Counsel questions water department practices

By Janet Hefler - July 27, 2006

The Tisbury Water Works, which has operated independently in negotiating contracts, administering its own payroll, and retaining profits, is a department of the town and should be subject to its oversight, according to a legal opinion provided to the Tisbury selectmen from town counsel Michele E. Randazzo of Kopelman and Paige in Boston.

Attorney Randazzo recently sent an eight-page letter outlining her legal opinion in response to questions from the selectmen regarding whether the water department is an independent entity or a town department. The selectmen also asked her to comment on what level of reporting responsibility the board of water commissioners has to them and the town in general.

Ms. Randazzo pointed to several practices as appearing to be "in contravention of state law," such as the water department maintaining a separate bank account, administering a separate payroll system, hiring its own legal counsel and financial auditor, and investing funds in interest-bearing accounts.

"We're not doing anything different that has not been done in the last 50 or 60 years," said David Schwab, chairman of the Tisbury Water Commissioners, in response to Ms. Randazzo's letter. Moreover, he said, the water commissioners have kept the rates low and accomplished new projects several years running in a system that is 100-plus years old.

"There is no way in retrospect that the water commissioners could get to the position they are in right now, without the blessing of the selectmen, the town accountant, and the town treasurer," Mr. Schwab said.

Both the water commissioners and Tisbury selectmen were caught off-guard by Ms. Randazzo's letter, which town administrator John Bugbee released to the Vineyard Gazette on Tuesday, July 11 before they had read it.

"If you're asking for a legal opinion, it might be nice for the board to digest it first," said selectmen chairman Tristan Israel a week after the letter was released and prior to any discussion by the board. "I wish it had not gotten out there before we had a chance to look at the information."

Mr. Schwab said a Vineyard Gazette reporter called him for a response to Ms. Randazzo's letter a day before he received a copy of it from Mr. Bugbee.

To support her opinion about the extent of the water department's autonomy, Ms. Randazzo referred back to Chapter 394 of the Acts and Resolves of 1905, when the state legislature authorized the creation of the Tisbury water supply system. "The language of Chapter 394 certainly gives the water commissioners significant, although not unfettered, authority," Ms. Randazzo wrote.

The selectmen's scrutiny of the water department began last spring when they took notice of the salaries and benefits package the water commissioners awarded through five-year contracts to superintendent Deacon Perrotta and administrator Lois Norton. Overseeing both the Oak Bluffs and Vineyard Haven water systems, the two administrators make over $100,000 - $50,000 from each town - with a more generous benefits package than those given to other town employees.

At that time, Ms. Randazzo reviewed the employment contracts and questioned their validity. In April, Selectman Tristan Israel attempted to amend the water department budget on town meeting floor to reduce Mr. Perrotta's and Ms. Norton's salaries. Voters rejected the amendment.

After Mr. Israel's thwarted effort, the selectmen submitted a public records request in May for the department's meeting minutes and financial audits from the last six years. They provided them to Ms. Randazzo with a request for her legal opinion.

In her recent letter, Ms. Randazzo said the joint contracts required authorization through approval at both the Tisbury town meeting and a district meeting of the Oak Bluffs Water District.

The selectmen also raised concern about $1.57 million in surplus cash documented in the water department's annual audit, conducted separately from the town's. Surplus amounts should be returned to the town's general fund, Ms. Randazzo wrote in her opinion, or the water rates reduced.

Mr. Schwab said that over the years, the water commissioners maintained the surplus towards funding upcoming projects, and in the past had not used as much as they should have, which allowed it to build up.

"The surplus is supposed to be used to lower the water rate or be returned to the town," Mr. Schwab said. "The charter says that - there is no question about it.

"We discussed it, and decided if we turn it back to the town, then we would have to raise rates to fund projects. Then we would have to borrow the money that we already had, and raise the rates to pay the interest on a loan. If we use the surplus, it actually keeps the rates low," he explained.

Ms. Randazzo also wrote that the water commissioners "do not routinely submit the water department budget to the Finance and Advisory Committee [FinCom] prior to town meeting...."

Mr. Schwab said the water commissioners have always submitted a detailed budget report to Tisbury's FinCom, with an explanation for any increases and future plans. However, it is reduced to several line items when it appears on the town budget, he said.

"Most of the things she [Ms. Randazzo] mentions seem to be procedural errors," Mr. Schwab said. "No one has done anything deliberately illegal here."

In taking steps to rectify the issues outlined in her letter, Ms. Randazzo suggested the selectmen contact the Massachusetts Department of Revenue for its opinion or seek town meeting approval for special legislation to define limitations on the authority of the water commissioners.

Mr. Israel said after the selectmen have had time to discuss Ms. Randazzo's letter, "We need to meet with the water commissioners so that we can articulate what our position is. It is my hope we can come out of all this working together to solve these issues, and that would be my preference."

The water commissioners and selectmen are scheduled to meet on Aug.1, at 5 pm.