ORDER-2016-164 : Amending Melrose Revised Ordinances, Chapter 228, Article IV, Section 228-30 (Sewer Rates Established) as set forth herein

Transcript (~29 min @ 1:56:40)

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▶ 1:56:37 Speaker 7: If that's the druthers of the Board of Aldermen, you certainly have the right and perhaps even responsibility to go ahead and do that if you feel strongly that you shouldn't have it and that the law is wrong and not evenly enforced to go ahead and do that. There's a cost to the people of Melrose to do that, and you'd have to talk to a city solicitor about you know the chances of winning something like that and the

▶ 1:57:05 Monica C. Medeiros: propriety of going ahead and doing it no I asked because when I had reached out to the MWRA and asked them that question they had said that that would would be acceptable so I you know obviously it's somewhat in conflict so I figured I

▶ 1:57:21 Monica C. Medeiros: would follow up on that I was also you know we've had some discussion about cost and I know that you know there was discussion you've mentioned that the previous base rates that we've had have been somewhat arbitrary I mean obviously these are these are fees this is not tax that we're doing and we have to make sure that we're not overcharging anybody you know we're charging them for the service that we're providing so you know with that in mind have we in could you perhaps break down what the cost is you know I know you said about a dollar and about two dollars but but maybe more specifically what the cost is per cubic unit you know to deliver the services the fixed rate cost so we at least have some kind of you know understanding of what that is I think that would be helpful to us and you know in in your opinion you know is there really a significant difference in the cost to deliver water to some of these more higher volume users I mean in the past the idea was if if there was a higher larger meter size that there was more strain on the system is that really true and and if so it you know how much is that and yeah it's a great question um

▶ 1:58:46 Speaker 7: and I'm probably gonna give you an answer that's not gonna satisfy you in terms of really answering your question because it's difficult to answer it in

▶ 1:58:59 Speaker 7: In terms of somebody that uses 10 times as much as a single family home, there's probably not as much in terms of piping to get it there. There's bigger pipes to get it there as there is for an individual home versus the business, let's say, that's 10 times as much. But the other factor is fire protection, which is a huge factor in this. the insurance agencies say you need 500 gallons a minute. A small commercial area, 1,000 gallons a minute. A large apartment, it's probably 2,000 or 2,500 gallons a minute. A big warehouse, 3,500 gallons a minute. And it's generally the larger users, the larger structures that have the higher water use, generally. Not always the case. And they have a higher fire protection demand. Fire protection is an extraordinary portion of the costs of your local costs, put aside the MWRA, but the local costs of the pipes in the ground. Instead of eight-inch pipes, you'd have four-inch pipes if you weren't doing fire protection. Instead of pumps that would do 200 gallons a minute, it might be 100 gallons a minute if you didn't have fire protection. So fire protection is a large chunk of the costs. And up until, oh, maybe 30, 40 years ago, there used to be fire protection charges where the water department would charge the municipality for fire protection, it'd be recovered through property taxes. The idea being property taxes were a reflection of the value of your property that was being protected from fire. So in that sense, yeah, there's certainly a lot more costs to provide water to those larger structures because of the fire protection cost element of it. The meters cost more and may cost more to maintain, but that's really a small portion of the whole thing.

▶ 2:00:51 Monica C. Medeiros: okay and um a lot of the bigger buildings are mandated to have sprinkler systems also so this must sort of mitigate in some ways that probably costs more in other ways maybe it mitigates um i also uh one last thing i appreciate the well i want to point out to the to the public that although your i don't think your presentation exactly is those slides were exactly uh in our iqm2 but this technical memorandum uh preliminary rate options which includes i think all the info almost all the information that was on your rate structure is uh we do have and it's on iqm2 available if you look up this order um i think it's under 2016-164 you can for 163 sorry you can

▶ 2:01:43 Peter D. Mortimer: it starts around page one for people at home if they look it up if it's the same as our computer starts around page 125 in the agenda packet and goes to about page 140 and that this is available

▶ 2:01:54 Monica C. Medeiros: for the public and we are going to have a public hearing on the water and sewer rates this coming monday the 16th at 8 p.m may 16th and so you know i just like to ask everybody at home to please you there's a lot of options here for us and I personally would like to have as much input as possible from the public into what options that they you know their concerns and I hope that they can attend and or you know email us or call and and let us know take a look at it and then one last thing is I do appreciate that there are different graphs that show the effects of each of the options they're or towards the end of this memorandum um with each of your proposed options and i was wondering if you if it would be possible to do a graph of this nature i know you've looked at the bills for the past um three years three years yeah uh over three years over three years three and a half years if if you can look at the the you know put something together from what what the effect has been for the these different groups of usage groups over that time period from you know maybe the last five years the last three and a half years and so the rate increases rate structure changes over the

▶ 2:03:18 Monica C. Medeiros: past three years what the impact has been because i think it's important to look at that you know we we've gone to um this you know progressive tiered rate system and we do have you know one group of users right now that is certainly subsidizing another group of users and i think you know we see that in in order to to equalize that rate if we want to it it will cause you know uh an impact on the the lower tiers and you know it's i think it's important to show what's happened to the people in the the higher tier so i would say actually since before the uh implementation of the tiered structure to now what what how that's impacted them that would be

▶ 2:03:58 Peter D. Mortimer: thank you thank you alderman Medeiros next in line we have president khan please thank you

▶ 2:04:05 Speaker 2: so if if i were if i myself were the water sewer rate setting commission um my priorities would be obviously we must recapture the cost affordability that would be my number two

▶ 2:04:23 Speaker 2: And also conservation, I was on the rate setting commission at one point but I'm not anymore, so I don't know what philosophy they were operating under. And my philosophy always tends to be somewhat different than most other people, but that's how I would attack things. I don't know how much of the history of what's going on here you folks know about, But one of the things that we have as a problem here is we've rolled out this tiered rate structure a couple of years ago. We had all kinds of discussions and we've had a very low level of support in terms of being able to technically answer questions relative to issues. And I'm going to tick through issues that have bothered me, but over the last couple of years, our support from experts has not been good in terms of giving any kind of logical rationale for some of the issues that have cropped up I'm heartened by what you folks have done so far. And what I'd like to do is, what we have to do here is we have a significant level of the population in Melrose as this is rolled out. who have lost confidence in the rate setting process. And I think a lot of it has been because of poor communication and responses to some of the questions that they've asked and we have not done a good job answering. The other thing I need to point out, because I don't think anybody else is going to point it out, but the tiered rate structure is subsidizing the people who were in the first rate and if you went to a unitary rate structure and maybe we would or maybe we wouldn't but everybody needs to understand that that subsidy is going to go away and people who are being billed in that tier are going to have a fairly large increase whether we do that or not you know is for discussion but let's let's be open about the the people in the in the first tier are benefiting from that and I believe it's and I haven't reviewed all the stats but I think it's more than 55% of the rate payers are in that first tier did you gentlemen know off the top about 70% of your residential customers fall within the first year under 2000 CF and I I believe it's a little above 50% or right about 50% the entire city as a whole. Yeah, so there's a huge percentage of the rate payers. So we're in the lowest tier, and the lowest tier is benefiting from the tiered rate structure. So I think it's fair that people know and understand that.

▶ 2:07:17 Speaker 2: Our commercial base here is minuscule. I mean, do you see any major impact on the rates if we were to go to some structure that broke out a commercial rate? I think we're 4% commercial.

▶ 2:07:33 Speaker 7: Probably not.

▶ 2:07:43 Speaker 7: We just went through this in another community in central Massachusetts where a large beverage manufacturer obviously had a very high water and sewer bill and complained.

▶ 2:07:55 Speaker 7: The impact on most non-residential users is not that critical. I can get a little long-winded here. When Boston Harbor cleanup started, a lot of bonds had to be issued. Standard & Poor's and Moody's, the two big rating agencies at the time, were very concerned about the impact on commercial users. Is this going to drive commercial business out of the greater Boston area? And did a big study for them at the time, and the result was no. Water and sewer bills are a tiny, tiny portion of almost every business. Now there's certainly exceptions, car wash, laundromat, something like that, beverage manufacturer. Again, it's a big one, though I would say even a beverage manufacturer, the cost of water in a bottle of coca-cola is a hundredth of a penny and it sells for what two bucks or something I mean so the cost of the product is of water and the product is irrelevant frankly out of the whole thing and the impact on commercial users is big in terms of dollars but in terms of total budget for the the business it's not usually a very big expense and as I said earlier you also have the tax advantage of it to the net impact on the commercial ones are user the the the notion um you had said before and i'll respectfully disagree with you on the the notion of the the people in the first block getting subsidized

▶ 2:09:25 Speaker 7: i think it comes to a question of fairness equity uh and again you and i might have a different

▶ 2:09:30 Speaker 2: i understand there's an argument that they're putting less demand on the system than somebody who's in who's in a larger volume user right well it's not even so much that it's what it's being

▶ 2:09:37 Speaker 7: used for if it's being used for uh residential consumption uh cooking cleaning health that type of thing um usually under 2 000 cubic feet in a home it's essential use is that more essential than the water that goes into a bottle of dasani water from coca-cola for example which is more essential is that really a subsidy and again there's not an answer there's not a right answer like that and the answer may very well be yeah it is a subsidy i pay more not using it in a

▶ 2:10:05 Speaker 2: a pejorative sense i know i understand understand what's going on yeah um it but it really gets into

▶ 2:10:09 Speaker 7: a a value of thing of what use of a public resource a public good tap water drinking water is the most valuable use of that resource is residential health and safety a higher value than i don't know making pancakes or bottles of coke or cleaning laundry you know and again that's a a value judgment and everybody's got a different answer to that and I only mention that in response to your saying there's that subsidy that happens automatically out of a tiered system and I mentioned because not everybody would agree that there is a subsidy in fact Connecticut there's a big fight down there just recently about not providing water to a bottling company was making bottled water. That's not an essential use. Why are you taking Connecticut's water, putting it in bottles of water to ship off to somewhere outside of Connecticut? That's not as valuable a use as bar resources feeding people that are thirsty or want to cook. Again, that's a value judgment, and I'm not trying to say which one is more or less, but I'm not advocating that we scrap the

▶ 2:11:20 Speaker 2: tiered system and go back to a unitary rate. We've had some recurring issues that have come up year after year since we started this that haven't really been well dealt with one thing that's been bothersome is an issue of the prorating of the bills and the paying and my understanding is that this is going away in this structure by setting the rate in october we won't ever have to grapple with that again so when we get to it mr chairman i'm going to ask you to uh i'm going to make a motion to ask that my order be placed on file but that's been a problem one thing that i'd like to just see discussed is people have expressed concern to us about the city not not paying for the city water and and i'm not expecting to discuss all this tonight but i'm just kind of going through my laundry list of of grievances relative to water and sewer issues i just want to have a full discussion on it i want to know

▶ 2:12:30 Speaker 2: how how other communities handle it you know whether other communities actually actually back their own water and sewer usage out of out of the budget somehow and i'm not going to i'm not going to be governed by what the majority of communities do but i i want the public just to understand what the what the backdrop is here relative to that yeah it's um i haven't got them

▶ 2:12:54 Speaker 7: in front of me um as i recall it's about 50 50. the communities that do in the communities that don't charge themselves for water and sewer service and then there's some in between um lexington i don't know if this is still true lexington um charged itself um the cost of mwra water but not its local costs that type of thing but But there's probably 48% that do, 48% that don't, and 4% in the middle that do something, sort of charging themselves, but not the full amount.

▶ 2:13:23 Speaker 2: Are you gentlemen going to be with us at our public hearing next Monday?

▶ 2:13:26 Speaker 7: I hope so.

▶ 2:13:27 Speaker 2: And, you know, you don't have to answer. Yes, we will be.

▶ 2:13:34 Speaker 2: One thing that people have questioned in the past, and, you know, I'm just a lawyer.

▶ 2:13:44 Speaker 2: i can't answer these questions um what is the methodology to set the tears what's the methodology i and it would seem to me that that's not a difficult question and it's been asked a lot in the past and we've gotten you know we set and and then this is i'm not directing this at my uh members of the uh of the administration here but we've we've had well you it's fair and equitable to do it this way and i would like somebody to explain if you're doing a a block rate system as a person with a with a background in science or engineering how you how you come up with the figures and i'd like to present that to the public in a way that even i could understand

▶ 2:14:28 Speaker 7: sure there's um that's a great question um sort of a mystery i'm going to expose the mystery of the answer to that there are a number of ways of doing it one of the ways is generally to set the first tier at what the essential use is for a typical home Commonwealth has said that nobody should use more than 65 gallons per person per day if you look at the census data for Melrose of how many people per household in a single-family home it turns out that it's I think it's just under 2,000 cubic it's about two thousand right about two thousand about two and a half hours per two and a half people were home at two thousand cubic feet that's one of the blocks um that starts to make sense to do that because you're saying okay the the state has said don't use more than this um so i'm going to try to set up a block that says if you use more than this i'm going to charge you more because it's it's now wasteful it gets into a problem about what do you do with a family of seven versus a family of two um type of thing and the problem with Lot of these things is how do you actually go ahead and administer a really fair system? Los Angeles they do but they haven't got any water in Los Angeles Los Angeles The rate book is this thick I mean it depends on how many people in the house the tiers change monthly for every account Not just for everybody every account tiers change monthly the rates change by season summer winter They change by zip code, which seems crazy, but high in the mountains get more rain, low in the valleys get less rain type of thing, and how much water you need for reasonably to maintain a garden or a lawn, that type of thing. Something like that gets to be really, really difficult and really, really expensive to administer. If you have no water, it's worth it, and that's why they do it in Los Angeles. We're fortunate. We have water in New England. The MWRA has water now. And I don't think it's worth the cost, frankly, of doing something that will look at how many people are in each household. How often do you do it? Do you do it just at the beginning of the year? What happens when people are born, people die? What happens when kids go off to school? What happens when grandma comes to visit for three months? That type of thing. When there's moving within a household, property changes, hands from a family of seven to a family of two, that type of thing. The administration of it gets to be very costly and expensive. And it gets to be a tradeoff as to how fair it is versus how expensive it is to be fairer. And generally what happens with water, because it's not that expensive, a dollar a day, is we try to lump them somewhat into groups. Residential is an easy group. Single-family homes is an easy group. It's a dominant group. And you can look at 65 gallons a day and 91 days in the quarter and 2,000 cubic feet to set that. The other tiers then get to be set on different ways normally. And you look at the sort of a frequency distribution of consumption. And the ultimate had asked earlier about having just one rate, it's just one class of customer, where you used to have several classes up until several years ago. what block rates really try to do is set different classes of users there's non wasteful residential users and wasteful residential users above and below 2,000 cubic feet again in general understanding that seven people two people difference is going to there's a problem with that but then you look at the the non residential uses and you sort of look at a frequency of their consumption and you can see where the peaks are and where the the curve sort of changes its slope and you say okay now I've got a different type of use and that's where I should be setting a block a lot of art a lot of art in terms of looking at grass a lot of science in terms of getting all that consumption looking at it every quarter your quarterly consumption isn't the same every quarter of the year it differs I would imagine every quarter so that gets to be a problem too in doing it but that's generally how blocks are set is looking at changes in the frequency distribution of curve I don't want to get too technical but generally what you do is a log curve percentage of people but at or below a certain level and the curve it's sort of a sine curve and you can see where the changes and slopes are and those are generally where you would look to to make the changes in blocks because that's a change in in groupings if you will or classes of customers again not residential commercial or five-eighths inch meter two-inch meter but in terms of just volume of usage is where those happen it's sort of a long answer to your question but it's it's not it shouldn't be just pulled out of the air yeah you know at the end of the

▶ 2:19:28 Speaker 2: day we're gonna have we get paid the big bucks here to make determinations on on these rate setting issues, and we'll make them, but we haven't had a good airing of some of these issues. And it's been frustrating, and I want to at least have the public get a good sense of what is behind some of these decisions. Another thing, and I don't even want to ask you to comment on this tonight, but we've been back and forth and back and forth about what to do with large multi-unit buildings. And I haven't even been able to get the answer to the question of what other solutions are there that are out there? And we really, it's been a frustration. What if anything do other communities do differently relative to large multi-unit buildings than we do? And essentially have been told you really can't do much of anything and there's case law out there. But, and if that's true, then we'll accept it. But I just want to make sure that on some of these issues which are of concern to the constituents, that we get the info out there in a way that people can understand it. And that we can understand it, and if we vote on it and people think we're wrong, then they can toss me out of office. But I at least want to make sure that people understand what's going on. I'm sorry, Mr. Chairman, I do tend to go on.

▶ 2:21:04 Speaker 7: Do you want me to touch on that briefly? I think Alderman Medeiros sort of raised that issue of multifamily, too. I mean, I can briefly.

▶ 2:21:10 Speaker 2: Yeah, if you could.

▶ 2:21:14 Speaker 7: It's, let me start off this way. Your attorney, you said, right now there is a lawsuit that is about to start in the Massachusetts community on this very issue. and on that alone the advice that we gave the water and sewer committee was don't do anything until that's resolved don't don't be a guinea pig and don't do something that you know six months from now is going to be overturned in court

▶ 2:21:40 Speaker 2: let that run its course it hasn't been filed but it would be at the trial not

▶ 2:21:43 Speaker 7: the appellate level um but it's about to be filed um what other communities do um

▶ 2:21:55 Speaker 7: vary somewhat most of them do nothing just what you have um some of them will look at condominiums um and owner occupied homes that are not for profit different from an apartment building that i own an apartment building rent it out and that's that's my business it's a business expense and i talked a bit about that but but pure residential like a condominium a condominium association or a two three family home something like that what some people have done is break it into number of units i'll take your consumption and if you're 18 100 cubic feet and there's three units it'll be 600 i'll assume 600 each unit and then run those through the blocks or increase the blocks by three the same thing do that um some of them have done that that's that's probably the is the focus of this lawsuit that I've mentioned is doing that some have done it just for that as I said the condominiums the residential some do it for everything including apartments I think that's where you get into some problems it's not always the the the benefit that you would think of and if you look at it this way if I have a three unit home and rent out two of them and i live in one of them and i have just one meter for the whole thing and i come to you and i say this isn't fair i've got two other units there's all these people of course i'm going to go above 2 000 cubic feet that's based on 65 gallons a person two and a half people i've got eight people in my three units i can't possibly i'll always be in that second tier that's not fair um i want to be treated like a single family home or three single family homes and if you want to be treated like saying three single family homes um that's not an unreasonable request but understand that each one of those single family homes also pays a base water and a base sewer fee and so you might have a one inch meter at your apartment with with three units in it but if you want to be treated like a single family home i'm going to treat you like a single family home i'll find 600 cubic feet in each one of you but each one of those units is going to pay as if they have a 5 8 inch meter as a single family home would as three single family my homes were and when you start putting that base charge into the the total bill all of a sudden it did the extra cost of the being into the second block is way overrun by the cost of the base charge which offsets that more than offsets that in a lot of cases you have to be a very big apartment to have that not offset and even in those cases it doesn't offset to do it so a lot of them that do do it will do that base charge same base charge as if you had a five inch meter in every unit so it's not really the big savings that you want a lot of them are saying no no I want to have just the one five-eighths inch meter or one one inch meter and then divide it by the number of units I sort of have your cake and eat it too and most communities don't do that they will say okay you want to be treated as single-family home will treat you as three single-family homes and bill you like three single-family homes it is is the element said replumbing is the big problem in doing that I mean you think it you usually have one hot water tank maybe for the the building and putting in three hot water

▶ 2:25:08 Speaker 2: tanks and we tried to solve this on an ad hoc basis by suggesting to everybody who could that they go out and remeter their buildings and as you might imagine most of them are resistant to this

▶ 2:25:20 Speaker 7: yes yeah anyways you didn't want an answer but i i really thought i should give you something

▶ 2:25:27 Speaker 2: since the two of you had really sort of brought it yeah and i mean just having a couple of options relative to that because to be honest with you i understand there's a senior discount proposed that's supposed to kind of take care of this and i'm not really all that keen on that as

▶ 2:25:43 Speaker 2: a solution to this issue i i think i've gone on long enough for now mr chairman thank you

▶ 2:25:46 Scott M. Forbes: president khan next in queue we have alderman forbes please thank you mr chairman i appreciate the comments from all my colleagues here tonight i want to thank you for your presentation i know know there's a lot of information here to take in a lot of the questions I had were already were already mentioned by my fellow aldermen so I'm just going to concentrate on one area since I have the experts in the room in your opinion does a single tier for residential and a single tier for commercial satisfy the requirements state of the Massachusetts general laws because I think the problem here is that it's the interpretation of the law and we have all the Medeiros says she spoke to somebody from the mwra and says it does satisfy that requirement we could talk to whether you know any municipal official whether it's a city solicitor or an attorney that does where and they they may have a different interpretation of the law i think what we all want is to make this decision a hundred percent confident that what we're deciding is going to be the right decision for the ratepayers so i guess that that's why you are here you are here to guide us and kind of steer that ship so i think it's it's important for us to know before we make a decision um what that interpretation of that law does yeah whether that satisfies the requirement whether or not that option uh out of the several options we have on board is the one that we're going to decide that remains to be seen but in order for to take an equal and and fair approach I think that does have to be answered I'm not sure if you could answer that tonight or if you would have to reach out to somebody because my next question was do you represent any MWRA communities that in fact have a fixed