Needed: Fair Water Rates for Residential Customers

Shrewsbury Residents:

At the September 26th Special Town Meeting, during the debate and discussion on Article 1 regarding water rates, the Town Manager presented a slide claiming that the result of a return to equal water rate structures for residential and commercial customers must be an increase in residential and condominium water bills totaling $526,819 (a). This claim is completely false. In his desperation to try to discredit Article 1 and defend the selectmen’s water rate decisions, Mr. Morgado misled Town Meeting and town residents with this slide. His slides have now been posted at https://shrewsburyma.gov/DocumentCenter/Home/View/2441, but they do not provide details on how he calculated this increase.

There are in fact many equal rate structure scenarios that would decrease residential water bills without decreasing total water revenues. Here is just one example.

An Equal Rate Structure Scenario (analysis excludes condominium accounts)
                             Residential Commercial
Base Charge               $24.00 $24.00
5,001 – 25,000             $3.50   $3.50
25,001 – 60,000 *        $6.00   $6.00
Over 60,000 *              $8.00   $8.00

* commercial rate cutoff is at 50,000

Applying these rates to the FY2016 water bills and consumption levels reported in Mr. Morgado’s Water Rates memo dated September 9, 2016, the resulting changes in total Billed Value would be:

Residential:                A Decrease     ($139,829)

Commercial:                An increase      $326,274

Total Change               An increase      $186,445

(The detailed calculations will be provided on request)

In other words, total residential water bills would decrease while total water revenues would actually increase.

Mr. Morgado’s slide was also misleading in that it implied that I wanted equal water rate structures. What I have repeatedly said is that residential and commercial rate structures should be made more equitable, in keeping with the plain language of state law. There are many, more equitable rate structures that would reduce total residential water bills without reducing total water revenues. Here is one.

A More Equitable Rate Structure Scenario (analysis excludes condominium accounts)
                            Residential Commercial
Base Charge               $20.00 $32.00
5,001 – 25,000             $3.70 $3.30
25,001 – 60,000 *        $6.50 $4.80
Over 60,000 *            $14.00 $6.40

Applying these rates to the FY2016 water bills and consumption levels reported in Mr. Morgado’s Water Rates Memo, the resulting changes in total Billed Value would be:

Residential                 A Decrease     ($173,441)

Commercial:                An increase      $178,524

Total Change               An increase      $    5,083

(The detailed calculations will be provided on request)

This rate structure would result in significantly lower water bills for residential and commercial consumers of 25,000 gallons or less. Offsetting these reductions would be increases for commercial consumers of over 50,000 gallons; however, their top rate of $6.40 per 1,000 would still be less than half the top residential rate of $14.00 per 1,000. Further, this higher top rate of $6.40 is consistent with the state recommendation that towns should use an increasing block rate structure in order to encourage conservation.

Both of these rate scenarios are more equitable than the current rate structure, and there are others that are also more equitable. Note that I sent this information to the selectmen in a letter dated November 4th (b), and also to Town Meeting members. Since the selectmen have refused even to consider more equitable rate structures that would benefit residential customers, it is the obligation of Town Meeting to become involved in setting water rates.

The facts are clear. I hope that Town Meeting members and town residents will let the selectmen know that more equitable water rate structures can and should be enacted.

Thank you.

John Lukach      Posted: November 14, 2016

 

(a) None of Mr. Morgado’s arguments at the Special Town Meeting refuted the major points in my Article 1 presentation at the Special Town Meeting. My presentation arguments can be viewed on this website.

(b) This letter is listed in the Communications section of the agenda for the selectmen’s November 15th meeting.