Facts about MWRA's FY2010 Rates and Budget
Massachusetts Water Resources Authority

OVERVIEW

On Wednesday, June 24, MWRA's Board of Directors voted to approve the FY 2010 Current Expense Budget ("CEB") and community water and sewer assessments.

The MWRA’s Proposed Current Expense Budget for FY2010 is $596.3 million, representing an average combined water and sewer rate increase of 3.8%. The MWRA's operating expenses have been level funded from FY09, with over half of the budget cuts coming from personnel line items.

CHANGE FROM PROPOSED FY 2010 BUDGET

Based on recommendations from the Board of Directors and Advisory Board at the June 3 Budget Hearing and recognizing the extreme hardships facing our member communities, MWRA worked diligently to identify additional budget cuts to lower the proposed rate increase from 4.8% to 3.9%. The challenge of lowering the rate was even greater given the recent elimination of an $867,000 subsidy from the Commonwealth for wastewater chemicals.

The Legislature has included $500,000 in statewide Debt Service Assistance (DSA) in the conference budget which, if approved, will provide approximately $350,000 in rate relief to MWRA communities. This Debt Service Assistance (DSA) enabled the MWRA to further reduce the Rate Revenue Requirement to 3.8% for FY10.

WHAT DRIVES MWRA'S RATES

The biggest driver of MWRA's budget is debt service (the share of its budget that is devoted to principal and interest payments) on the bonds that financed major capital improvement projects [Figure 1].

Debt service represents 58.2% of MWRA’s total budget.

FIGURE 1 MWRA has completed $6.8 billion worth of upgrades to its water and sewer systems since 1985. larger image

FIGURE 2 Staffing has been reduced by over 530 positions since FY97. larger image

FIGURE 3 The Proposed FY10 budget includes a 10% cut in overtime across the agency. larger image

Most of the projects funded through debt service were mandated by the federal court or state regulators, such as the successful Boston Harbor Clean-up and modernization of the drinking water system.

CUTTING OPERATING COSTS

MWRA must continue to find ways to keep costs down and to ensure that every dollar spent provides real public health or environmental benefits. In response to financial uncertainties facing the agency and its customer communities, MWRA staff have reviewed every direct expense line item and made aggressive reductions to achieve level funding of direct expenses at $214.5 million.

Staffing Reductions:

• The Proposed FY10 budget recommends a reduction of 30 positions from the FY09 funding level [Figure 2].
• A modified hiring freeze was instituted in FY09. The freeze will continue through FY10. Note that since its peak staffing level in 1997, MWRA has reduced staffing by over 530 positions.
• The Proposed FY10 budget includes a pay freeze for the agency’s non-union managers, resulting in a savings of $227,000.
• The Proposed FY10 budget includes a 10% reduction in overtime spending across the agency [Figure 3].

Reduced Energy Consumption and Continued Renewable Energy Initiatives:

• MWRA has made a major commitment to reduce energy consumption at its facilities in an effort to reduce both operating costs and environmental impacts. MWRA has recently performed energy audits at the Deer Island Treatment Plant, the Carroll Treatment Plant and the Chelsea facility. Audits are planned at other facilities in FY10.
• New initiatives such as solar panels at Deer Island, along with the audits, have provided annual savings of about $730,000. New renewable energy projects like wind turbines at Deer Island will generate even more savings.

REDUCING THE BURDEN OF DEBT SERVICE

• A recent budget cutting exercise, combined with some favorable trends in certain major accounts, has created a $20 million surplus.
• MWRA will use those funds to defease debt service payments due in FY10 and FY11.

BUDGET IMPACTS BEYOND MWRA'S CONTROL

There is a certain level of risk involved in reducing the budget for items over which MWRA has no control, such as:

• changes to public health and environmental requirements
• fuel and electricity costs
• overtime and chemical costs, are directly affected by the weather.

NO CUTS IN SERVICES

MWRA will cut budget items as much possible, but not at the expense of public safety or the reliability of critical water and sewer services.

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Updated June 26, 2009