By MAUREEN DOHERTY
NORTH READING — The Select Board accepted both a 6% increase in the FY24 water rates for bills issued after July 1, 2023 and approved the FY24 water system capital improvement plan Monday night.
Water Superintendent Matt Prince made his first presentation to the board at the annual public hearing since being appointed to the role following the retirement of Mark Clark earlier this year. The Water Commissioners joined the Select Board for these annual hearings.
The 6% increase across the town’s three water rate tiers will result in nominal increases in water bills, which are billed quarterly in August, November, February and May. No increase was made to the administrative fee which is $5 per bill.
“To cover the budget increase, pay debt services and to keep up with Andover’s rate increase the recommendation is to increase water rates 6% across all three tiers. With this increase and a moderate year for water use, we also project to use $240,000 from the Stabilization Fund to offset a further rate increase,” Prince stated.
For Tier 1 users – up to 10,000 gallons per quarter – the fee will increase by 60 cents per 1,000 gallons to $10.61 (up from $10.01).
For Tier 2 users – from 10,000 gallons to 22,500 gallons per quarter – the fee will increase by 88 cents per 1,000 gallons to $15.56 (up from $14.68).
For Tier 3 users – usage above 22,500 gallons per quarter – the fee will increase by $1.20 per 1,000 gallons to $21.22 (up from $20.02).
Prince provided a cost impact analysis of these water rate increases across the three tiers to compare FY23 bills with FY24 bills. In the first of the four examples given, a low volume user whose annual water usage totaled 20,273 gallons would see an annual increase in their water bill of $12.16 (from $202.93 to $215.10).
A household or business classified as a “medium volume” user totaling 42,261 gallons annually would pay an additional $26.31 for the same volume of water ($438.96 in FY23 vs. $465.27 in FY24.
For a “moderate” usage customer with an annual water consumption of 98,312 gallons, a 6% rate increase means this customer would pay an additional $83.62 annually ($1,395 in FY23 vs. $1,478.62 in FY24).
In the last example provided by Prince, a customer with high seasonal usage – someone whose summer water usage spikes to 162,428 gallons due to lawn watering and filling a pool, for example, but who was a moderate user the rest of the year averaging between 17,000-19,000 gallons per quarter for an annual consumption of 216,945 gallons would see an increase of $224.49 on the annual bill ($3,745.17 in FY23 vs. $3,969.66 in FY24).
There are two main factors that have led to the 6% fee increase this year and a recommendation for a 6% increase each year through 2030. The first factor is a desire to stay ahead of an anticipated spike in Andover’s water rates in 2028. That year will mark the 10-year anniversary of the 99-year lease agreement between the two towns and the expiration of the present capped annual water rate increase of 2.5% for all North Reading water consumers. Starting in year 11 of the 99-year lease, the town’s water rate with Andover will be capped at 95% of that town’s Tier 1 rate (North Reading consumers will pay a rate 5% cheaper than Tier 1 Andover cusumers will be paying for their water).
If the North Reading Water Dept. simply matched the 2.5% increase each year from now through FY27, the town would be hit with a 38.5% increase in its water rate in FY28, followed by an estimated 5% in FY29 and 2% in FY30, according to Prince. Therefore, by keeping the increase at 6% across the board now through FY2030 households and businesses can better plan their budgets.
Additionally, Prince reported to the board that Andover is presently seeking rate increases for its own customers over the next several years to fund its own capital improvement needs. For FY24, Andover is seeking a 9% rate increase and is projecting an 8% increase in FY25, 6% increases in both FY26 and FY27 and 5% increases in both FY28 and FY29. While these increases will not affect North Reading’s capped annual increases of 2.5% prior to year 11 in the lease, the net result will be higher rates for users in both towns once the cap sunsets.
“That is projected to be an increase of 53% from what we are currently paying. Based off of that information there will be a need raise rates over the next several years to “catch up” with what Andover is doing to their rates,” Prince stated.
MassDEP Drought Management changes
Also looming large on water rates for all consumers statewide is the plan by the Massachusetts Department of Environmental Protection (MassDEP) to force all cities and towns to abide by one set of drought management measures.
According to Prince, starting on April 8, 2025, MassDEP will enforce four drought level requirements as follows: Level 0 being no restrictions; Level 1 being one day a week watering; Level 2 being no lawn watering; and Level 3 being all nonessential outdoor water use is banned.
“With enforcing these management measures we can see our revenues drop upwards of $1,000,000,” Prince estimated.
“The water rates were increased at the start of FY23 by 5% over the FY22 rates. The current water rates – based on a year of ‘average’ water demand – are sufficient to generate approximately $4,820,000. In order to fully cover the FY24 budget of $5,237,298, a water rate increase of nearly 10% across the three tiers would be needed,” he explained.
“Focusing on the Operating Budget, there is an increase of 3% when compared to FY23. It has been standard practice to look to the revenues generated by water rates and fees to cover any increase in the operating costs of the Water Enterprise.”
“Last year we looked to draw $532,632 from the stabilization fund to offset the need for a large increase in rates. Fortunately in FY23 we were able to bill for over our ‘average year’ and will have some retained earnings. This year we are projecting the same as we did last year at this time, based off an average year of water use we would need approximately $235,000 and a 5% rate increase to meet budget needs in FY24,” Prince stated.
“The Water Department currently has a total of $3,100,735 between the Stabilization fund (2,965,919) and the Stickney Well fund ($134,816). The plan for FY23 was to use a portion of the Stabilization Fund to offset the increased cost in debt services. This past year, being a drier year, we sold more water than our forecast and did not need to draw money from the Stabilization Fund.
“Billing is complete for all four quarters of FY23. The total amount of revenues committed for collection was $5,269,772. Using an estimated 93% collection rate, it is anticipated that $5,254,651 will be collected by fiscal year end. With the annual water enterprise revenues collected, previous years’ bills collected, and unexpended appropriations, it is estimated that $400,000 in retained earnings will be generated,” he concluded.