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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JUL
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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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^