The Usage Charge for Brookfield Sewer Utility
With the WPCA taking over its own finances in 2009, for the first time in Fiscal Year (FY) 2012-13 the budget was arrived at with an eye on depreciation. Depreciation is a real factor, but it is a non-cash item.
|Why the increase?|
With a compete inventory of assets there is now a good handle on a depreciation number. Since ‘75 until the switch over to Enterprise Fund accounting in 2009, the Town did not generate a depreciation value and communicate it to the WPCA. Under Special Revenue fund accounting, the accounts are designed to zero out at the end of every year. With the WPCA this accounting practice could not happen. This hybrid fund did not get the full attention of the Controllers office for decades. It took about two years to do the diligence to list and classify all the assets from a cold start. That was a rather extensive undertaking.
Prior to 2010, WPCA budgets were cash budgets only. For FY 2010-11 the usage fees were raised from $75 to $85 (per unit per quarter) to keep from running a deficit on a cash budget basis, as had been the case the previous 3 or 4 years. The $85 rate was held for 2-years knowing that depreciation was not properly covered. Having no good basis for the depreciation calculation, the rates were not increased until 2012.
Budgeting is an inexact science. Every year we all get better at it. Two years later, FY 2012-13, the $85 per unit per quarter was probably just sufficient to keep the WPCA afloat on a cash basis, but not fund depreciation. Why fund depreciation? The pumps and pipes, structures and infrastructure all have a limited life. So as to operate in an operationally and environmentally responsible manner, it is important to have funds in reserve for routine and major repairs. With funds in hand, needed repairs can be accomplished as needed, rather than waiting for financing.
Consequently, the Commission voted unanimously to raise the rates for September 2012 year to $95 per unit per quarter so as to partially fund depreciation. For the 2012-13 FY depreciation is not fully funded. However, it was judged by the Commission that the increase of almost 12% was all that Brookfield WPCA customers should absorb. As with most decisions in life, it is a balancing act. To fully fund depreciation for this new FY would require a much larger increase. It was a WPCA Board decision to take a half step towards fully funding depreciation.
If depreciation is only partially funds will rates increase next year? No, that is not anticipated. With the Clean Water Fund Danbury plant charge going away for FY 2013-14, it is expected there will be sufficient revenue to fund depreciation going forward for several years at the $95 rate. (There will be a partial offset of contribution to cash with the loss of revenue from those that were paying the plant charge only.)
Thus, the $95 rate is a careful construct toward responsible sustainability without going overboard. It is not unbridled rate structuring. Funding depreciation merits a fresh look each year. According to the CT DEEP, some CT WPCAs put nothing in reserve. Other towns build reserves to fund improvements and expansions. Brookfield is somewhere in between with the ability to fund recent and pending improvements as reflected in the capital budget. These infrastructure improvements are self-funded, mostly from unrestricted capital funds, without resorting to a loan or asking the Town for a grant.