To the Editor:

It is not too late to fix the financial problems at the Warwick Sewer Authority, but doing so will require cooperation between the City Council and the Sewer Authority. The basic problem at the Sewer Authority is that the assessment rate has not kept pace with the cost of constructing sewers. Due to political concerns, rate increases were deferred and not implemented at crucial points. Construction was allowed to continue even though it was certain that the authority would lose money. A scheme was in place whereby projects were grouped together—one was known to produce a deficit, another was known to produce a surplus. The net result was supposed to be a break-even scenario. Unfortunately, during the time it took to complete the entire group of projects, the costs of construction outpaced even conservative estimates, and there was no means of modifying the assessment rate. Attempts to do so were met with public outrage, and cries of “You told us the assessment rate was going to be ____!” Elected leaders sided with their constituents, and the Sewer Authority Board maintained the inadequate rates.

This gave birth to the notion that the deficit from inadequate assessment revenues could be offset by usage revenue. Provided that a certain amount of people tied into the sewers, the financial solvency of the Sewer Authority would be restored. Unfortunately, the actual number of tie-ins fell far short of even the most conservative estimates, and the financial unraveling continued. Since previously assessed properties could not be re-assessed at higher rates, usage fees became a critical source of revenue. As the need for revenue became dire, the Board voted to increase usage rates, and the public responded with more outrage.

The Board found a remedy for the “project grouping” assessment scheme and voted to discontinue the practice, in favor of setting the assessment rate after determining the actual cost of individual projects. This was a smart decision, but considerable damage to the Warwick Sewer Authority’s finances had already occurred. This damage could only be repaired by significant revenue inflows from usage fees. But money is scarce in the worst economy Rhode Island has seen in decades, and the average cost of connecting to the sewers—approximately $2,500—has discouraged an already debt-ridden public from doing so. Mandatory tie-in programs and connect-capable fee schemes are understandably not well received in the present economic environment. Without one or the other, however, the finances of the Sewer Authority will continue to erode. Usage fees will continue to rise, which will penalize people who have tied into the system, and further discourage new users from connecting. Eventually, the Authority may have to file for bankruptcy, at which point the taxpayers would have to bail it out.

While this is a bleak picture, there is still time to avert a catastrophe. The solution will require cooperation and leadership from the City Council and the Sewer Authority. A mandatory connection program, backed up by a realistic enforcement mechanism, is critical to the long-term viability of the Sewer Authority. To its credit, the Sewer Authority recognized that the primary objection to a mandatory connection is the cost of the connection itself. That is why the Authority voted to construct a billboard on its property and use all the revenue from leasing the billboard to connect people to the sewer system. The Authority signed an agreement with Lamar Advertising that would result in over $800,000 over a period of 20 years. The money has already been coming in and is sitting in an account frozen by the City Council, which believes that construction of the billboard and entering into a lease arrangement needed its approval. In hindsight, the Board probably should have talked to the City Council but, as was explained to the City Council, it was not an intentional slight.

As Chairman of the Sewer Authority, I proposed the following compromise to then Council President Joe Solomon and current Council President Bruce Place, and I offer it once again: the Warwick Sewer Authority gives the City Council the 20-year cash flow stream in return for an agreed upon sum (present value of the cash flow stream discounted at an agreed upon rate, less a nominal amount to cover the City Council’s expenses and effort). Let’s say that the sum is $600,000. This would enable the Authority to pay the full connection cost for approximately 250 properties, or provide sizeable grants toward connections of several more properties.

This is a win-win situation for the Sewer Authority, the City Council and the ratepayers (not to mention the Bay). This plan would not only provide revenue to the Authority, which would reduce the need for future usage rate increases, but it would also provide a much needed economic stimulus, while blunting the impact of the mandatory connection program. Finally, it would show the citizens of Warwick that its leaders, both elected and appointed, are working on their behalf.

Thomas P. Stone

Former Chairman

Warwick Sewer Authority