City Leaders Scratching Their Heads on Drop in Water Sales

There seems to be no end to the secondary effects of the COVID-19 virus, and now City officials are at a loss to figure out why water sales for home and commercial ratepayers are down.

The MWRA has taken steps to reduce rates this month to help cities and towns handle this year’s coming budget complications, and that will be helpful as Everett copes with having lost revenue due to lost water sales.

Water sales for Everett through May 8 were down 1.1 percent, something that was unexpected as people stayed home from work in greater numbers than before. The same was true for Boston, which was down an astounding 13.7 percent. Losses in Boston and large cities like Everett could skew rates in the coming year.

“The question becomes is this a long-term thing or will it settle down and even out,” said Fred Laskey, MWRA Director. “We will want to know if there is a permanent change in the water usage. If Boston and other large communities are down, then it could result in an increase for suburban communities. It’s too early to push the panic button. We are looking at it, as are other communities.”

Everett CFO Eric Demas said they will be watching usage to see if it continues to decline, as other nearby communities like Revere (down 3.6 percent) have also declined.

“I was a little surprised with water usage being down given everyone is home,” he said. “It doesn’t correlate. We want to make sure we understand why…We’re still trying to monitor our usage locally. We are analyzing the data.”

The water and sewer system in most cities, like Everett, is fully funded by ratepayers. If less water is sold, but costs on improvements continue to go up, it could mean a rise in water bills. For Boston, one of the key potential reductions comes due to the slowdown of Logan Airport, which uses a lot of water. In that same vein, Demas said it’s possible the closure of Encore could be part of the reduction, as well as some industries locally.

Meanwhile, on May 6, the MWRA Board voted to reduce base rates to cities and towns significantly. MWRA proposed a 3.6 percent increase in February, but with reductions to its operating budget and capital financing, the rate increase, which goes into effect July 1, was lowered to 1 percent. These cuts will not result in any loss of service, and amount to $29 million in reductions through the MWRA membership communities.

“We’re in uncharted waters,” said Laskey. “The finances are up in the air. They’re talking about a state shortfall in funding and local challenges will be apparent too. We thought it was the appropriate time to do this. The thing is we did this early. We usually don’t set water rates until the end of June. These communities wanted to know and we did it early so they could plan.”

In addition, the MWRA agreed to potentially defer over $71 million in community loan payments. That stipulation – which will help communities with cash flow problems – allows them to defer payments on any Local Water Pipeline and Infiltration/Inflow loans with repayments due to MWRA in FY2020, FY2021 and FY2022.

Demas said the rate reduction will be a major help for the City and for ratepayers, though he doubted they would utilize the loan deferrals.

“The rate reduction is certainly going to help,” he said. “We are taking a look at the potential loan modifications payments to help with cash flow…We’re going to have to pay the loans back anyway. They are not forgiving them. It’s just re-adjusting for cash flow. There are a lot of municipalities looking to take advantage of that program, but not everybody is…On the rates, we’re always one of the lowest rates for all MWRA communities. We expect that will continue and won’t change. Ultimately, every tool helps. The MWRA actions are just another tool that allows us to ease the burden.”

The MWRA also received an allocation this month from the state to help debt service, which is typically used to pay off the Boston Harbor cleanup costs. This year the $891,535 will be directed to communities to help reduce assessments further.

Everett’s share of that funding came out to $16,681.

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