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Full text of "Annual report"

BOSTON PUBLIC LIBRARY 




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Boston Water and Sewer Commission A Tl^adition of Service 



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Message from Chairman lye 



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TheBoston Water and Sewer Commission was established nine years ago by the State Legisjature " • " • •*'>>>ikV 
to assume ownership and responsibility for maintenance and operation of water and sewer ser^esto 
Boston residents, visitors, businesses and institutions. 

At present, the Commission is providing the City of Boston with some of the purest water in the 
nation and is meeting the challenge of properly utilizing a wastewater disposal system that is over 1 00 
years old. 

This annual report documents the Commission's impressive record of achievement. We have 
repaired and upgraded substantial portions of the water and sewer infrastructure, installed a modern 
metering system, improved stability of financial operations, and begun the long battle to end pollu- 
tion of Boston Harbor, 

The Commission has also made significant improvements in its pricing system. With increased 
metering, more parties are held responsible for their water use. The institution of an inclining block 
rate has encouraged water consen/ation among both domestic and industrial users. 

An important result of these efforts has been a growing respect for the Commission in both envi- 
ronmental and financial communities. Recently, the Massachusetts Audubon Society honored the 
Commission for outstanding achievement in environmental consen/ation. Additionally the Commis- 
sion's bond rating, a substantial indication of financial stability, has been upgraded by the nation's two 
leading rating agencies. 

My fellow Commissioners join me in thanking the highly competent and professional staff who 
have worked so hard to help make the Commission one of the best providers of water and sewer ser- 
vices in the country. 

As we continue with our mission, I know that Bostonians, and people from all over New England, 
also share my wish that some day soon we shall witness the rebirth of Boston Harbor as a renewed 
source of commerce and recreation. While that vision may still be far away, it will guide the Commis- 
sion today as we plan for tomorrow's clean Harbor. 



Sincerely 



A. Raymond Tye 
Chairman 



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Digitized by the Internet Archive 

in 2010 with funding from 

Boston Public Library 



http://www.archive.org/details/annualreport1985bostsew 



Message from Chairman lye 



The Boston Water and Sewer Commission was established nine years ago by the State Legislature 
to assume ownership and responsibility for maintenance and operation of water and sewer services to 
Boston residents, visitors, businesses and institutions. 

At present, the Commission is providing the City of Boston with some of the purest water in the 
nation and is meeting the challenge of properly utilizing a wastewater disposal system that is over 1 00 
years old. 

This annual report documents the Commission's impressive record of achievement. We have 
repaired and upgraded substantial portions of the water and sewer infrastructure, installed a modern 
metering system, improved stability of financial operations, and begun the long battle to end pollu- 
tion of Boston Harbor 

The Commission has also made significant improvements in its pricing system. With increased 
metering, more parties are held responsible for their water use. The institution of an inclining block 
rate has encouraged water conservation among both domestic and industrial users. 

An important result of these efforts has been a growing respect for the Commission in both envi- 
ronmental and financial communities. Recently the Massachusetts Audubon Society honored the 
Commission for outstanding achievement in environmental conservation. Additionally the Commis- 
sion's bond rating, a substantial indication of financial stability has been upgraded by the nation's two 
leading rating agencies. 

My fellow Commissioners join me in thanking the highly competent and professional staff who 
have worked so hard to help make the Commission one of the best providers of water and sewer ser- 
vices in the country. 

As we continue with our mission, I know that Bostonians, and people from all over New England, 
also share my wish that some day soon we shall witness the rebirth of Boston Harbor as a renewed 
source of commerce and recreation. While that vision may still be far away it will guide the Commis- 
sion today as we plan for tomorrow's clean Harbor 



Sincerely 




A. Raymond Tye 
Chairman 




To solve the problem 
of digging a sewer in 
ttie congested Cause- 
way Street area in 
1884, engineers 
devised a unique 
system. They devel- 
oped tressels to carry 
buckets of gravel and 
dirt out of the hole so 
workers could place 
pipes in the ground. 
Then, traveling over- 
head, the buckets 
would return with 
the gravel and dirt for 
fill — a most effi- 
cient operation to 
keep the horse 
and carriage 
traffic moving. 



Looking Back 



Because of an abundant water supply, early 
travelers to America chose Boston as a primary 
settlement site. Landing at Charlestown in June 
of 1 630, English travelers confirmed reports of 
an excellent spring at what is now Dock Square. 
The Indian name for the region held promise— 
Shawmut, the place of living springs. 

The town's first reservoir was constructed 
to hold a central supply from these local springs 
and wells. But, as Boston began its inexorable 




growth, springs and wells ran dry, watersheds 
were supplanted, and the need for new sup- 
plies became acute. 

A dramatic and innovative solution was first 
offered by private interests who founded the 
Boston Aqueduct Corporation to transport 
water from Jamaica Pond to the City of 
Boston— a distance of over 1 5 miles. For over 
fifty years the Corporation supplied some 1600 
households and numerous other buildings and 
businesses, storing 3.2 million gallons of water 
for customer use. Soon, that was not enough. 

As continued expansion transformed Bos- 
ton from a town into a city, officials adopted an 
even more progressive plan to bring water 18 
miles from Long Pond, now called Lake Cochi- 
tuate, toa reservoir on Beacon Hill. Fed by this 
fresh supply Boston's waterworks continued to 
spread across the City meeting the needs of an 
ever-increasing population. 

The first sewers, constructed before 1 700, 
were designed primarilyto deal with storm run- 



off. Following the common practice of the time, 
residents were disposing of waste by burying it, 
or dumping it in nearby rivers and streams. Until 
Boston was granted its city charter, sewer ser- 
vice continued to be supplied by independent 
private interests. 

The first half of the nineteenth century wit- 
nessed two significant milestones in Boston's 
water and sewer services— the City's decision to 
allow the disposal of waste in the drainage sys- 
tem, and the advent of the flush toilet. As a 
result, by the 1870s, Boston was faced with a 
major health hazard. 

When the Board of Health requested a 
solution, a three-member panel of civil engi- 
neers designed a unique plan. They proposed 
construction of two main drainage systems 
north and south of the Charles Riverto tie 
togetherthe City's 32 independent sewer dis- 
tricts, and allow the sewage to be pumped fur- 
ther out into the Harbor Although this plan was 
simplistic by today's standards, it established a 
precedent in the City of Boston for planning 




water and sewer services to meet future needs 
and demands. 

In 1 884, the southern system was com- 
pleted, followed by the northern system in 
1890. By that time, state lawmakers had consol- 
idated the provision of eastern Massachusetts 
sewer services. 

Demand on the City's sewer system con- 
tinued to increase as the annexation of 
Charlestown, Dorchester and Roxbury, and a 
continuous flow of immigrants, boosted 
Boston's population to over 500,000 at the 
turn of the century. In addition, raw sewage 
from dozens of area cities and towns was 
being dumped into Boston Harbor off Moon, 
Nut, and Deer Islands. 

In an attempt to strengthen services, east- 
ern Massachusetts water and sewer operations 
were merged by the State Legislature in 1919 
into a single organization— the Metropolitan 
District Commission. When the addition of new 
water sources such as the Sudbury River and the 
Mystic Lake still failed to meet the need of the 





metropolitan area, MDC engineers envisioned 
an expanding supply beginning with the con- 
truction of the Wachusett Reservoir in central 
Massachusetts and culminating further west 
with the massive Quabbin Reservoir 

Completed in 1939, the Quabbin's capacity 
of 412 billion gallons made it the largest man- 
made water supply in the world. Through an 
intricate series of smaller reservoirs, pumping 
stations and deep rock tunnels, Boston resi- 
dents and visitors could enjoy an ample supply 
of clean water transported 65 miles to the city 
The Quabbin Reservoir was and remains today 
an impressive engineering feat; its existence, a 
tribute to the remarkable vision and foresight of 
its planners. 

However, by the 1970s, Boston had grown 
so rapidly that City officials were faced with the 
need for a more consolidated approach to the 
management of water and sewer services. The 
MDC sewage treatment facilities on Nut and 
Deer Islands were at capacity and water and 
sewer rates were insufficient to maintain the 
system properly 






The Calf Pasture 
Pumping Station in 
Dorchester went on 
line on January I, 
1884. Powered by a 
giant steam engine, 
its massive fly wheels 
were over 30 feet tall. 
Today the station is 
powered by electric- 
ity and is still func- 
tioning as a pumping 
station for Boston's 
sewer system. Its 
graceful stone facade 
and elegant architec- 
tural style is admired 
by historians 
throughout New 
England. 



From Lto R: Calf Pasture Pumping Station, Dorchester; 
Stony Brook Channels near Fenway; 
Construction Site at Turn of the Century 




Dating back to 1890, 

this Commission map 

is one of a senes of 

original calligraphied 

maps completed 
during the 1800s to 
represent Boston's 
sewer system. On 
occasion, these 
historical documents 
have assisted current 

Commission 
engineers in solving 

serious drainage 
problems in the more 

than 100 year old 
system. The compari- 
son of older maps 
w/ith their modern 
counterparts can 
often show the 
various changes in 
the topography 
of Boston. 



The Boston Water and Sewer Commission 



It was evident during tine mid 1 970s that a 
total restructuring of the water and sewer sys- 
tem would be necessary to ensure badly 
needed repairs to the more than 1 00 year old 
system and to provide an increase in funding 
levels for maintenance and new construction. 

Responding to this need for decisive action, 
officials designed an innovative strategy. They 
proposed the creation of an independent 
agency with the authority to set rates at ade- 
quate levels, and the fiscal autonomy to develop 
a rangeof financing techniques. 

Passing a Home Rule Petition, the City 
Council and the Mayor sent legislation to the 
State House which resulted in the creation of 
the Boston Water and Sewer Commission. 

Under the bill's provisions, a three-member 
commission would oversee operation of a 
newly formed organization to take possession 
of the City's water and sewer systems, retain all 
current personnel, hire additional staff as 
needed, and run the system in a manner similar 
to a private corporation. 

The Boston Water and Sewer Commission 
would be required to set water and sewer rates 
at sufficient levels to meet all costs for operation 
and maintenance. It would also have the fiscal 
power to raise money for capital improvements 
through the sale of revenue bonds. Addition- 
ally, experienced management personnel 
would provide the professional support neces- 
sary for the effective operation of a multi- 
million dollar agency. 

Citing the need "to avoid the . . . deteriora- 
tion of the financial . . . and physical condition" 
of Boston's water and sewer system, the need 
to "protect natural resources" and "insure the 
availability of . . . services at fair but sufficient 
rates," the State Legislature granted authority to 
the Boston Water and Sewer Commission on 
July 18, 1977. 

In January of 1978, the Commission pur- 
chased the City's water and sewer system along 
with all of its equipment for $24 million, and 
assumed responsibility for maintenance, repair 
and upgrading of the aging infrastructure. 

In its eight years of operation, the Commis- 
sion's tangible accomplishments and profes- 



sional standards have made it a national model 
for the provision of high quality municipal water 
and sewer services. Its emphasis on planning, 
controlling costs, and providing quality service 
to customers will ensure this continued level of 
excellence in the future. 





MASSACHUSETTS WATER 
RESOURCES AUTHORITY 

Until 1985, the Metropolitan District 
Commission (MDC) provided water and sewer 
services to the cities and towns of Eastern 
Massachusetts. Mirroring the concerns which 




created the Boston Water and Sewer Com- 
mission, state lawmakers established the 
Massachusetts Water Resources Authority 
(MWRA) to succeed the MDC. 

The MWRA is an independent agency serv- 
ing 60 communities in the metropolitan Boston 
area. Its dual mission is to repair and upgrade 
the former MDC water and sewer systems and 
to oversee the clean-up of Boston Harbor. 

The MWRA provides water and sewer ser- 
vices to each city or town within its system, but 
each community is responsible for the mainte- 
nance of those services within town lines. 
The Authority also operates and manages the 
sewage disposal facilities on Nut Island and 
Deer Island in Boston Harbor. 

The Boston Water and Sewer Commission 
is the Authority's largest customer, providing a 
third of total sewage revenue and almost half of 
total water revenue. The two agencies work 
together closely on such issues as water conser- 
vation, industrial waste control, and harbor 
clean-up. 

A major reason for creation of the MWRA 
was the need for massive financial resources to 
modernize water and sewer services and to 
manage the clean-up of Boston Harbor. 
Because the MDC was within the state budget 
system, it was restricted by Proposition V/2 and 
legislative oversight. As an independent author- 
ity MWRA has the flexibility to set rates and 
issue revenue bonds to raise the dollars its mis- 
sion requires. 

As such, the Authority has instituted sub- 
stantial rate increases to cover all costs of opera- 
tion. Rates will continue to increase as the 
Harbor clean-up program gets fully underway. 

The Authority has made an encouraging 
start on Harbor clean-up with the siting of a 
$1 .4 billion secondary sewage treatment facility 
on Deer Island. While the Commission recog- 
nizes the need for this investment, it also appre- 
ciates the impact of subsequent rate increases 
and will monitor Authority rate methodology 
while working with MWRA to achieve its 
worthy goals. 




Dating back to the 

1 700s, these wooden 

pipes were removed 

during construction 

oftheFaneuilHall 

Marl<etplace in the 

1970s. Made of a 

hard wood, usually 

oak, wooden pipes 

were the basis for the 

water and some of 

the sewer system in 

Boston. The pipes 

were gravity fed from 

water sources at 
relatively low eleva- 
tions and as a result 

were not able to 
develop much pres- 
sure in the system - 
Although not in use 

today miles of 
wooden pipes are still 
in the ground and 
remain intact and 
free from wood rot 
as long as they are 
kept wet. 




The brick work in the 

sewers of Boston is 

some of the most 

interesting in the City. 

Fired hard and set 
using a mortar with a 
low lime content, this 
brick resists deterio- 
ration from sewer 
gasses. Boston's orig- 
inal sewers in the 
early to mid 1 700s 
were wood, followed 
by stone and slate — 
then brick by the turn 

of the century. 

Masons still use brick 

to repair and adjust 

manhole and catch 

basin covers to 

street grades. 



A Record of Achievement 

BUILDING A MODERN SEWER 
SYSTEM 

The Commission's sewer system, which col- 
lects the City's waste water and storm drainage, 
connects ninety thousand service pipes extend- 
ing over a length of 1 300 miles. Numerous 
related facilities— pumping stations, gate 
houses, regulators, and tidegates— complete 
the system. 

the Boston Main Drainage System has 
served the City for more than 1 00 years and 
continues today as the system's central ele- 
ment. However, since its installation, the popu- 
lation it serves has grown to over 571 ,000. 
Added to this increased burden are over yi mil- 
lion commuters, shoppers and tourists visiting 
the City each day. 

REPLACING THE BOSTON MAIN 
INTERCEPTOR 

One of the major challenges facing the 
Commission was the need to expand the sewer 
system's capacity to keep up with growing 
demand and to counter serious deterioration 
affecting parts of the original system. 

In 1981, an ambitious plan was initiated to 
build two new large interceptors to replace 



sections of the old system . Construction of 
the new Boston Main Interceptor and East 
Side Interceptor is ahead of schedule and tar- 
getted for completion by 1 990. 

PLANNING FOR WASTE WATER 
FACILITIES 

A year after construction began on new 
interceptor pipes, the Commission launched a 
comprehensive study of the entire wastewater 
system. 

Completed in 1 985 the study included eval- 
uation of all large sewers, and those smaller 
sewers where problems were reported. It pro- 
duced an up-to-date set of maps, an inventory 
of all sewers and storm drains, evaluation of the 
condition and capacity of interceptors and 
major sewers, and predictions of future 
demands on the system . 

The sewer system, although more than a 
century old in many parts, was found to be in 
generally good condition. Suggestions for 
improvements ranged from cleaning of existing 
pipes, replacement or rerouting of others, to 
the institution of a maintenance program to 
clean and monitor major sewers on a routine 
basis. 




Sewerage Service Area 



■ BWSC sewerage system 



CLEANING UP BOSTON HARBOR 

The Boston Water and Sewer Commission 
is joining the Environmental Protection Agency, 
the Department of Environmental Quality Engi- 
neering, and the Massachusetts Water 
Resources Authority in an aggressive program 
to end the pollution of Boston Harbor. 

Chief among the Commission's efforts to 
end this environmental crisis is the installation 
of new sewer interceptors. With the addition of 
these pipes, sewage will no longer back up into 
Harborwatersduring periods of peak demand. 
The elimination of dry weather sewage over- 
flows will help keep area beaches free of debris 
and eliminate sources of coastal pollution. 

Approximately one third of Boston's sew- 
age system is constructed to combine collection 
of wastewater and storm drainage. This design, 
championed in the 1800s, did not considerthe 
effect of rapidly increasing demand. As rain 
water and wastewater enter the system at the 
same time, sewage can overflow at 58 locations 
throughout the city These combined sewer 
overflow (CSO) points are a source of Harbor 
pollution. 

One remedy is the separation of combined 
sewers to increase capacity Separation projects 





are now underway in the South End, Dorches- 
ter, Hyde Park, Jamaica Plain, Allston, Charles- 
town and South Boston. 

A second solution is treatment of the over- 
flow before it enters the Harbor Facilities for 
such treatment have been constructed at CSO 
sites at Cottage Farm and at Boston Sand and 
Gravel. Initiated by the M DC, these projects are 
now managed by the MWRA. A third facility 
has recently been completed at Constitution 
Beach in East Boston, and additional facilities 
are in the design stage at Fox Point and Com- 
mercial Point in Dorchester. 

A third approach to CSOs is storage of the 
overflow until the system regains the capacity 
required for proper treatment. 

As part of the recent comprehensive exami- 
nation of the sewer system, areas of excessive 
infiltration and inflow were identified for reme- 
dial action. To help prevent illegal discharges, 
the Commission conducts monthly inspections 
of storm drains, and performs dye tests on 
homes and businesses to detect illegal 
connections. 

Although the City of Boston is not solely 
responsible for Harbor pollution, the Commis- 
sion will continue to seek cost-effective and 
responsible strategies to help improve the envi- 
ronmental quality of Boston Harbor. 




Some manhole cov- 
ers are over 100 years 

old. Made of cast 

iron, covers like these 

are still seen on the 

streets of Boston. 

Their sizes and 

shapes document the 

history of the 

changes in the 

Boston Water and 

Sewer systems. The 

older covers have 

large knobs and 

letters which were 

designed to keep 

horses with heavy 

loads from slipping 

on wet streets. 

Before the 1940's 

foundries competed 

to design the most 

attractive and 

distinctive covers. 

Unfortunately those 

variations of designs 

were eliminated after 

the '40s when it 

became more cost 

effective to make the 

covers uniform. 




The Lowry pre-dates 
the postfire hydrant. 
It was used in areas of 

the City like Down- 
town and the North 

End where there 
were no sidewalks or 

room for standing 
hydrants. Strapped 

on fire trucks, the 

Lowrys would be 
attached to under- 
ground connections 
at the scene of a fire. 
They were also used 

at the end of dead 
end streets to blow 

out stagnant and 
rusty water Today it 

is possible to see a 

Lowry carried on a 

pumper truck 

because some are still 

needed for service 

in certain Boston 

neighborhoods. 



BRINGING CLEAN WATER TO 
BOSTON 

Currently the Commission buys 120 million 
gallons of water a day for the City of Boston. 
This water, among the purest in the nation, is 
purchased in bulk from the MWRA by the 
Commission at 29 metered connections and is 
distributed through the system's 1 080 miles 
of pipe to over 87,000 homes, apartments, 
businesses and institutions. 

When the Commission took possession of 
Boston's aging water system in 1 978, somehow, 
half of the water provided to the system, some 
74 million gallons each day, could not be 
accounted for. Although some loss is common 
for any water system, this rate was unusually 
high. 

The sources of the problem lay in two 
areas; first, pipe deterioration within the aging 
system; and secondly, a lack of properly func- 
tioning meters to measure water usage. 

However, by 1985, unaccounted for water 
in the City of Boston had been reduced by 
almost thirty-five percent. The results of the 
Boston Water and Sewer Commission's Leak 
Detection and Metering Program were 
profound. 



LEAK DETECTION AND REPAIR 

Leaks are inevitable along a thousand miles 
of pipe, much of which has been underground 
for over a century. Causes include pipe deterio- 
ration, soil condition around pipes causing 
shifting or corrosion, frost upheavals, vibration 
from heavy traffic, and "water hammer"— 
rapidly changing flow direction and pressure 
caused by opening and closing valves and 
hydrants. 

To combat water loss, the Commission 
plans the rehabilitation of eleven miles of pipe 
each year with the goal of replacing or relining 
all water mains, 100 or more years old, by the 
turn of the century. During the last three years, 
thirty-five miles of pipe have been repaired, 
keeping this program ahead of schedule. 

To reduce cost and minimize disruption of 
traffic flow and residential service, pipe rehabili- 
tation is scheduled to coincide as much as possi- 
ble with other municipal and state public works 
projects. 

The Commission's Leak Detection Program 
is one of the most successful in the country and 
is considered a model for other cities. 




Water Sen/ice Area 



•Major water main 



MODERN METERS 

The second phase of the Commission's 
efforts to reduce water loss is the repair of exist- 
ing meters when appropriate or the installation 
of modern meters where necessary. 

Of the 87,000 water accounts serviced by 
the Commission, some 75,000 are residential 
customers. The residential metering program, 
since its inception in 1978, has resulted in the 
installation of 40,000 new meters with remote 
reading capability Plans call for additional 
installations at a rate of 5000 a year. After new 
meters are installed, they will be replaced on a 
1 5-year cycle, as they tend to be less accurate 
overtime. 

System-wide distribution of accurate 
meters fairly allocates costs and reduces esti- 
mated bills. The Commission is also rerouting 
meter-reading sequences to increase pro- 
ductivity of meter-reading personnel. Options 
for use of advanced technology to further auto- 
mate and centralize the process are under 
consideration. 

Prior to creation of the Commission, use of 
water by the City was not metered . Meters have 
now been installed in many City departments, 
including Fire, Libraries, Police, Public Works, 





Schools, and Traffic and Parl<ing, making the 
City the system's second largest consumer 
Metering efforts are now focusing on the 
Health and Hospitals Department. 

The Commission's Metering Program has 
significantly reduced unaccounted for water 
and stimulated water conservation measures by 
system users. 

FIREFIGHTING 

As part of its water distribution system, the 
Commission maintains over twenty-two miles of 
high pressure fire pipes and over 1 3,000 
hydrants. 

The City is fortunate to be served by a water 
system which provides both elements critical to 
successful firefighting— adequate volume and 
sufficient pressure. 

The Quabbin Reservoir is situated 530 feet 
above the base level of Boston. The force of 
gravity propels water through aqueducts and 
tunnels to Boston where this natural pressure is 
utilized for firefighting, eliminating the need for 
expensive pumping, except in the case of sky- 
scrapers, which are serviced by high pressure 
pipes. Volume is provided by the over 470 billion 
gallon joint capacity of the Quabbin and 
Wachusett Reservoirs. 




To build Boston's 
brick pipes, engi- 
neers had to design 
gigantic wooden 
structures to aid in 
their construction. In 
the conduit near the 
Fenway, bricks for the 
bottom half of a pipe 
were laid and then a 
collapsible wooden 
frame was placed 
over them. Bricks 
were then placed 
over the structure to 
form the top half of 
the pipe. When the 
top section was com- 
pletely dry, the struc- 
ture was collapsed 
and moved down to 
the next section to 
begin again. This 
construction process 
was arduous and 
sometimes danger- 
ous for the workers 
involved. 




In 1 795 when wells 
proved unable to 
supply the town of 
Boston with water, 
the Boston Aqueduct 
Corporation devel- 
oped an innovative 
solution to the 
problem. They 
transported water a 
distance oil 5 miles 
from Jamaica Pond to 
downtown Boston. 
For over fifty years 
Jamaica Pond was 
the primary source of 
clean water to Bos- 
ton. Today the pond 
is used solely for rec- 
reational boating and 
fishing while Boston 

receives its water 
from the giant Quab- 
bin and Wachusett 
reservoir system in 
the western part of 
the state. 



Community Affairs 

Public interest in water and sewer issues 
has increased profoundly over the last few 
years. Part of this interest results from higher 
rates and the disruption of some neighborhood 
thoroughfares for maintenance and improve- 
ment. In addition, the critical issues of water 
conservation and pollution control have 
required the Commission to make every effort 
to increase public understanding of theiropera- 
tionsand goals. 

The Commission's Community Affairs 
Department has excelled at highly effective, 
cost-efficient methods of educating and 
informing its customers. Attractively designed 
and clearly written notices mailed with quar- 
terly bills, advertisements in neighborhood 
newspapers and regular appearances on news 
and talk shows all contribute to a high level of 
public understanding of Commission activities. 

More effective than any other method of 
outreach, however, the Department's commit- 
ment to go out to the neighborhoods and meet 
with residents has produced unified acceptance 
of the need to upgrade water and sewer ser- 
vices and clean up the Harbor 

Recent public information efforts have 
tackled issues such as the institution of an 



inclining block rating system and future 
increases in rates. By installing safety caps and 
locks on hydrants, the department has also 
moved to reduce the incidences of unauthor- 
ized opening of fire hydrants during summer 
months, a practice which lowers water pressure 
and endangers lives. 

In the area of water conservation, the 
department joins with the MWRA to distribute 
and display educational material offering con- 
sumers simple and practical ways to reduce 
their use of water 

The Commission recognizes that along 
with properfinancing and sound planning, an 
essential prerequisite for the successful imple- 
mentation of modern water and sewer services 
will be an informed public. 

During the coming years, as Harbor clean- 
up impacts neighborhoods and forces contin- 
ued rate increases, the Community Affairs 
Department will be challenged as never before. 





Professional Management 

As an independent agency with a single 
focus, the Commission has been able to 
improve dramatically top management. 

A three-member Board of Commissioners, 
appointed to four year terms by the Mayor sub- 
ject to confirmation by the City Council, has 
responsibility for the formation of basic policy. 
Members meet on a regular basis for consider- 
ation of Commission business. 

The Commission Chairman is A. Raymond 
Tye, serving his second term after being reap- 
pointed in 1984. Chairman Tye is Chairman of 
the Board of United Liquors, Ltd., a wholesale 
beverage distribution firm. Active in civic affairs, 
he is a Trustee of Beth Israel Hospital, an Honor- 
ary Trustee of the Combined Jewish Philanthro- 
pies and a member of the Board of the Greater 
Boston Convention and Tourist Bureau. 

Commission member Lisa Chapnick, 
appointed to the Board in 1 985, is Director of 
the Public Facilities Department of the City of 
Boston. Commissioner Chapnick is a member 
of the Mayor's Development Cabinet and serves 
as the City's liaison to the Commonwealth on 
housing and development issues. Her wide 
range of public sector experience includes ser- 
vice as Commissioner of the City's Traffic and 
Parking Department, and as a member on 
the MBTAAdvisory Board, the Boston Public 
Schools Task Force, and the Allston Civic 
Association. 



Commission member Mary Nee, Director of 
the Mayor's Office of Capital Planning, was 
appointed in 1986. Experienced in budget man- 
agement and long range capital planning, 
Commissioner Nee provides the financial exper- 
tise required by statute. She also serves on the 
Mayor's development and financial commit- 
tees, and on the Board of the Boston Industrial 
Financing Authority 

The organization is structured underthe 
Office of the Executive Director, and includes 
departments managed by the Director of 
Administration, the Chief Engineer, the General 
Counsel, the Director of Management Informa- 
tion Systems, and the Treasurer. 

The Commission staff has remained at a 
stable complement of approximately 500 since 
1 980 and includes personnel with professional 
qualifications in finance, accounting, engineer- 
ing, construction management and law, as well 
as the technical skills required to maintain water 
and sewer services. 




The advent of the 

flush toilet in the 

1820s and the City's 

decision to allow 

disposal of waste in 

the drainage system 

caused a major 

health hazard. In 

response, engineers 

developed the 
unique plan to pump 
sewage away from 
the City out to Moon 
Island. At Columbia 
Point the sewage was 

pumped through 
channels to the Shaft 
House where it fell 
through a 4-foot 
diameter conduit, a 
distance of 170 feet, 
to the 7-foot diame- 
ter tunnel below, 
which carried the 
flow to the holding 
tanks of Moon Island. 
The tanks were 
opened with the 
outgoing tide and 
the sewage was 
washed out to sea. 




A. Raymond Tye 

CHAIRMAN 



Mary Nee 

COMMISSIONER 



Lisa G. Chapnick 

COMMISSIONER 



David L. Conlon 

TREASURER 




Francis W. Gens 

EXECUTIVE DIRECTOR 



Cliarles Button 

CHIEF ENGINEER 




Riclnard Luccio 

GENERAL COUNSEL 



Michael T. Feeney 

DIRECTOR OF 
ADMINISTRATION 



Edmund Ackerson 

DIRECTOR OF M.I.S. 



Water and Sewer Rates 

A major impetus for creation of the Com- 
mission was the need to generate adequate rev- 
enue to meet the cost of proper operation and 
maintenance of the City's water and sewer 
systems. 

Priorto 1977, all revenue from water and 
sewer charges was placed directly in the City's 
general fund. The Department of Public Works 
Water and Sewer Divisions were forced to com- 
pete with other departments for annual fund- 
ing. Because these divisions never received 
enough budgetary support and rates were not 
in line with the actual costs of delivering these 
services, the system suffered physical 
deterioration. 

Currently, rates must be established at a 
level sufficient to generate revenues to recover 
the full cost of operations on a fair and equita- 
ble basis, with 1 5% water discounts in place for 
the elderly and fully disabled. If an operating 
deficit occurs, it must be recovered the follow- 
ing year, and any surplus must either be applied 
to the next year's rate level, or returned to the 
City. The rate making process considers legisla- 



Combined Water & Sewer Rates 
(/1000CU.FT.) 



Combined Yearly Rate 
In Dollars 




83 84 85 



r^ 48.7 
I Yearly Pert 



13.4 4.0 — 7.8 3,6 
Percentage Increase 



7.5 7,0~~] 



Revenue Analysis 
(SOOO's) 



PriorSurplus 1.1% 

(Deficit) 

$772 




1985Total Revenue Requirement: $68,644 

tive, financial, legal and consumption analyses. 

Capital improvements defined as system 
replacement or repair are included in the cost of 
operations; improvements or extension of ser- 
vice are financed through the sale of bonds. 
The debt service on these bonds, paid out of 
operating expenses, also affects rate levels. 

During the Commission's first year, water 
and sewer rates were increased by 49%, raising 
them to adequate levels sufficient to fund oper- 
ations. However, since the first year, rate 
increases have tempered to an average of 8% a 
yearthrough 1985. 

The Commission's customer base includes 
City residents, businesses and institutions. 
While residents make up 86% of all accounts, 
they consume only 24% of total services. 
Twenty large volume customers— the City, State 
and Federal governments, area hospitals, hotels 
and universities— account for one-quarter of all 
charges. 

Charges to customers produce more than 
80% of the Commission's total revenue. Addi- 
tional revenue is generated through special 



Average Annual Increase; 8.15 



service fees and charges, state and federal 
reinnbursements, and income from 
investments. 

The creation of the MWRA has had a sub- 
stantial effect on Commission rate levels. As the 
Authority embarks on a Harbor clean-up pro- 
gram, MWRA communities are feeling the 
impact. Today charges for MWRA services have 
accounted for approximately one-third of the 
Commission's annual expenses. 

Expenditures by the Authority are likely to 
produce average annual rate increases of 
approximately 1 5% for the next five years. 
Whilethe Commission's financial stability will 
not be threatened because it has prepared for 
this necessary period of intensive capital invest- 
ment, Boston Water and Sewer customers will 
be faced with continued rate increases. 

To assure accurate rate levels, the Commis- 
sion carefully monitors metering at the 29 
points where water is delivered by the MWRA, 



Combined Capital Improvements to 
Water & Sewer Property 



$96,015,164 
$93,753,284 



$70,296,763 
$65,816,991 

$58,882,238 

$54,419,330 
$51,151,258 



$43,542,231 B 
$37,427,351 I I 

I 1 1 1 



Combined Water & Sewer 
Projected CIP Spending Levels 




1986 87 88 89 

and independently reviews Authority rate- 
making methodology 

INCLINING BLOCK WATER RATES 

The MWRA is required by its enabling legis- 
lation to conduct a review of the environmental, 
social and economic impacts of its charges for 
water and sewer sen/ices. The legislation also 
encourages MWRA service area communities 
to institute innovative rate-making strategies to 
promote water conservation. 

In response, the Commission had the fore- 
sight to institute the inclining block rate in 
1985. The inclining block rate structure is com- 
posed of ten steps designed to correspond to 
customer consumption, ranging from single 
family household to large industrial users. Its 
impact on water use is closely monitored to con- 
tinually assess the value of the program. 

At present the MWRA is asking service area 
communities to follow the leadership of the 
Boston Water and Sewer Commission and insti- 
tute the inclining block rate structure in their 
communities. 



1977 78 79 80 81 82 83 84 85 86* 
'Through 6/30/86 



Financial Management 

FINANCIAL STABILITY 

Since acquiring the water and sewer sys- 
tems fronn the City of Boston, the Commission 
has employed a series of innovative financial 
strategies which have allowed substantial capi- 
tal improvement, while at the same time secur- 
ing a reputation for the Commission as one of 
the best managed public utilities in the country. 

The initial step towards stability most visible 
to Boston residents was a 49% rate increase in 
the Commission's first year. This single large 
jump was required by the loss of rate subsidies 
formerly provided by the City because rates had 
been held below levels required to properly 
fund the system. Rate increases have since mod- 
erated, averaging approximately 8% a year 
through 1985. 

Revenue from rates, however, only funds 
operation and maintenance. Improvements to 
modernize service and end pollution of Boston 
Harbor are funded through the sale of bonds. 

The Commission first acquired substantial 
debt when it purchased the water and sewer 



system for $24 million. Added to that was $13.2 
million in outstanding obligation bonds previ- 
ously issued by the City. To cover those costs and 
to generate funds to begin capital improve- 
ments, the Commission issued its first series of 
bonds. Because this first issue of $45 million 
was guaranteed by the City the Commission 
was required to accept a number of covenants 
restricting its financial flexibility 

Within the next few years, however, the 
Commission developed a reputation for fiscal 
integrity and stability Its overall debt manage- 
ment policy allowed independent access to the 
financial marketplace and use of a broader 
range of financing strategies. 

FINANCIAL INNOVATION 

By 1984, the Commission was ready to 
establish a debt structure which would provide 
the foundation for funding of all future capital 
requirements. 

The first step was to issue $69.7 million in 
General Revenue Bonds to refinance the Com- 




mission's debt, fund capital improvements, and 
institute a state-of-t lie-art bond resolution to 
allow maximum flexibility within the everchang- 
ing financial marketplace. The Commission's 
1984 Revenue Bonds were structured as junior 
lien bonds, subordinate to future debt, provid- 
ing future increased debt capacity. 

In 1 985, the Commission took advantage 
ofthe flexibility of its new bond resolution by 
issuing $51 millionof variable rate debt. Under 
this "flexi-note" program, the Commission 
accessed the short-term bond market which 
historically had traded at lower interest rates 
than the long term market, thus generating 
substantial savings to the Commission. 

The final element of what is termed the 
Commission's "Financial Trilogy" culminated in 
August of 1 986 with the execution of a combi- 
nation Rolling Cross-Over Refunding and New 
Money Issue of $85 million in general revenue 
Bonds. 

The Rolling Cross-Over Refunding allows 
the Commission to pay the low short-term inter- 








est rates associated with the 1 985 "flexi-note" 
program; at the same time, it secured a take out 
forthe 1 985 issue at historically low long-term 
rates in the event of future higher short-term 
rates. The 1986 Revenue Bonds also provide 
funds for capital improvements through 1989. 

The combined result of the Flexi-note and 
Rolling Cross-Over Programs has been a savings 
to the Commission estimated by Goldman, 
Sachs to be nearly $40 million in debt services 
costs over the next 30 years. 

Citing "continued good financial perfor- 
mance, continued increased operating efficien- 
cies, and capable management," Standard & 
Poor's has assigned the Commission an "A" rat- 
ing. Moody's has also recently raised its rating 
from Baa to Baal . Sophisticated financial plan- 
ning and proper management of revenue has 
achieved forthe Commission a clean audit opin- 
ion for eight straight years. 

As the Commission prepares to enter a 
period of maximum capital expenditure, its 
financial foundation has never been stronger. 







Preparing for the Future 

Since the City's earliest days, provision of 
water and sewer services has required careful 
planning. Preparing for the future remains 
essential as Boston continues to grow. 

For the short term, the Comnnission pre- 
pares a plan each year which projects activity 
for the coming three-year period. Generating 
an average of 30 projects annually capital 
improvement programs fulfill the Commission's 
statuatory responsibility to repair and modern- 
ize its water and sewer system. 

The infrastructure now in place has an 
approximate value of $5 billion. During the last 
eight years, the Commission has invested $133 
million to improve its property, plant and 
equipment. 

The Commission's achievements include 
construction of the new sewer inceptors to 
replace substantial portions of the Boston Main 
Drainage System, repair or replacement of 10 
miles of sewers, installation or maintenance of 
all the tide gates in our system, rehabilitation of 
80 miles of water pipe, installation of 40,000 
remote reading meters and improved metering 
of City facilities. 

Plans for the next three years focus on 
sewer projects to increase capacity of the sys- 
tem to minimize sewer overflows and thereby 
significantly contribute to the cleanup of Bos- 
ton Harbor. Investment in the water system will 
include additional pipe construction as part of 
the Commission's goal of rehabilitation of all 
1 00 year old water mains by the year 2000, and 
continued installation of residential and public 
meters. 

The projected costs in the 1986-1988 Capi- 
tal Improvement Program are $22.8 million for 
water and $35.2 million for sewer, totalling $58 
million. 

Concurrent with the Commission's capital 
improvement program is MWRA's investment in 
its delivery and recovery systems. For the same 
period. Authority costs will total $275 million 
for water and sewer projects. 

A comprehensive study of the downtown 
area is now underway to assess water, waste- 
water and storm drainage capacity in light of 
rapid development. Also nearing completion is 
a detailed examination of those sewer system 
areas identified as potential points of high 




ground water and surface runoff resulting in 
excessive inflow and infiltration. This study will 
analyze each indicated trouble spot in detail to 
determine cost effective remedies. 

The Commission is also moving to comput- 
erize its maintenance to respond more quickly 






clockwise from Upper Left: Jamaica Pond, Haveys Beach, 
Quabbin Reservoir 



to customer needs and to target preventative 
measures. With the impending acquisition of a 
site for consolidation of headquarters and all 
field operations, customers can look forward to 
reduced costs and better service from improved 
coordination. 

WATER CONSERVATION 

As one of the most effective programs of its 
kind anywhere in the country, leak detection 
will continue to be at the heart of the Commis- 
sion's water conservation program. Few conser- 
vation efforts can boast a savings of tens of 
millions of gallons each day As an added mea- 
sure, the institution of the successful inclining 
block rate structure further encourages conser- 
vation through price inducement. Educational 
material, highlighting simple ways to save water 
will also continue to be distributed to customers 
on a regular basis. As a result of improved 
awareness, Boston's per capita residential con- 
sumption is already well below the national 
average at 65 gallons a day 

THE NEXT CHALLENGE 

Much has been accomplished in the last 
eight years towards the Commission's goal of 
providing superior water and sewer services to 
the City of Boston. But even as this task is mas- 
tered, greater challenges now begin— the 
clean-up of Boston Harbor and the long-term 
provision of an adequate water supply 

Financial resources and political initiative 
are in place. The same vision that guided plan- 
ners to tap Long Pond, construct the Boston 
Main Interceptor System, and build the Quab- 
bin Reservoir must guide us to shape our future 
as well. 

The restoration of Boston Harborwill con- 
tinue to impact the health and growth of the 
City of Boston. We will not see immediately the 
fruits of our work. Yet, a day will come when 
Boston Harbor will once again be a source of 
pride and commerce and our children will 
thank us as we thank those whose foresight 
and planning has enriched and improved our 
lives. 




Boston Harbor 



Auditors' Opinion 

Boston Water and Sewer Commission: 

We liave examined tlie balance sheet of tiie Boston Water and Sewer Commission as of December 
31 , 1985 and the related statements of operations, of Commission equity and of changes in financial 
position for the year then ended. Our examination was made in accordance with generally accepted 
auditing standards and, accordingly included such tests of the accounting records and other such 
auditing procedures as we considered necessary in the circumstances. The financial statements of the 
Boston Water and Sewer Commission for the year ended December 31,1 984 were examined by other 
auditors whose report, dated April 1 9, 1 985, expressed an unqualified opinion on those statements. 

In our opinion, the financial statements for 1985 present fairly the financial position of the Boston 
Water and Sewer Commission at December 31 , 1 985 and the results of its operations and changes in 
its financial position for the year then ended, in conformity with generally accepted accounting princi- 
ples applied on a basis consistent with that of the preceding yean 



April 11, 1986 



Balance Sheets, December 31, 1985 and 1984 



ASSETS 

CURRENT ASSETS: 

Cash 

Trusteed assets 

Nontrusteed assets 

Accounts receivable— customers, less 

allowances of $4,389,000 in 1985 and 

$7,274,000 in 1984 
Earned revenues in excess of billings, 

less allowances of $632,000 in 1 985 

and $945,000 in 1984 
Accounts receivable— federal and state 

construction grants 
Prepaid expenses 
Deferred charges 
Total current assets 

TRUSTEED ASSETS 

NONTRUSTEED ASSETS 

PROPERTY, PLANT AND EQUIPMENT NET 

DEFERRED CHARGES 

DEBT ISSUE COSTS, LESS AMORTIZATION 

TOTAL 



NOTES 



4,7 
4 



1985 



1984 



1,2,7 



616,806 $ 521,626 
22,034,432 13,533,696 

19,313,246 3,401,999 



27,338,903 27,626,887 



7,578,599 



8,714,809 



8,312,284 4,804,263 

1,194,653 950,532 

8,825,590 2,064,092 





95,214,513 


61,617,904 


4 


22,904,826 


15,863,663 


4 


33,809,763 


5,122,472 


3,8 


156,400,245 


135,415,016 


1,2 


18,588,284 


10,843,828 




3,679,475 


2,627,256 




$330,597,106 


$231,490,139 



See notes to financial statements. 



LIABILITIES AND COMMISSION EQUITY 

CURRENT LIABILITIES: 
Payable from current assets: 

Accounts payable 

Other accrued liabilities 

Due to City of Boston, net 
Total 
Payable from restricted asset funds: 

Massachusetts Water Resources 
Authority assessment for water and 
sewerage 

City Bonds, including accrued 
interest 
Total 
General Revenue Bonds, 1984 Series A, 

including accrued interest 
General Revenue Bonds, 1 985 Series A, 

including accrued interest 
Deferred revenues 
Total current liabilities 

OTHER LIABILITIES: 

Massachusetts Water Resources Authority 

assessment for water and sewerage 
City Bonds 
General Revenue Bonds, 1984 Series A, 

net of unamortized original issue 

discount 
General Revenue Bonds, 1 985 Series A 
Deferred revenues 
Other liabilities 
Total other liabilities 

COMMISSION EQUITY: 
Contributed capital 
Accumulated deficit 
Total Commission equity 



TOTAL 



NOTES 



1985 



1984 



4,301,686 

11,083,122 

5,481,835 



2,764,257 

10,320,884 

6,718,817 



20,866,643 19,803,958 



27,245,808 
849,224 



20,849,040 
889,365 





28,095,032 


21,738,405 


4 


3,978,413 


554,735 


4 
1,2 


784,375 
18,973,734 
72,698,197 


10,528,478 
52,625,576 


5 
4 


16,121,457 
4,215,000 


10,825,438 
4,995,000 


4 
4 
1,2 


64,372,068 

50,800,000 

51,799,980 

3,622,871 

190,931,376 


64,662,848 

43,395,309 

1,475,000 

125,353,595 


1 


72,514,229 
(5,546,696) 
66,967,533 


59,057,664 
(5,546,696) 
53,510,968 




$330,597,106 


$231,490,139 



statements of Operations 

for the Years Ended December 31; 1985 and 1984 



TOTAL WATER SEWER 



NOTE 1985 1984 1985 1984 1985 1984 
OPERATING REVENUES: 

Water and sewer usage $50,776,445 $47,684,778 $27,277,897 $26,782,406 $23,498,548 $20,902,372 

Firepipe 951,135 807,807 951,135 807,807 

Other 377,776 248,565 202,866 137,954 174,910 110,611 

Total operating revenues 52,105,356 48,741,150 28,431,898 27,728,167 23,673,458 21,012,983 

OPERATING EXPENSES: 

Operations 32,700,176 32,258,714 18,337,123 18,457,671 14,363,053 13,801,043 

Engineering and administrative 9,470,741 9,178,404 5,085,788 5,094,015 4,384,953 4,084,389 

Maintenance 3,433,962 4,321,214 1,810,639 2,564,547 1,623,323 1,756,667 

Depreciation 2,691,923 2,539,940 1,371,682 1,273,349 1,320,241 1,266,591 

Total operating expenses 48,296,802 48,298,272 26,605,232 27,389,582 21,691,570 20,908,690 

TOTAL OPERATING INCOME 3,808,554 442,878 $ 1,826,666 $ 338,585 $ 1,981,888 $ 104,293 

OTHER INCOME (EXPENSE): 

Interest income 9,646,691 6,573,862 

Interest expense (9,313,374 ) (6.835,637 ) 

INCOME FROM CURRENT 

OPERATIONS 1 4,141,871 181,103 

PRIOR YEAR RATE SURPLUS 
RECOGNIZED IN 

CURRENT YEAR 772,365 591,262 

CURRENT YEAR RATE SURPLUS 
DEFERRED TO 

SUBSEQUENT YEAR 1 (4,914,236) (772,365) 

NET INCOME $ -0- $ -0- 



See notes to financial statements. 



statements of Commission Equity 

for the Years Ended December 31, 1985 and 1984 



BALANCE, JANUARY 1, 1984 

CONTRIBUTIONS IN AID OF 
CONSTRUCTION 

AMORTIZATION OF RELATED FIXED 
ASSETS 

BALANCE, DECEMBER 31, 1984 

CONTRIBUTIONS IN AID OF 
CONSTRUCTION 

AMORTIZATION OF RELATED FIXED 
ASSETS 

BALANCE, DECEMBER 31, 1985 



TOTAL 

CONTRIBUTED ACCUMULATED COMMISSION 

CAPITAL DEFICIT EQUITY 

$51,163,589 $(5,546,696) $45,616,893 

8,268,075 8,268,075 

(374,000 ) (374.000) 

59,057,664 (5,546,696) 53,510,968 

13,902,552 13,902,552 

(445,987 ) (445,987) 



$72,514,229 $ (5,546,696) $66,967,533 



See notes to financial statements. 



statements of Changes in Financial Position 
for the Years Ended December 31, 1985 and 1984 



7985 



1984 



CASH FROM OPERATING ACTIVITIES: 

Net income 

Depredation and annortization (no cash 

required) 
Realized from (used for) operating 

activities: 

Accounts receivable— net 

Earned revenues in excess of billings- 
net 

Deferred charges 

Accounts payable assessments 
accrued liabilities and other 

Deferred revenues 
Total 

CASH FROM FINANCING ACTIVITIES: 
Bond proceeds 
Bond liquidation 
Bond payments 

Contributions in aid of construction- 
net 
Debt issue costs 
Total 



$ -0- 


$ -0- 


3,293,589 


2,728,220 


(3,220,037) 


(3,781,377) 


1,136,210 


(1,573,987) 


(14,505,954) 


(11,489,104) 


18,012,134 


12,181,104 


16,849,927 


4,057,469 


21,565,869 


2,122,325 


51,000,000 


64,662,848 




(64,042,331) 


(815,000) 


(1,405,000) 


13,456,565 


7,894,075 


(1,294,665) 


(1,153,803) 


62,346,900 


5,955,789 



CASH USED FOR INVESTING ACTIVITIES: 
Purchase of property, plant, and 
equipment 



(23,677,152) (19,250,022) 



CASH AND SECURITIES: 
Increase (decrease) during year 
Balances at beginning of year 

Balances at end of year 



60,235,617 
38,443,456 



(11,171,908) 
49,615,364 



$ 98,679,073 $ 38,443,456 



YEAR END BALANCES COMPRISED OF: 

Cash 

Current portion: 

Trusteed assets 

Nontrusteed assets 
Noncurrent portion: 

Trusteed assets 

Nontrusteed assets 

TOTAL CASH AND SECURITIES 



$ 616,806 $ 521,626 



22,034,432 
19,313,246 

22,904,826 
33,809,763 



13,533,696 
3,401,999 

15,863,663 
5,122,472 



$ 98,679,073 $ 38,443,456 



See notes to financial statements. 



Notes to Financial Statements 



1. ORGANIZATION, BASIS OF 
PRESENTATION AND SUMMARY 
OF SIGNIFICANT ACCOUNTING 
PRINCIPLES 

The Boston Water and Sewer Commission 
(the Commission) was created by the Boston 
Water and Sewer Reorganization Act of 1 977 
(the Enabling Act) to take over operations, 
assets, and certain liabilities of the City of 
Boston (the City) and its Department of Public 
Works (the D.P.W.) pertaining to the City's water 
and sewerage works systems. 

The Enabling Act requires that the Commis- 
sion maintain its books and records and present 
its financial statements on an accrual basis in 
accordance with generally accepted account- 
ing principles. The Commission has also 
adopted accounting policies and practices to be 
utilized in connection with its rate setting pro- 
cess. These policies and practices, which are in 
conformity with sound and appropriate rate 
making practices used by similar organizations, 
require recognition of certain expenses and 
expenditures on a basis different than generally 
accepted accounting principles for a nonregu- 
lated business. 

The Commission has adopted Financial 
Accounting Standards Board Statement (FAS) 
No. 71 , "Accounting for the Effects of Certain 
Types of Regulation." Under that Statement, 
revenues which are raised currently to pro- 
vide for certain costs that are expected to be 
incurred in the future are recorded as deferred 
revenues. Additionally, certain costs are 
deferred if future revenues result in amounts 
equal to the deferred costs. The effect of these 
changes allow a more meaningful presentation 
of the results of operations, in that the financial 
statements under generally accepted account- 
ing principles more closely reflect the Commis- 
sion's rate setting financial results. 

The following is a reconciliation outlining 
the effects of FAS No. 71 on the statement of 
operations forthe years ended December 31, 
1985 and 1984. 



1985 



1984 



Net income (loss) 

prior to deferrals $5,294,324 $(7,431,636) 
Revenues and 
expenses deferred 
in accordance 
with FAS No. 71: 
Deferred 
revenues: 
Excess of reve- 
nues raised 
over 

expenditures (2,096,566) 
Other (4,388,437) (3,876,365) 

Deferred expenses 5,332,550 11,489,104 
Income from current 
operations $4,141,871 $ 181,103 



The Enabling Act requires that any net sur- 
plus or deficit, as defined by the rate setting 
process, must either be returned to the City or 
applied to offset water and sewer rates forthe 
following year The Commission has applied 
$4,91 4,236 and $772,365 for the years ended 
December 31, 1985 and 1984, respectively to 
offset rates in the respective subsequent years. 

REVENUES 

Water and sewerage fees are billed to users 
of the systems on a quarterly cycle basis. Reve- 
nues are accrued for periods between the termi- 
nation of billings for the various cycles and the 
end of the year 

SHORT-TERM INVESTMENTS 

Short-term investments, consisting of 
direct and unconditionally guaranteed obliga- 
tions of the U.S. Government; repurchase 
agreements and money market units secured 
by government securities, are stated at cost 
plus accrued interest (approximating market). 

PROPERTY, PLANT AND EQUIPMENT 

Property, plant and equipment is stated at 
cost. Depreciation is provided on the straight- 
line method based on the estimated useful lives 
of the various classes of assets. Maintenance 
and repairs are charged to expenses as incurred. 
Major renewals or betterments are capitalized 
and depreciated overtheirestimated useful 
lives. 



Contributions received in aid of specific 
construction projects are considered contrib- 
uted capital and are included in Commission 
equity. Accordingly, amortization of the related 
fixed assets is charged directly to Commission 
equity and is not included in the accompanying 
statements of operations. 

The ranges of estimated useful lives used in 
computing depreciation are as follows: 



Water: 
Works 


60 to 100 


Meters and hydrants 


lOto 40 


Sewerage: 




Works 


40 to 75 


Pumping station 


35 


Other 


3 to 15 



2. DEFERRED CHARGES 
AND REVENUES 

The following is a summarization of the major 
components of deferred charges and revenues 
as reflected in the accompanying balance sheet: 



The Commission capitalizes interest cost related 
to construction of assets for its own use. Inter- 
est totaling approximately $722,000 and 
$6 13,000 was capitalized in 1985 and 1984, 
respectively. 

BOND ISSUE COSTS 

Expenses related to the issuance of bonds 
are amortized on a weighted-average basis over 
the life of the bonds. 

RECLASSIFICATION 

Certain prior year amounts have been re- 
classified to conform to current year presentation. 



Deferred charges: 
Provision for pension 

settlement (see 

Note 7). 
Excess of amounts 

accrued for water 

and sewerage 

assessments over 

cash payments 
Provision for 

litigation claims 
Provision for 

adjustments 
Total deferred 

charges 
Current deferred 

charges 
Noncurrent deferred 

charges 
Total 



1985 1984 



(OOO's OMITTED) 
$ 8,300 $ 8,300 

14,400 2,763 
1,744 1,845 
2,970 - 



$27,414 $12,908 

$ 8,826 $ 2,064 

18,588 10,844 

$27,414 $12,908 





(OOOS OMITTED) 


Deferred revenues: 






Capital 






improvement 






reimbursements 


$34,391 


$31,046 


Principal payments 






on long-term 






debt 


8,814 


8,835 


Allowance for 






slow collection 


12,196 


9,682 


Other 


15,373 


4,360 


Total deferred 






revenues 


$70,774 


$53,923 


Current deferred 






revenue 


$18,974 


$10,528 


Noncurrent deferred 






revenue 


51,800 


43,395 


Total 


$70,774 


$53,923 



3. PROPERTY, PLANT AND 
EQUIPMENT 

The cost of water and sewerage plant and 
equipment in service and related accunnulated 
depreciation at December 31, 1985 and 1984 
are summarized as follows: 



Water: 

Works 

Meters and 
hydrants 
Total water 



Sewerage: 

Land 

Works 

Pumping station 
Total sewerage 
Other 
Total 
Less accumulated 

depreciation 
Total 
Construction in 

progress 
Total 



1985 


1984 


$ 58,285,036 


$ 42,088,279 


7,574,543 
65,859,579 


7,079,891 
49,168,170 


195,482 

51,397,296 

6,772,785 

58,365,563 

5,037,862 

129,263,004 


195,482 

44,675,126 

6,729,843 

51,600,451 

4,767,545 

105,536,166 


18,711,037 
110,551,967 


15,565,727 
89,970,439 


45,848,278 
$156,400,245 


45,444,577 
$135,415,016 



1^84_ 4 BONDS PAYABLE 

REVENUE BONDS 

In April 1985, the Commission issued 1985 
Series A General Revenue Bonds (1985 Bonds) 
in order to provide funds for projects under the 
Commission's ongoing capital improvement 
programs and other capital and operating 
needs. The bonds have a principal balance of 
$51 ,000,000 at December 31,1 985, bearing 
variable interest rates (6.375% and 7.375% at 
December31, 1985), maturing in two equal 
amounts on November 1, 2014and 2015 and 
require annual sinking fund contributions 
through the year 201 4. 

In December 1 984, the Commission issued 
1 984 Series A General Revenue Bonds (1 984 
Bonds) in order to advance refund a series of 
1980 System Revenue Bonds. The bonds have 
a principal balance at December 31 , 1 985 and 
1 984 of $69,670,000, bearing interest rates 
ranging from 6.75% to 10.5% with maturity 
dates ranging from January 1 , 1 986 to January 
1 , 2011 . Under the Refunding Trust Agreement, 
the Commission deposited sufficient funds with 
the 1 980 Bond Trustee to pay when due, the 
principal of and interest on all 1 980 Bonds 
through January 1 , 2001 , the final maturity 
date thereon. By depositing such funds with the 
1980 Bond Trustee under the Refunding Trust 
Agreement, the Commission caused the 1 980 
Bonds to be no longer outstanding under the 
1980 Resolution. The 1980 Bondholders have 
no right, title, interest or liens in any other 
funds, real or personal property or assets of 
the Commission otherthan the amounts held 
underthe Refunding Trust Agreement and 
pledged for their benefit thereunder. 



The Resolution Establishing Issue of Reve- 
nue Bonds adopted by the Comnnission on 
December 6, 1 984 places certain restrictions on 
the Commission's operations. It requires that 
rates, charges and fees be set at a level suffi- 
cient to meet a net revenue test on an annual 
basis and requires that all revenues, as defined, 
be deposited in a Revenue Fund maintained by 
a fiscal agent. Amounts held in the Revenue 
Fund are to be disbursed to and withdrawn from 
other funds provided for in the Resolution. The 
Resolution provides that all excess cash be held 
in the Revenue Fund until the last business day 
ofthefiscalyear. At that time, if certain conve- 
nants are met, the Commission has the option 
to remove any excess cash from the Revenue 
Fund and place such cash in a fund not 
restricted by the Resolution. 

In compliance with the Resolution, the 
Commission has established both trusteed 
and non-trusteed funds with assets, principally 
short-term securities, which are restricted for 
payment of specified liabilities. The Commis- 
sion has options for early redemption of reve- 
nue bonds starting in 1995 at prices ranging 
from 1 03 to 1 00 percent of face value. 



CITY BONDS 

At the time of its creation, the Commission 
assumed general obligation certificates of 
indebtedness of the City (City Bonds) pertaining 
to the water and sewerage works systems with 
aggregate principal balances of $4,995,000 
and $5,81 0,000 at December 31 , 1 985 and 
1984, respectively, bearing interest rates rang- 
ing from 4.25% to 8% with maturity dates 
ranging from November 1 986 to December 
1999. Payments for principal and interest are 
made directly to the City in accordance with 
the original maturity and interest schedule. 

Bond maturities and sinking fund require- 
ments of the 1 985 Bonds, the 1 984 Bonds, and 
the City Bonds, in aggregate, at December 31, 
1985 are as follows: 



1986 

1987 

1988 

1989 

1990 

Thereafter 

Total 

Unamortized debt discount 

Accrued interest 

Total bonds payable 

1985 Bonds 
1984 Bonds 
City Bonds 
Total bonds payable 



$ 1,630,000 

1,660,000 

1,920,000 

1,950,000 

2,050,000 

116,455,000 

125,665,000 

(4,647,932) 

3,982,012 

$124,999,080 

$ 51,584,375 

68,350,481 

5,064,224 

$124,999,080 



S.MASSACHUSETTS WATER 
RESOURCES AUTHORITY 

On January 1 , 1 985, legislation became 
effective creating the Massachusetts Water 
Resources Authority (the Authority) which 
transferred possession, control and operations 
of the Metropolitan District Commission (MDC) 
Waterworks and Sewer System to the Authority. 
The Authority commenced operations on 
July 1,1985. 

The Authority (previously MDC) provides all 
the Commission's water and sewer treatment 
requirements and assesses the Commission for 
its actual operating and capital expenses. Pay- 
ments for the prior calendar year's water and 
sewer treatment assessments are due semi- 
annually in November of the current year and 
in May of the subsequent year Interest is not 
charged on the outstanding balance. Estimated 
charges and assessments for 1 985 and actual 
amounts for 1 984 are as follows: 



1985 



1984 



Water charges 
Wastewater 

assessments 
Total 



$14,141,000 $11,524,000 
17,563,000 9,541,000 



$31,704,000 $21,065,000 



In 1985 and 1984, approximately 66% of 
water purchased from the Authority was billa- 
ble to customers. Since its inception, the Com- 
mission has increased the percentage of billable 
water from 52% in 1977 to the current level of 
66% in 1 985 and is continuing to take steps to 
improvethe amount of water billable, including 
replacement of old and defective meters and 
a comprehensive leak detection and repair 
program. 



6. TRANSACTIONS WITH THE 
CITY OF BOSTON 

The Commission's ongoing program to 
meter City facilities has resulted in billings to 
nine City departments based on actual con- 
sumption of $707,000 and $579,000 in 1 985 
and 1984, respectively The remaining four City 
departments were billed based on estimated 
consumption for $988,000 and $932,000 
during 1985 and 1984, respectively 

The City provides services to the Com- 
mission, including paving and facilities 
rental. Operating costs billed by the City were 
$924,000 and $1 ,540,000 during 1 985 and 
1984, respectively Capital costs billed by the 
City were $684,000 and $2,735,000 during 
1985 and 1984, respectively 

7. RETIREMENT BENEFITS 

Retirement benefits for eligible employees 
are provided underthe State— Boston Retire- 
ment System (Boston System) which is a "pay as 
you go" system requiring participating mem- 
bers to reimburse the System on a proportional 
basis of all pension benefits currently paid by 
the system based on current regular compensa- 
tion of covered employees. Because of the dis- 
pute with the Retirement Board of the Boston 
System, as noted below, the Commission is not 
a participating member of the Boston system. 
The Commission's policy is to accrue currently 
for its employee base the normal cost of future 
retirement benefits using 1 1.14% of regular 
compensation based on an actuarial valuation. 



Pension expense was $1,1 79,000 and 
$1,140,000for1985and1984, respectively. In 
order to provide a funding mechanism forthese 
retirement obligations, the Commission has 
voluntarily established a pension trust fund 
with assets of $9,451 ,000 and $7,531 ,000 as 
of DecemberBI, 1985and 1984, respectively 
The Commission does not record this fund as its 
asset because it is anticipated that the fund will 
be used to satisfy pension obligations. 

The Retirement Board of the Boston System 
has requested that the Commission be a partici- 
pating member of the Boston System and, as 
such, to pay its proportional share of all pension 
benefits paid by the System. The Commission's 
estimate of the amount at issue were they to 
become a member is $1 1 .3 million for benefits 
paid during the years 1 978 through 1 985. In 
1984, the Commission recorded a liability of 
$8.3 million to provide for its estimate of settle- 
ment. This amount has been recorded as a 
deferred charge and an other accrued liability 
in the accompanying balance sheets. 

In 1 985, the Commission voluntarily depos- 
ited $8.3 million in a trust fund forthis matter 
(assets were $8.9 million at year end) from pro- 
ceeds of the 1 985 Series A Bonds (see Note 4). 
This fund has been recorded as a current trust- 
eed asset in the accompanying balance sheet. 
Any of the $8.3 million proceeds which remain 
unexpended shall be applied on November 1 , 
1 986 to the redemption of 1 985 Series A Bonds 
maturing in 2014. 

. COMMITMENTS 

The Commission exercised its option to 
renew the lease for office space through April 
1988 at an annual rental of $193,000 which 
provides that the Commission pay for utilities, 
insurance, tax escalation and maintenance. 
Total rent expense charged to operations 
amounted to $764,000 and $878,000 in 
1985 and 1984, respectively 

A major capital improvement program is 
currentlyin progress. As part of this program, 
the Commission has entered into a number of 
contracts for the design and construction of its 
facilities. Commitments underthese contracts 
aggregate $4,01 3,000 at December 31 , 1 985. 
Capital improvements, primarily related to 
water and wastewater system projects with an 
emphasis on the clean-up of the Boston Harbor 
area, are expected to aggregate $1 59 million 
for 1986 through 1993. Of this amount $88 



million represents extension and improvement 
projects to be funded by the proceeds of Com- 
mission revenue bonds and federal and state 
grants for certain wastewater projects, and $71 
million represents renewal and replacement 
projects to be funded by current revenues of 
the Commission. 

9. CONTINGENCIES 

The Commission is involved in ordinary and 
routine litigation incidental to its operations. 
Management believes that the resolution of 
these matters will not materially affect the 
financial position of the Commission. 

The Commission has received federal and 
state grants for specific purposes that are sub- 
ject to review and audit by the grantor agencies. 
Such audits could lead to requests for reim- 
bursement to the grantor agency for expendi- 
tures disallowed under terms of the grant. The 
Commission believes such disallowances, if any, 
will not be significant. 

10. EVENTS SUBSEQUENT TO 
DATE OF AUDITORS' OPINION 

During July 1986, the Commission, 
the City and the Retirement Board have 
engaged in discussions which the Commis- 
sion expects will lead to the execution, by 
all three parties, of a settlement agree- 
ment with respect to the dispute described 
in Note 7. The terms and conditions of this 
settlement agreement will require certain 
approval prior to implementation. In the 
event the Commission and the City execute 
a settlement agreement prior to August 1 , 
1986, the Commission expects to deposit 
approximately $9 million from the pro- 
ceeds of the 1 986 Series A Bonds into a 
trust fund forthis matter. Any of the $9 
million proceeds which remain unex- 
pended on February 1 , 1 987 shall be 
applied to the redemption of 1 986 Series A 
Bonds on the first available call date. This 
amount, together with the sum of $8.3 
million previously deposited (see Note 7) 
and the investment income earned on the 

1 985 deposit, is expected to be sufficient 
to cover all of the costs of such settlement. 
The Commission intends to record the 

1 986 portion of this settlement as a 
deferred charge to be recovered through 
future rates. 



32 




Boston Water and Sewer Commission 

10 Post Office Square 

Boston, MA 021 09 









t^.i^