Proven: Shrewsbury Water Rates Are Not Equitable

On May 18, 2016, I presented at Town Meeting the following slides with comments in support of Article 14, which would require Town Meeting to ratify future water rate increases before they could go into effect.

The Town Manager followed with a lengthy monologue opposing the article, but without refuting the facts in my presentation. Perhaps the best example is the data in slide 13. He never refuted what this slide showed. He never explained why it was necessary for Shrewsbury to have substantially higher top residential water rates and substantially lower top commercial rates than the towns he himself had selected for comparison purposes.

His main argument against the article appeared to be that rate setting is too complicated for Town Meeting to address. Not so. The article would only require a simple thing, that Town Meeting have the opportunity to hear the selectmen defend their proposed rates, which if reasonable, would be ratified by Town Meeting.

SLIDES

Slide 1 – MA General Laws, Chapter 41, Section 69B

“The water commissioners …. {are} … subject to all lawful by-laws and to such instructions, rules and regulations as the town may from time to time impose by its vote.”

And

“They … fix and collect just and equitable prices and rates for the use thereof.”

Comment: 1) Some town officials had questioned the legality of the article, claiming that it violated the separation of powers. The General Laws say otherwise. 2) Water rates should be just and equitable. This presentation shows that in Shrewsbury they are not.

Slide 2 – Why this Article is Needed

Current rates are not just and not equitable.

The top commercial rate is too low to encourage more water conservation by larger commercial users.

Incorrect residential consumption reports were used to justify punitive residential rate increases in 2012 and 2015.

Water fees are a significant revenue source, and are paid by almost everyone in Shrewsbury.

Water rates need more public scrutiny. (a)

Slide 3 – State Imposed Water Limits

Two state-imposed restrictions on Shrewsbury’s water consumption that influence rate-setting are:

A residential limit of 65 gallons per person per day average

A limit on the number of gallons pumped per day. More conservation by BOTH residential and commercial users helps lower this limit.

Slide 4 – Rate Timeline

  • 2003 – The Board of Selectmen instituted separate, higher Residential rates compared to Commercial, except for the base rate, in order to reduce Residential usage.
  • 2006 and 2008 – further increases in rate gaps between residential and commercial users.
  • 2010 and current – Shrewsbury’s residential average has been 55 gallons or less, well below the state limit of 65.

So since 2010 there was no longer any good reason to increase residential rates faster than commercial rates.

  • Yet in 2012 and 2015 the selectmen continued to increase the rates at high and moderate consumption levels for residential users faster, in dollar terms, than for commercial users.

Comment: The Town Manager could not explain why he and the selectmen believed it was necessary to continue to increase residential rates in 2012 and 2015 faster than commercial rates when the reason for the different rates – the need to meet the state limit on average residential consumption – was no longer applicable.

Slide 5 – Residential Water Consumption, Source: MassDEP based on Shrewsbury Reporting

Year   Population   Water Use (MGY)      Avg Gallons
2008       33,622            747.168              60.9
2009       33,533            717.486              58.6
2010       35,608            716.112              55.1
2011       35,608             695.028             53.5
2012       35,608            695.866             53.5
2013       35,608            790.815 E           60.8 E – overstated
2014       35,608            791.308 E           60.9 E – overstated

Comment: The 2013 and 2014 numbers are substantially overstated, as confirmed by the Town Manager.

Slide 6

Slide6

Comment: The Town Manager’s water reports for both FY2014 and FY2015 showed that residential water consumption was well below the state’s 65 gallon limit. 

Slide 7 – Excerpts from Town Manager’s April 7, 2016 Letter

1) “I have reviewed the ASR’s for the period of 2011 to 2015”

2) “I find that your analysis is substantially correct”

3) “The good news is that the Town’s RGPCD should end up in the 53-56 gallon range well below the 65 gallon limit”

Thus the larger residential rate increases in 2012 and 2015 were not needed in order to meet the 65 gallon limit.

But the selectmen still have not publicly admitted that the recent rate increases were based on erroneous reporting. (a)

Comment: The ASR’s are Annual Statistical Reports on the town’s water system to MassDEP. Admitting that my analysis is substantially correct means that the ASR’s for 2013 and 2014 were seriously in error with regard to average residential consumption. The selectmen failed in their responsibility to ensure accurate reporting.

Slide 8

Slide8

Comment: Average residential consumption was well below the state limit of 65 gallons from 2010 on, so after 2010 there was no justification for increasing residential rates faster than commercial rates.

Slide 9 – Current Water Rate Break Points

Slide9a

Comment: This graph shows that incremental rates for residential are currently higher than commercial at all consumption levels above 5,000 gallons.

Slide 10 – The Massachusetts Water Conservation Standards, June 2012

“The price difference between blocks (consumption levels) and the number of gallons included in each block are very important in influencing the customer‘s use behavior. If the difference in cost between blocks is too small, or the number of gallons included in each block is too large, it will not provide the incentive to conserve at the higher block rate.”

This comment about encouraging water conservation applies to both residential and commercial users.

Slide 11 – Current Commercial Water Rates

Rate Tier (Gal)        Commercial Rate

0 – 5,000 (Base)      $40.00/Thousand

5,001 – 25,000        $3.30/Thousand

Over 25,000            $4.30/Thousand

Comment: The current commercial water rate schedule does not satisfy the two concepts of the Water Conservation Standards described in Slide 10, so it does not provide more incentive for larger commercial users to conserve water.

Slide 12

Slide12

Comment: This chart shows 1) how cheap commercial consumption per thousand above 5,000 gallons is; and 2) the high cost per thousand for residential users below 5,000 gallons.

Slide 13

Slide13

Comments: The selectmen have not explained: 1) Why almost all other towns charge the same rates for residential as commercial and still meet their water use restrictions, but Shrewsbury cannot. 2) Why  Shrewsbury’s top residential water rate must be so much higher than these other towns. 3) Why Shrewsbury’s top commercial rate must be so much lower than these other towns

Slide 14

Slide14

Comment: A tiny number of commercial users consume a very large percentage of total commercial consumption, but they pay no more than $4.30 per Thousand no matter how much more water they consume. Meanwhile residential consumption above only 25,000 gallons costs $6.90 per Thousand, and $14.00 per Thousand above 60,000 gallons.

Slide 15

Slide15

Comment: This slide compares water consumption by the top commercial users to total consumption of all commercial, residential, and condominium users. The results are startling. The 464 commercial bills for consumption over 50,000 gallons were just 1% of all the bills in these three categories, but they consumed 15% of the total, yet their top rate is now only $4.30.

Slide 16 – Responses to Finance Committee Hearing Comments

1) None of the Town Manager’s charts and exhibits contradicted my charts and exhibits.

2) His fear that the selectmen’s ability to obtain bonds for water projects will be impeded is unwarranted.*

3) A selectperson claimed that this article would create a separation of powers problem. Not true. State law says that Town Meeting can regulate in this area.

Slide 17 – Responses to Finance Committee Hearing Comments

4) The Town Manager said that setting water rates was a policy question, and policy questions are solely for the selectmen to decide. Again, not true. Town Meeting can decide policy questions in other areas, and state law allows Town Meeting to be involved in water rates.

5) The Town Manager’s memos and presentation focus on average costs per thousand, but promoting more conservation requires one to focus on the incremental cost of the next 1,000 gallons of water consumed.

Slide 18 – Summary – Why this Article?

– Current rates are not just and not equitable, as called for in state law.

– The top commercial rate is too low to encourage more water conservation by larger commercial users.

– Water rates need more public scrutiny.

Therefore, Town Meeting should debate and ratify water rates to ensure that they are equitable and that they promote more conservation by all users.

Please Vote FOR this article.

John Lukach, June 3, 2016