HADLEY — Hadley officials are moving forward with a plan to ask voters to temporarily reduce the Community Preservation Act surcharge and to use those savings to cover operations and improvements to the municipal sewer system.
A looming operational deficit in the sewer enterprise fund and the costs of future infrastructure improvements on Route 9 are prompting the Select Board to support what Christian Stanley, the board’s chairman, describes as a complicated, multitiered approach.
The idea, Stanley said, is to sustain the sewer enterprise fund for the next five years while minimizing the financial impact on residential taxpayers.
At its July 17 meeting, the board voted unanimously to have voters at fall Town Meeting, and at a subsequent ballot vote, reduce the CPA property tax surcharge from 3 percent to 2 percent. The $92,000 saved annually would then allow officials to transfer an equal amount of sewer debt service, which is estimated at about $135,000 per year for the next seven to 10 years, to residential and commercial property tax bills.
With $2.1 million in the CPA account’s reserves, the Select Board is comfortable that there is enough money for projects supported by CPA, such as land protection and historic preservation, even if the surcharge reduction will mean less money and a smaller match from the state.
Stanley said Town Meeting would be advised that this is only a temporary reduction in the surcharge, for three to five years.
Select Board member Molly Keegan said residents understand infrastructure needs are paramount and that they should be willing to give up the luxury of CPA for what she notes is “a net neutral” revenue position.
If the plan is approved by voters, Hadley would be the 11th community in the state to consider a reduction in the CPA surcharge, according to information provided by the Community Preservation Coalition in Boston. Of the other 10, seven successfully lowered the surcharge, including the most recent, Sandwich, where a vote in May approved a decrease from 3 to 2 percent.
Stuart Saginor, executive director of the coalition, wrote in an email that while the coalition tracks those communities who decrease the surcharge or increase it, as Amherst has done twice, it doesn’t focus on the reasons.
“The ability to raise or lower a community’s surcharge is one of the features that comes with CPA, and the decision on that is made completely at the local level,” Saginor said.
Meanwhile, the Select Board will also ask Town Meeting to cover the remaining sewer debt by transferring $130,555 from either the town’s free cash or stabilization accounts.
Town Administrator David Nixon provided the Select Board statistics showing that in fiscal year 2019, which ended June 30, the sewer enterprise fund had revenues at $931,665 and total expenses at $961,269, resulting in a projected operational deficit of $29,604. That was later revised to a $22,120 surplus.
But Nixon said he is expecting anemic revenues that will not meet targets and expenditures to continue to go up, meaning the sewer enterprise fund remains on thin ice.
“I think at this time next year we’re going to be looking at a shortfall of $150,000 — that’s my crystal ball,” Nixon said.
In June, the board put off a proposed 15 percent increase in the sewer rates after a report from Tighe & Bond consultants showed that expenses are outpacing revenues, and that officials need to develop a plan that will keep the enterprise fund on track.
Stanley said the possible increase in sewer rates will return for discussion at the board’s Aug. 7 meeting, with a hearing at 7 p.m. on whether rates could go up just for commercial users.
“We’re trying not to raise residential rates at this time,” Stanley said.
Scott Merzbach can be reached at smerzbach@gazettenet.com.
