Water And Sewer Oversight Board Calls For Common Council to Investigate Mayor's Actions

The Water Pollution Control Authority (WPCA) unanimously called for the Common Council to investigate the "abrupt" movement of Water and Sewer administrators to an office in City Hall. Mayor Sebastian Giuliano on Friday responded to this letter by detailing a long series of failings in the management of Water and Sewer, "The department has been running inefficiently for years."

John Giuliano, Chair of the WPCA, objected to being told of the move after it had already taken place. In their letter to the Council, the WPCA pointed to the significant tasks facing the Water and Sewer Department, mostly surrounding the transition into the Mattabassett Sewer District. The letter was signed by all of the members of the WPCA, including the Democratic and Republican Council members, James Streeto and David Bauer.

The Mayor's response, in a Friday press release, listed a series of problems with Water Department finances, and suggested that future work on joining the Mattabassett District would require extensive meetings with the Mayor's office and with the Finance and Legal Departments, all located at City Hall. He cited the presence in City Hall of the Public Works director, who supervised more employees, most of whom work at a field site.

Mayor Giuliano said, "We have tried everything to get this department back on track and quite frankly this move is the last option before termination proceedings of top administration officials commence."

Dan Drew, one of two Democratic mayoral candidates, questioned the Mayor's previous management of Water and Sewer, "The buck stops with the mayor, so when he condemns the Water and Sewer Department, he is condemning the job he himself has done as mayor. He can’t claim to be the city’s leader when things go well and then disabuse himself of responsibility when they don’t."

Christine Bourne, the other Democratic candidate for mayor, has not responded to a Friday request for a comment on Mayor's remarks.

Drew also took the opportunity to repeat his call for more jobs and lower taxes, "We need to cooperate to improve Middletown’s economy, but we have too much conflict coming from the sitting mayor. We need to bring people together to expand job opportunities and reduce taxes rather than engage in internal fights.”

Progress Made in Sewer Department Crisis

Under pointed questioning by members of the Common Council, Water and Sewer Department director Guy Russo explained the history of a financial "perfect storm" which drained nearly all revenue from the Sewer department, and the steps already taken to bring the department back into financial health.

The special workshop meeting of the Common Council was called at the end of the regular September Common Council meeting to allow time for Russo to analyze the problem, and answer questions submitted by Council members. At that time, the Sewer Department was broke, and did not have the funds to meet expenses.

Russo blamed deliquent accounts and conservation as the main culprits in the Sewer Department shortfall.

"If bills had been paid as they regularly are," Russo explained. "We wouldn't be where we are today.

In the past month, with an agressive second billing, and lien notice program, the department has collected 38% of it's goal of $500,000 in revenue from these billings, and that's with two days left in the month, with a plentitude of late-payers who wait for month's end to settle up.

The meeting got off to a rocky start as Mayor Sebastian Giuliano designated the workshop as a sole function of the Common Council, and handed chairmanship for the meeting to deputy mayor and Council member Joe Bibisi.

Bibisi attempted to hold Council members to a preliminary recitation of submitted questions, which Russo would be asked to answer.

Instead, Russo made a lengthy opening statement, and then the Council members asked submitted questions and follow-ups.

Along with the nearly $200,000 collected against delinquent accounts, Russo explained that his department had applied for a $200,000 refund from the State Department of Environmental Protection and was preparing thousands of dollars in cuts in the deparment in areas from open jobs, to scheduled maintenance.

Council members peppered Russo, and city Finance Director Carl Erlacher with questions about bugeting process, audits and collections. They also quizzed Russo, and city attorney Tim Lynch about how the WPCA (Water Pollution Control Authority) operated, and where authority and responsibility for financial decisions rested. Both Russo and Erlacher admitted that procedures were not perfect at the WPCA or the Sewer department, but when revenue was good, the department remained out of financial trouble. When the economy forced individuals into financial binds, paying the sewer bill was often the last thing residents would consider.

"They pay their mortgage so they don't get thrown out of their house," Russo said. "They pay their car payment so they can drive to work. They pay their credit card bill so their rate won't increase. Our 18% interest fee was once considered punitive, and that's no longer true. And if you don't pay your sewer bill, it doesn't get reported on your credit report."

However Russo indicated that a collections agency is being interviewed to go after delinquents, and that property liens will be issued. He also suggested that turning off water to delinquent accounts is being considered, as is the publication of the names of delinquents.

Russo explained that the economy and conservation have also taken tolls on other water and sewer departments, and other utilities. Middletown has seen a 12% reduction in use of water and sewer.

The WPCA meets Thursday afternoon, and Russo intends to present his cost-savings and revenue-increasing measures to the authority for a vote.

WPCA Endorses Solvency Plan

The Water Pollution Control Authority voted Thursday to endorse a plan submitted by Mayor Sebastian Giuliano and city Finance Director Carl Erlacher to pump money into Middletown's sewer fund.

The sewer fund is currently operating at a deficit.

"It's crucial that we do something, extremely urgent," Erlacher said at the meeting. "We haven't been paying our operating bills, just our payroll."

In the past, the Sewer and Water Department, under the financially independent WPCA, has budgeted on a consumption basis, but that budgeting process has been problematic.

"That trend seems to be a little aggressive, at the least" Erlacher explained, noting that the optimistic billing figures have left the department in the hole for three years straight.

The plan to infuse cash, as detailed in a press release earlier Thursday from Giuliano, includes borrowing money from the $2.5 million General Sewer Improvement Fund, aggressively pursuing delinquent accounts through an outside collections agency, and cutting spending in the department.

Erlacher contended that rate increases may be likely, though his plan, if pursued aggressively may push off those hikes. They mayor feels that any rate hikes are unfair to residents.

"I don't think its fair to hit people who have been paying their bills with a rate increase because other people haven't been paying their bils," the mayor said.

WPCA member and Common Council member David Bauer also suggested that partial payments on water and sewer bills should apply first to the sewer deficit. Currently partial payments apply first to water bills.

The group also discussed tactics to convince delinquent accounts to pay bills. Those tactics included placing a lien on property, and shutting off service, something the mayor said the city has avoided doing in the past.

The group voted to endorse the plan unanimously, but WPCA member and Common Council member James Streeto attempted to convince the members of the Authority to make the language of their resolution stronger. Instead of endorsing the plan, he suggested that the group vote to implement the plan, but other members felt that the endorsement was strong enough.

Water and Sewer commissioner Guy Russo vowed to take immediate action but warned that his department could not avoid repairs or replacements that they are obligated to make to "protect the waters of the state of Connecticut."

Mayor Favors Sewer Fund Bailout Without Rate Increase

In a press release (see below for complete release) just released, Mayor Sebastian Giuliano says he will "alleviate the tightening financial pressures on the Water & Sewer Department" with a plan that does not include rate increases.

Yesterday the Eye reported that the city's sewer fund was out of cash, and that one of the solutions to the problems, as suggested by Water and Sewer director Guy Russo in a memo, was to raise rates in November.

In today's press release, Giuliano calls the budget crisis a "trend" based on a "perfect fiscal storm" says that he is opposed to any rate increase:

“One thing I want the public to know is the fact that I do not support any rate increases. That would be taking the easy way out. I won’t punish the good tax paying citizens who paid their water and sewer bills on time for the delinquency of some segment of the population that doesn’t pay. That’s not right nor is it fair.” said Giuliano.

As reported in yesterday's post here, a multi-faceted solution, now reported to be crafted by City Finance director Carl Erlacher, includes a loan of a half a million dollars from the General Sewer Improvement Fund, agressive collections of deliquent accounts, improved budgeting procedures, and austerity measures including the freezing of discretionary spending, and postponement of filling vacant positions.

In addition, Giuliano has appointed retired Financial Director Jim Reynolds to provide fiscal oversight in the department.

Erlacher will make a presentation on the plan at this afternoon's meeting of the WPCA (Water Pollution Control Authority) at 5:15 PM at the Water and Sewer Department on Berlin St.

PRESS RELEASE FROM THE MAYOR'S OFFICE

Mayor Sebastian N. Giuliano today announced his intention to implement a plan to alleviate the tightening financial pressures on the Water & Sewer Department. The plan was crafted by Finance Director Carl Erlacher.

Water and Sewer Director Guy Russo and Erlacher briefed the Mayor on Monday regarding fiscal issues caused by two main factors in 2009:

1. An increased delinquency rate that traditionally occurs during economic downturns as taxpayers choose to pay other bills they perceive as more pressing. In the last year, dating June 2008 to June 2009, outstanding collectible Water & Sewer bills, including interest, increased by $488,810 bringing the total of uncollected bills including interest to $1,053,810 by the end of June 2009.
2. An unusually wet Spring and early Summer decreased the need for water consumption for lawn care or cooling and thus decreased projected revenues. Early data for the last two months (July and August 2009) indicate a decrease in water usage of nearly 12%.

“Carl and Guy briefed me on what amounts to a perfect fiscal storm. I give them credit for seeing the trend and bringing it to my attention before it was too late to act. There are reasonable action steps we can take to combat the situation. We need to be vigilant, take the necessary action steps but not panic,” said Giuliano.

The Mayor also reassured the public regarding potential rate changes. “One thing I want the public to know is the fact that I do not support any rate increases. That would be taking the easy way out. I won’t punish the good tax paying citizens who paid their water and sewer bills on time for the delinquency of some segment of the population that doesn’t pay. That’s not right nor is it fair.” said Giuliano.

Giuliano announced the following action steps in accord with Erlacher’s analysis while keeping water and sewer rates steady:

1. {sic}
   
2. To meet immediate cash flow needs within the Sewer Department, a loan of $500,000 will be made from a specialized sewer protection fund known as the GSIF. This $500,000 loan will be repaid with interest to the specialized fund by June 30, 2010.
3. Hire the appropriate collection agency to aggressively manage outstanding bills. General City revenue goals have been met by utilizing this tactic.
4. Better manage internal Water & Sewer Department work flow, bill collection practices and fiscal procedures with a keen eye on outstanding bills.
5. In order to achieve greater fiscal oversight at the Water & Sewer Department and the WPCA and to achieve goal #3, bring aboard retired Finance Director Jim Reynolds to monitor billing, purchasing, and other expense control measures. Reynolds will consult with the Water and Sewer staff and will be on site at the Water and Sewer office on Berlin Street to provide any necessary fiscal guidance. He will report his findings directly to the Mayor.
6. Implement better internal budget creation techniques by shifting away from consumption based budgeting and away from unrealistic collection goals. Include current trending data into any budgeting going forward.
7. Reduce other Water & Sewer spending and expenses where possible including reducing Overtime, Freezing Discretionary Spending, Postpone filling vacancies and Delaying all Capital Expenses.

Giuliano also added his desire to prevent any employee layoffs. “That’s another quick fix that some may propose, but it really solves nothing. A layoff would drain our specialized workforce of those whose technical expertise is critical to our water and sewer treatment facilities. We’ll save where we can but not at the expense of our staff or of departmental competence.”

Russo added, “I agree with the Mayor. We’ll cut and be lean like any business has to do to get through this rough patch. But we can’t and we won’t sacrifice public safety or any necessary infrastructure repairs or water line patches. I think we’re taking the right steps and I am looking forward to working with Carl and Jim to find any internal budgeting adjustments we can make to insulate us from similar economic storms and downturns.”

Erlacher concurred with the Mayor and Russo. “I’m happy we caught this before it got away from us. Our Finance Department plan will work and will get us through this period. There are long term fixes we need to implement like changing the way the WPCA budgets, but the Mayor is right when he says we need to act but not panic.”