Oak Bluffs business owners question wastewater department policies

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The Oak Bluffs wastewater treatment plant serves 200 commercial accounts, 483 residential accounts, and 15 municipal accounts—a total of 698 active accounts. — Photo by Michael Cummo

Updated 6:20 pm, Friday

At a recent meeting of the Oak Bluffs Wastewater Commission on October 15, members of the Oak Bluffs Association (OBA), several of them among the town’s largest users, expressed their unhappiness with the current rate structure. They also charged that the town had, over a six-year period, mistakenly drawn over $650,000 from the wastewater enterprise fund, money that should have been used to defray system costs, and as a result the largest users paid more than their fair share.

A closer examination of their complaints revealed that several years ago the confluence of dire financial times and the untimely death of town treasurer Paul Manzi contributed to an accounting oversight, in which a one time emergency transfer from the wastewater enterprise fund repeated for an additional four years.

A look across the state reveals that Oak Bluffs has one  of the highest sewage rates in Massachusetts. As the town considers additional sewering to address the rapidly declining health of water bodies, business owners who contend they’ve already shouldered an inordinate amount of the town sewering costs want to see changes in the department’s operation and rate structure.

Punitive rates
Oak Bluffs wastewater customers are billed on an ascending scale, meaning the price per gallon goes up as usage increases. OBA board director Terry McCarthy said the ascending scale places an undue burden on the larger businesses, especially restaurants and hotels, that already contribute considerable excise tax revenue to town coffers. “From a big user’s point of view, the ascending scale is punitive,” Mr. McCarthy, a former state representative who has harborside commercial interests, told The Times. “They say it’s to make people conserve, but I think that argument is a little specious. With a flat rate, you pay more if you use more, so that incentive is still there. This is particularly hard on restaurants and hotels. If you run a large hotel, what do you do? Make people take shorter showers?”

“The ascending rate structure is endorsed by Department of Environmental Protection because it encourages people to save water,” wastewater commissioner and selectman Gail Barmakian told The Times.  “Some very big users have saved considerable amounts of water, and saved themselves a lot of money, so it does work. Also, you have to consider that being hooked up to wastewater has allowed some businesses to expand and become more profitable. That’s a service to the town as well, but it gives them an advantage.”
About one third of Massachusetts communities bill on an ascending scale, according to the 2012 Tighe and Bond Massachusetts sewer rate survey.

Oak Bluffs property owners are charged a penny a gallon for the first 40,000 gallons used per annum and the rate goes up in 40,000 gallon increments until it tops out at 2.8 cents a gallon for 360,001 gallons and above. There is no difference between commercial and residential rates. Usage rates have not increased since the system went into operation on April 1, 2002.

According to the Tighe and Bond survey, the average yearly charge for sewage in Oak Bluffs was $1,020. The state average was $646. Only 12 percent of communities in the survey averaged $1,000 or more per year. Comparatively, the Edgartown annual average was $520, according to the survey. Tisbury, was not listed in the survey, but according to the town website, the department of public works charges a flat fee of 3.1 cents per gallon.

Sludge is costly
Lisa Merritt, an Oak Bluffs wastewater department administrator and lab technician who’s been with the department since its inception, told The Times there are many reasons why Oak Bluffs sewage rates rank among the highest in the state. “We have to ship our sludge off Island, which costs over $80,000 a year,” she said. “We run a sequencing batch reactor plant (SBR), which is expensive because it requires over 300 grinder pumps, working 24/7, and they need maintenance 24/7. An SBR plant has the smallest footprint and it’s the cheapest to build, but it’s also the least cost-effective in the long run.  Another reason is our effluent — the treated water — is pumped under Ocean Park, which is extremely expensive. Edgartown uses open pits.”

Burdensome betterments
In addition to usage fees, Oak Bluffs wastewater customers pay betterment fees, which cover the actual cost of installing the sewering and thereby “bettering” their property. Betterment fees were initially $10,000 for residences and $20,000 for businesses. In 2007, betterment fees were recalculated based on usage, again hitting the biggest users the hardest.

According to Peter Martell, owner of the 95-room Wesley Hotel, the largest hotel in Oak Bluffs, his betterment fee increased 1000 percent. “The original price for betterments was $10,000 for a residence and $20,000 for a business,” Mr. Martell told The Times. “The state didn’t like that formula for some reason. So my betterment bill went from $20,000 to $200,000 in one year.”

Ms. Merritt said the initial betterment fees were always noted as temporary. “You cannot give a final betterment figure until all of the final bills are tallied when a new wastewater system or any large project is complete,” she wrote in an email to The Times. “It was explained to everyone that the [initial] estimates had been recalculated using water usage and included the final numbers for the completion of building the new wastewater treatment plant. In the case of the Wesley Hotel, the betterment was $168,675.69,” Ms. Merritt wrote. “The new betterment figure started the 20-year repayment period over again in 2007, subtracting what was paid between 2002 and 2007 with a repayment interest rate of 2 percent.”

Room to flow
According to Mr. McCarthy, who was a member of the first Oak Bluffs wastewater committee, it was assumed the treatment plant would need to expand its footprint for additional sewering around the ponds, the harbor, and other critical areas. As a result, they purchased a five-acre lot directly across Pennsylvania Ave., known as the Leonardo property. But when it came time to make the payment in FY 2009, the town was broke.

“When the first year principal was due, [town administrator] Michael Dutton and [town treasurer] Paul Manzi went to wastewater begging us to help pay just this one time,” Mr. McCarthy said.

According to the minutes from the March 12, 2008 water commissioners meeting, “Paul Manzi also requested that the Wastewater Department pay the Leonardo property loan payment this year and for one year only because the Town is in a budget shortfall. The loan payment is approximately $136,000.”

At town meeting in April 2008 (FY 2009), the town approved an article to pay for the Leonardo property. “This year only, the wastewater department will be paying for the principal and interest for the purchase of the Leonardo property,” voters were told in the executive summary.

“We were told this was a one time deal to get the town out of a tight spot,” Mr. McCarthy said. “But subsequent to that in [FY] 2010, 2011, 2013 and 2014, the payments continued and nobody was ever told. Never once did anybody, from the finance committee or the selectmen go to the wastewater commission and say, ‘By the way, we’re going to just tap these payments out of your account.’

“Since the money is controlled by the town, even though it’s our fund, it’s very frustrating. There was a total of $794,871 taken out of our account, of which only $136,500 was actually authorized by wastewater commissioners. Somebody made the decision to quietly and covertly make these payments in subsequent years, but no one was told these amounts were being appropriated from the Wastewater Retained Earnings Fund.”

After investigating Mr. McCarthy’s claims, town accountant Arthur Gallagher told The Times that Mr. McCarthy was essentially correct, except that the town, not the wastewater commission, covered the $117,125 mortgage payment in FY 2014.

Mr. Gallagher, who became town accountant in March 2012, said he could only speculate on why the wastewater enterprise fund was repeatedly tapped for the Leonardo property purchase. “What I think occurred is with the death of Mr. Manzi, no one in the Town’s administration knew the terms of the agreement and therefore continued to charge wastewater 100 percent of the pay down,” he wrote to The Times. “Additionally, the consultants hired to fill this void would not be charged with changing and or setting new policies. Not being present during [that] period, this is all supposition on my part.”

Mr. Gallagher said the town will pay off the rest of the loan. “Typically these payments would be split 50-50 with the town,” he said. “Wastewater made the paid first five payments and we’re paying the last five that will be reduced in budget moving forward.”

Water under the bridge
“We’re not pointing a finger at anyone,” OBA vice president Renee Balter said. “We discovered this problem and think it should be given some thought.” Ms. Balter also said that future town meeting appropriation articles should close the loophole that says, “or to take from any other source.”

Some business owners would like to see reduced rates to make up for the yeoman’s share they’ve paid over the years. “If they’ve been taking $100,000 plus every year it stands to reason they could give a reduced rate, or increased flow, to the high gallonage people,” Mr. McCarthy said.

Mr. Martell concurred. “The bottom line is our fees should be dropped,” he said. “I give them the benefit of the doubt, they can’t drop it much. The only way to do that is to expand the system, and the town needs to do that to save the ponds. Hopefully it’s not too late.”

Mr. McCarthy said that the current town sewering and treatment plant are greatly diminished versions of what he and some of the original wastewater commission advocated. “There was a contingent, which I was a part of, that wanted to sewer most of the town, and there was a strong contingent that wanted to kill the whole thing, because they thought sewering would encourage development and ruin the environment,” he said. “Now we’re trying to figure out ways to sewer areas near the Lagoon, Sunset Lake, Crystal Lake, and Sengekontacket, and we’re going to pay a helluva lot more for it than we would have back then. That’s water under the bridge. Moving forward we have to work with commissioners and selectmen to develop a long-range plan to increase treatment capacity, and we have to act quickly.”

Correction: A reference to the Edgartown wastewater plant in an earlier version of this story mischaracterized some of that plant’s operations and accounting systems. There is no additional drain charge. Bills are calculated by the current charge of $68 per drain. The Edgartown system is not almost entirely a gravity collection system. In fact, of the 1,100 accounts there are more than 400 grinder pumps. Edgartown did not avoid sludge shipping costs and spent $110,000 to ship and dispose of 675 tons of sludge off-Island in FY14. Lastly, while a filter press reduces transport costs, the processing and disposal of septic tank waste and the sludge generated from it are operating costs for the facility ($65,000 in FY14). Revenue from septic haulers does not go into the facility’s operating budget, but is returned to the town’s general fund.