How much is a sewer treatment plant worth? Who wants to buy our sewer treatment plant or our capped
landfill? Leave it to city hall to find a loophole in Prop 2 ½ to cover their cost overruns in the
fire department and the legal department and wherever the red ink is flowing. No need for an override, get the
money out of the utility rate payers. Twenty years ago they developed a weird PILOT program. The city appraised its assets, including the landfill, and billed its Enterprise Funds a
PILOT fee. For a succinct explanation of PILOTS go to the Pioneer Consulting link below. It has been one of the best kept secrets in Northampton over the last twenty years.
It’s not the normal kind of PILOT. Normal PILOTS are voluntary agreements between the municipality and non-profits who decide to make a voluntary payment to the city to recompense them for the
city’s costs in providing services like police, water and sewer. Northampton never has written a PILOT ordinance, but it does accept modest payments in lieu of taxes from Smith College, B’nai
B’rith, The Housing Authority, and the U.S. Fish & Wildlife program. These pilot payments total $98,900.
But this other PILOT program will bring in $668,000 for Northampton’s general fund this year, and has contributed to all the cheer about budgetary matters at city hall. Why worry about cost
overruns? The only hint in the Mayor’s FY 15 financial report that this Pilot might exist are tiny
notes in the margin that unspecified PILOT payments made by the landfill are not coming in any more. We have heard rumors in the community for a long time that landfill revenues were paying
for our schools and public safety costs. The fact that the city pushed for another landfill in the face of a
grassroots revolt by its neighbors kinda buttressed the impression that the landfill was a cash cow of some kind.
I think this PILOT was the brainchild of John Musante, who is now Amherst’s town manager. He didn’t return my call. It does not fit the traditional definition of Pilots. It is not
voluntary. There aren’t two separate entities involved. The city appraised the value of its own dump, said it was
worth “X” million dollars, and charged the enterprise fund around $600,000, a rough equivalent of the taxes the landfill might have paid in taxes. Taxing a facility bought and
paid for by taxpayers. Who was doing the appraisal every year? I dunno. There’s no way the city can treat our
enterprise funds as separate entities from the city. The DOR says: “The enterprise is still a municipal
department that is subject to ordinary municipal finance procedures.”
Is there anything normal about charging a municipal department a fee for using city property? Does any
municipality anywhere routinely pay tax money on its buildings and property to itself? The supposed advantage of having enterprise funds, according to a private website run by the
Pioneer Consulting Group is to prevent “town officials from taking a predatory action against water
department revenues.” Or landfill fees. It is not stopping predatory action here.
Well, this all seems like Alice in Wonderland, and I’m not going to try to explain the rationality of it.
Anybody want to buy a sewerage treatment plant or our old landfill? Now that it is capped and doesn’t smell any more maybe we can sell it for big money. It has got a great view.
The State’s Department of Revenue has not approved these PILOTS, and it’s a risky business. The Mayor told me
they are studying them with an eye of working out a policy. He said the DOR person thought their PILOT was okay
if the city changed its policy and paid its own water bills. In its FAQ sheet on Enterprise Funds, the DOR waffles indecently.
“From a purely accounting perspective, a payment in
lieu of taxes is a proper expense of an enterprise. ” But the next paragraph, and they underline the
“Notwithstanding the foregoing, it must be noted that from a legal point of view, it is not at all clear to what extent a court would consider a
payment to be part of the actual cost of providing the service, and therefore an appropriate component of the enterprise’s fee structure.”
“What this means,” said an accountant friend of mine,”
Is that this has never been tested in the courts.”
Some day, someone may refuse to pay their sewer bill and assert that the PILOT expenditure made by his enterprise fund was not an actual cost of the sewer department, but an illegitimate
attempt by a municipal government to raid water and sewer funds for money to cover cost overruns elsewhere. Why keep this a secret from rate-payers? What ever happened to transparency in city
government? The Mayor’s budget message doesn’t mention it as part of FY15’s accounting.
The only reason we found out about it is that Susan Wright, the Mayor’s finance chief, went to a DPW meeting a couple months ago and brought a bunch of spreadsheets showing how the city was
allocating the revenue for the four enterprise funds. No reporters were there. Taxpayer advocate and KOTL friend Dick Guzowski attended the meeting, and he noticed something weird. Not only were the enterprise funds paying a substantial amount of city hall salaries and employee benefits, they were
also paying $668,514 this year into the general fund for “Payment in Lieu of Taxes.” A friend of mine that is
more comfortable with figures than I am took a look at this one spreadsheet and whistled.
” That is a lot of money coming into the general fund,” he said. “Where is that money coming from?”
It’s coming from the ratepayers of Northampton who pay their water, sewer and storm water utilities fees. Why are Northampton’s water and sewer bills so high, and getting higher every
year? Look at the curve that
Fred Zimnoch, a retired nuclear engineer, did chart the growth in water/sewer rates.
And this is his curve showing the growth and recent dip in the PILOT payments. The recent dip is probably due to the closure of the landfill.
There’s no limit to how high your water and sewer bills can be jacked up by the municipality. The tax rates on property, however, are
capped by prop 2 ½. Northampton has found a way around prop 2 1/2. Hit the
utility rate payers. Our rates are much higher than any of our neighbors and rising faster. See this for details. I looked at fifteen neighboring communities and Northampton is the
highest. Click here to get the comparative figures. At $1344 it is about 164% of the
median. They aren’t paying CEO-style salaries down at the sewer treatment plant or up at water department. The revenue being generated
by sewer charges is projected to top $6.3 million this year, but we haven’t had a major upgrade at the sewerage treatment plant for
many years. If our bills were calculated on ordinary costs, our bills for water and sewer would be a lot lower than what
they are now.
I had to go over to Easthampton to hear a people talk about the need to keep costs down for rate payers. They were aware they could have
done a PILOT, but they wanted to ensure that their enterprise funds only paid real indirect costs. Indirect costs are payments to city agencies for services
rendered, like for billing, payroll and paying benefits to enterprise workpeople. Their rate for water and sewer is $796, Northampton’s
rate is $1344. Is the water tastier over here? I did a comparison taste test and couldn’t tell the difference. Is our sewerage treatment plant
classier than theirs? Not appreciably. Maybe Easthampton’s government cares
about keeping civic costs down for working people and people living on retirement.
It’s okay for the enterprise funds to pay their share of the time and money that elected officials and city hall departments spend on their
business. Every town and city does it. But Northampton’s figures seem puffed
up. For a full breakdown, see these spreadsheets. Does the treasurer’s office
spend 18% of their time on enterprise matters? Do city councilors spend 13% of their time talking about matters involving the enterprise
funds? I kinda doubt it. We have competent staff at the DPW and their board of commissioners to handle enterprise matters.
No, it looks to me that cost overruns elsewhere in the city budget are being paid for by rate payers. Look at this huge jump in Fire/Rescue, the city
department just loaded with well paid supervisors. Since FY 2009, its budget has jumped 1.42 million.