Ever since Mayor John Harkins and the Town Council started mentioning during the past year that the town may want to sell the land on which the Stratford Water Pollution Control Facility (WPCF) is situated to the Water Pollution Control Authority (WPCA), some residents have been asking questions about those possible transactions.
One of the questioning residents, Terry Masters, wrote letters in June and August to the Connecticut Department of Energy and Environmental Protection (CT DEEP) with copies to the U.S. Environmental Protection Agency (EPA), the state attorney general, and the U.S. senator from Connecticut, Richard Blumenthal. Masters alerted those officials to WPCA paying $600,000 in an annual land use fee to the town and potentially using its reserve funds to buy land from the town.
Masters suggests in her letters that such uses of funds may be improper, because WPCA funds are intended for the operations and maintenance of the water pollution control facility.
A director at CT DEEP, Denise Ruzicka, wrote back to Masters in July saying, “The town and the WPCA have apparently previously negotiated a lease agreement for the use of the land … and are now negotiating a deal for the transfer of ownership of the land to the WPCA. Based on the information available to us, no violation of Connecticut statute or regulation has been identified.”
EPA is still studying
A regional manager at EPA, Mark Spinale, replied to Masters in September, giving her some encouragement, and said, “Actions which could adversely impact the financial integrity of the town’s treatment plant is a concern to the [EPA].”
Regarding “concerns about the impact on the WPCF if the town were to sell the land to the WPCA, using funds dedicated to eligible costs of operating and maintaining the treatment facility,” it “will take time to determine their legality and also their potential impact on the WPCF’s ability to return to compliance or maintain compliance with water quality objectives.”
Spinale’s letter said, “A member of my unit has been in touch with Connecticut’s Clean Water Fund at DEEP. In addition, EPA Region 1 staff has raised the issue to enforcement personnel to determine whether the potential financial transaction(s) proposed by the town could adversely impact the ability of the WPCF to comply with the requirements of administrative orders.”
Spinale’s letter referred to Connecticut General Statute 7-267, which says, “All benefit assessments and charges for connection with or use of the sewerage system, whether pledged for payment of bonds or notes or otherwise, shall be kept separate from other funds of the municipality and shall be used for the sewerage system, including the payment of debt incurred for the sewerage system and interest thereon, and for no other purpose.
Star’s Q & A
While EPA works with enforcement personnel and CT DEEP to form its opinion, The Star addressed Masters’ questions and others to the Harkins administration. Answers were obtained and provided by Chief of Staff Marc Dillon. He got the actual responses from a variety of sources in town hall, including the town attorney, the chief administrative officer and the finance department.
So, are the WPCA funds kept separate from the town’s municipal budget?
According to town hall, the WPCA is a separate legal entity, and, as an enterprise fund, its funds are accounted for separately from the town’s funds.
In Masters’ June letter to the state officials she stated that since 2010 the amount of the WPCA Reserve Fund “has never been specified.”
According to Dillon the amount of money in the reserve fund is specified each year in the town’s Comprehensive Annual Financial Report, a public document, also known as the audit report.
The WPCA Fund Balance is found in Exhibit V of the 2013 Comprehensive Annual Financial Report. The Waste Operating Funds Unrestricted (Reserve) Fund Balance as of June 30, 2013, was $5,204,621.
“A more recent fund balance value will not be available until the fiscal year 2014 audit is complete,” town hall said, and that is expected in December.
Land purchase and fund balance
In Masters’ June letter she wrote that in order to comply with EPA Sewer Collection and DEEP Clarifier Improvement Project administrative orders, “the town must adequately fund the operations and maintenance of the water pollution control facility and hold reserve funds for unanticipated failures and long-term planning.”
It is not known how much of the WPCA reserve fund would be used to acquire land, if the decision to acquire land is made. Stratford’s finance director has said that, if a decision were made for WPCA to acquire land, she would recommend that the WPCA use a combination of its reserve fund and bonded/borrowed monies.
Leaving the reserve fund very low could jeopardize the WPCA’s ability to make any and all unforeseeable repairs to the water treatment equipment, according to Masters, and that could mean not being able to comply with environmental protection standards. This is a key component of Masters’ argument against use of the reserve fund for land acquisition.
When asked if it would be advisable to take the reserve balance down to a very low level to pay for land, the town was not specific. “The level of funding for the reserve is a product of the rate sewer users pay, to a large extent,” said the written response provided by Dillon. “The authority and the administration constantly try and find a balance between a healthy reserve fund and the ratepayers’ ability to pay.”
The likelihood of a sale
The town’s current municipal budget was approved by the Town Council with a $4.5-million revenue shortfall, because the council chose not to have more property taxes cover it. At the time of the budget passage, the mayor’s office distributed a list of town-owned properties that, it said, could be sold to cover the $4.5-million budgeted shortfall.
The town-owned WPCA land, with an stated assessed value of $5.6 million was the only property on the list with an assessed value over $1.5 million.
The town would not say recently if it expects to sell any of the roughly 30 properties on its for-sale list in order to cover the town’s budget shortfall. “We continue to market all of the properties on the list, but we do not comment on real estate negotiations,” it said.
The chance that the land at the WPCF is selected to be sold to cover the town budget shortfall is considered likely by some, not only because of the higher value of the land but also because the town has a direct connection to the buyer. The 10 persons who make up the Town Council and would vote whether to sell the land are the same 10 persons who constitute the WPCA who would vote whether to buy the land.
Masters refers to this possibility in an August letter to DEEP and EPA as an “illegal money grab from town hall.”
Legal opinions on use of WPCA funds
Responding to Masters’ suggestion that using WPCA funds to pay rent or acquire land could represent “financial impropriety,” because WPCA funds are for the sewerage system and for no other purpose, Ruzicka wrote, “We have determined that funds acquired under the user charge system are not being diverted to uses not related to wastewater.”
The town’s legal opinion agrees with DEEP’s opinion. Dillon wrote, “The answer I received is that the WPCA has the legal authority to acquire and dispose of real and personal property incidental to its purpose of handling sanitary sewer effluent. In other words, the WPCA can buy land, buildings, vehicles or anything else it needs to serve its purpose and can sell same when it no longer needs them.”
Specifically regarding the use of funds to pay rent, Dillon wrote, “According to the lawyers, acquisition of land or any other appropriate item can be by purchase or lease.”
The same opinion applies to the WPCA reimbursing the town for administrative overhead expenses.
The town agreed with the hypothetical proposition that if it were no longer to own the land on which WPC facilities sit, it would no longer charge WPCA a land use fee.
The town added, “The June 30, 2013 (reserve) Fund Balance is unrestricted. This fund balance can be used for items such as ongoing capital repairs and maintenance, ongoing annual debt service related to the $60 million plant upgrades completed in October of 2010, or rate stabilization from year to year, as a few examples.”
More questions
Another set of questions is sure to arise if the mayor recommends that the entire WPCF be sold to and operated by a different authority outside Stratford.