water and sewer services at $652 per year' compared to a national average of $387 per year for a typical family using 100,000 gallons of water. Costs associated with the Boston Harbor Cleanup and other mandated projects will cause MWRA water and sewer rates to skyrocket over the next decade. According to internal "rate MWRA projection" documents obtained by the Office of the Inspector General, a family in the district now paying $750 per year in water and sewer bills will pay $2,600 by July of 2003. A business which pays $10,000 in water and sewer bills today will pay more than $34,000per year MWRA in July of 2003, before the capital program is completed. By the time of completion of the harbor clean-up project, water and sewer bills in the MWRA region will not just be the most expensive in the nation, but will be "off-the-chart" in comparison to other regions ofthe country. Our economic region must recognize and plan for MWRA the coming "rate shock" resulting from regionally funded projects. Forpersons offixed income, families of low to moderate income, municipalities, rental housing owners and businesses large and small, the local water and sewer bill will become a major burden within the next ten years. The shortage of straightforward public information about future water and sewer rates hinders critically needed planning efforts by public leaders. A true understanding of how high rates will climb by the completion ofthe project is an important tool to all parties concerned. MWRA The has informed this Office that it has chosen not to publicly discuss how high rates MWRA are going to climb beyond the year 1999. Internally, however, the utilizes sophisticated computer models to project rates to the year 2005, in conjunction with its issuance of bonds. These models included best case, base case and worst case scenarios. The overwhelming portion MWRA of its future rate increases are directly related to capital projects already planned. The can make reasonable revenue requirement projections within a meaningful range. Public information about future rate increases beyond the year 1999 must be disseminated MWRA to public leaders and customers in order to avoid misconceptions about the long term MWRA MWRA effects of the capital plan. For example, the recently announced that it had lowered its projected 1999 rate by $89 per 90,000 gallons from $1,296 to $1,207. At the same time, it had raised its projected July 2003 rate by $168, from $1,710 to $1,891 per 90,000 gallons. The public might get the mistaken impression from the 1999 rate projection, alone, that the rates are not going to be as bad as originally thought. In the larger perspective, postponement of scheduled projects beyond 1999, coupled with a policy of not discussing post- MWRA 1999 rates, disguises the underlying rate impact associated with projects. Some disturbing facts to consider are these: (i) The MWRA's spokesperson recently stated that rates will stabilize at the end of the century and "the only increase you'll see will be in the single digits, at the rate of MWRA inflation." Yet even according to its "best case" internalprojections, annual rate charges will increase by more than $400 million between 1999 ($792 million) and July MWRA 2003 ($1.2 billion). For comparative purposes, current rate charges are $291 million per year. MWRA, (ii) According to the household water consumptionvaries from a low of 60,000 gallons to a high of 130,000 gallons per year. Some families in the high range will be paying more than $3,000per year within the next ten years for water and sewer services. MWRA (iii) By the completion of the project in 2005, the projects that its maintenance and operation budget, exclusive ofany debt payment for the construction oftheprojects, will be $497 million per year. By comparison, total rate revenues today are $291 million. Therefore, the maintenance of the system, exclusive of the cost of the harbor clean up, will cost $930 per year to a family using 90,000 gallons per year, not even counting the capital cost of the clean up. In other words, the rates are not going to return to anything resembling present rates, ever when the capital project is paid for in full. (iv) Over the 30 year life of the MWRA's $6 billion borrowing plan, the average family will pay more than $24,000 as its share of the interest and principal owed to retire this debt. (v) These rate projections should be given immediate attention because, as much as the public may protest and object, statutory provisions have already been implemented to MWRA protect bondholders by requiring the garnishment oflocal aid payments from any MWRA municipality which refuses, or is unable, to make payments to the in the future, when rates become potentially unaffordable for some ratepayers. * SSS5»tnOZZ5S2srmootD(iHli > 5 X3i)o IJO 3nC£O ^2Cu—O. „B?OJ W5Dl OC_P CD O § | 3 g £ It3OQ a> </> O a2 3o * 3 5" CO su o "<ST to 3. o 2 w pi 6f0t s6Oi0 6O0l 6Ul0 6JUv0 6A0 VOt) VAf XOTlT VOlf \OJlf VCD7 Ul IE OO) CO N(Jl SCD -> ift 8 c"o iMn 6en cMo sOi fOtl S 12 I< §8 "pMUU-^-inwr^*^r»MCor*crn*ur*i.w-*fr*trc*nr*oir*cjc.-»o.c-*ir4u- r-*'srj4o-'g. 5 I OUMIOC«lfiWNuK)OU-i O-»lO(OCOlOO)UI-'MSlD 6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O6O60Cc._ rOoJfr-ot'"QrI_•o.-D"'-f(»DOf0o-l0»cgOo-il*cl"o-D<*0fs-"tIs»JrC-CoO*D• "-o»> V-Sl1c"rfo-o'tirOooiniCmOnc_~iC-Jnn»>-c§'n-_g§-'>3kii-oox*joo$i> ctp\ _"JroOo "rCooj roCoD c1o0 <rg<o <: "Ooo 6Si0o 6se|0n 6Of0lt 6Oro0l <fiAto Woein <cseAon <eCAnD Vfaut'--Vi'n"^MaoUoVsirinvosTiiivfotrDi/ViA'ooV/fuct* fVu/trtlsV/N»AsiVJue*-% u'W/AMuw/Orui*urWi/i\noV//t-» wo en id co ft io O) co en co 8 II i b» r-oo1 wccoo cofot u—ro* ot*o VCCC*DDD <rfOAto) "V-Cf<*»Ot0 6rOCO0Oo "riu^c/To*»•ntvecsTndOs"MvrefonttoCVrfrifooo/\ouv-tr»ornif"VeotcnfoocevonoTjn^"ocevcf/o\jnVrctiu'oon nfVeoTnoot"VrrsurooT\oo"VerrTnooia"VerwirnoTo-u"VtrcT'no-o *O'V1r-foT»\ Soi» "2H1-< fgS^JNfsTmit7oTfwi#vtca"ocni/vofafswt/%JrcTaTioJ/wcpi//>ofi/Vc/tO%*oMMjVtci\*iooevnrnTcsooe\jgcncfoinVefnor"tofVe*nfrttoeVinc'-Do'Vec*nrSooVCeTnri'ooeV)FnroVenTftTeSTnTrcoVeoTncoeVcnnTftVecoTnfteVtn*ofVitmn7 88 |- s 5) Go ft ro ro S co fri wofitofotsroirnow^cro\)i^jr^oco^ofutucior^vqji^OjMN^OftO-f*troicnoococcoo -r"o• >r<o -oftftui-'CDCiicoiocDcnoftcn-'-'-'ftftaicna) § 8 co W w w w w « » in 60 v> to & 60 60 60 60 60 60 60 CCcDOn CD CftD cC0n0O tctono cftn con ccftnn "cconn tisoni ofto crrnoo —ofti 2 tt-vool ro stsiio tGtJoo CtOo tIsoiD 0ss3ii 6O0 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 b bCO bCO ro ro ro ro ro ro ro ro CO ro ro ro ro ro bCO ro ro ro ro "asi si ft "s| cn "cn "co ft CO "si "co "ft "ft CO "en "to CD ro tCoD rfto o CO rCoD too rcon CtOo CoD CsDi 2 CCDD CD s rCoD rCoD CCOD tCoO teon % tfto f) I