Stoneham Election April 3, 2018 follow up – what I meant by “bankrupt”

In my post on my choices for the upcoming 2018 election (which you can read here) I said the following:

More seriously, she [Caroline Colarusso] has bankrupted our water and sewer system to the point where all our rainy day funds are gone, and you will see a 29% increase in your next bill. That’s an average of $75 a quarter this coming year PLUS we have no money in the rainy day fund now. Caroline led the charge, sending out flyers for the Water and Sewer policy that ran through the savings we’d put aside. She wants to bankrupt our trash system in the same way. (Mark your calendars for the Town Hall Meeting Monday, May 7, where we need to show up and fight this fiscally irresponsible plan.)

Caroline asked to meet with me this weekend, taking umbrage with much of what I wrote, but in particular this section. “There’s $692k in the account! That’s not bankrupt!” She asked how I could justify that statement. Since she’s proposing we make this exact mistake again, in the upcoming trash fee discussion, I thought it was worth discussing at more length.

Question: How can you have money in an account and still be bankrupt?
Answer: When your expenses exceed the amount of money you have to pay for them.

There are three possible amounts of money we should have in our water and sewer reserve fund. Some recommend 10% of costs. Some recommend 15%. Our current stated target is 3 months worth of operating expenses. In 2014, the town had 2.24 million in the reserve fund (3 months). Today we have 692k in the reserve fund (~6%). If a 30% rate increase had not been approved for the next bill you will get, dear taxpayer, that sum would be $0, or negative. Zero percent. The difference was the initiative led by Caroline to drain our reserves for a temporary rate cut.

Perhaps you think it’s not important to have this money set aside in the reserve fund, but please note that this is the money that is used to pay for water main breaks. We have had numerous such breaks in the past years, and it would be surprising if we went for a long time without having more. If all of a sudden North Street is flooded, do you want to hear that we have no money set aside to fix it? What if it’s a sewer main, spilling literal crap into our streets?

There was not enough money in the bank this quarter to pay our bills without either using the very last drops of our reserve fund, or raising rates. If we completely wiped out our reserve fund this quarter, those big rate increases would still come next quarter. And we’d be hosting bake sales to pay for water main breaks.

I’d love to direct you to the links on the Town of Stoneham website that include all the agendas and supporting details on this. By law, those documents are required to be available. However, despite the fact I could have sworn they were available previously, they are no longer there. I had to ask Selectman Anthony Wilson to help me find the information. I’m attaching my sources to this post, and invite correction or (better yet) for correct data to be posted to the town website by the appropriate authorities.

Water and Sewer projections from 2017 (which are very close to actuals)
Water and Sewer retained earnings (reserve fund)
Slides showing how the previous rate cut impacted our reserve

Water and Sewer was clearly bankrupt because without a 30% increase, there was not enough money to pay the bills. And Caroline is advocating that we do it again, this time with our trash services. Let’s at least be smart enough to learn from our mistakes.