Will the state uncork new funds in the rebate debate?

By Chet Williamson

For the past 10 years, 22 communities across the Commonwealth had been receiving a credit from the state on their water bills. The rebate was originally provided as a way to offset rising water rates caused by municipalities trying to comply with the Federal Safe Drinking Water Act. As of Jan. 31, those funds have been shut off.

In 1998, the state began allocating the grant money to those cities and towns that were upgrading their district water treatment facilities. In this program, Worcester had been receiving $635,000 a year.

"The city of Worcester built a filtration plant that went on line in 1997," says Philip Guerin, the city's director of environmental systems. "We have been receiving a grant from the state to offset the cost of that construction."

With the grant about to end, water departments across the state began discussing with legislators the financial impact consumers could expect as a result of the loss in funds. Other communities, like Worcester, wondered if the rebate program could be extended.

During the process, it was discovered that there were inequities in the way the money was distributed. In an initiative led by Aquarion Water Company in the Hingham/Hull District, a petition was filed with the state to address the issue.

In a commentary that appeared in The Hingham Journal, Larry Bingaman, senior vice president of Aquarion, stated that after working with state Sen. Robert Hedlund (R-Plymouth) and state Rep. Garrett Bradley (D-Plymouth), it was revealed that the State Drinking Water Program provides a greater amount of assistance to communities now than the original grants received by the 22 water districts. He pointed out that the reason was because the cost of interest on debt to finance a water project was included as an eligible cost.

"Subsequent to our getting [the grant], the program changed to a low-cost loan program," Bingaman explains. "When they did that, the state allowed interest on debt to be included as an eligible cost for a project. We were not allowed interest on the debt."

In June of 2007, Sen. Hedlund and Rep. Bradley filed Senate Bill 508, An Act Relative to Drinking Water Revolving Fund Equity, to address the imbalance. Bingaman says it could be done by extending the grant to account for the allowed interest paid on debt to finance a water facility in the original 22 water districts.

"Each of these town's residents receives a rebate in the form of reduced water, tax or sewer rates to offset the cost of a water project," Bingaman says.

In Worcester, Guerin says, the new program was more of a loan program, "but in effect, it worked out better for [the other] communities because I think debt service payments could be tied into the program, which we weren't allowed to do. Usually grants are better than loans because loans you have to pay back. In this case systems that got the loans got a greater benefit financially in the long run."

Though not her bill, state Sen. Harriette Chandler is well aware of the proposed legislation.

"There are only two sections to it," Chandler says. "It provides for a greater number — in terms of eligible costs. Second, it provides twice as much money than originally planned in the Acts of 1998. So instead of providing for $80 million, it provides for $160 million and it will go until the money runs out."

The first hearing on the bill was held on June 25, 2007, before the state Legislature's Joint Committee on Natural Resources, Environment & Agriculture.

"The bill was reported favorably by the committee on Oct. 22 and referred to the Committee of Ways and Means at that time," Chandler says. "[State] Sen. Edward Augustus signed on the bill. He has some better knowledge of why the bill has sat in Ways and Means since October — especially on a bill that is about to expire for the original legislation."

When contacted for comment, Sen. Augustus office issued a statement saying, "The senator remains supportive of the efforts to keep water bills of his constituents in Worcester and Auburn down and retain the rebates that have been received for the past 10 years."

Scott Jordan, executive director of the Massachusetts Water Pollution Abatement Trust, has determined the most equitable amount of continuing grant money for the 22 communities. If SB 508 should pass, he estimates that Worcester would receive $635,167 annually for the next 10 years. The FYO7 cost was $7,852,853. The total annual cost for continuing the grant is estimated to be $7,494,674.

Bingaman says, "The bill would correct the inequity for residents of the affected towns so they receive the same benefit as those whose town received Drinking Water Funding that included interest costs. And, it eases the cost burden of water projects that have been brought on line to comply with regulations."

Guerin says, "So this bill would extend the grant payments that we have been receiving. In doing so it creates equity between what we will get and what systems were approved after we were, in terms of loans." o