R.I. Tapped into Water Funds to Fill Budget Holes

By FRANK CARINI/ecoRI News staff

PAWTUCKET, R.I. — Ratepayers in most of Rhode Island’s 31 water districts pay some $5 million combined annually in surcharges. These water-related fees, however, are more like taxes, since most of that money now ends up being used to pay for, say, bottled water at the Statehouse, State Police overtime or filling potholes.

On their monthly or quarterly water bills — it can usually be found under R.I. state surcharge — ratepayers pay a fee of 0.0292 cents per 100 gallons. Under state law, it’s known as Public Drinking Water Supply Protection.

The surcharge is broken down into three “buckets”:

The Water Quality Protection Fund (0.01054 cents). Commonly referred to as the “penny fund,” it’s “imposed on each supplier of water, for the purpose of protecting the quality and safety of the public supply of water.” This average annual revenue stream of typically between $800,000 and $900,000 is collected in a Rhode Island Water Resources Board Corporate escrow account and then deposited in the Rhode Island Infrastructure Bank.

The Water Resource Operating Fund (0.01664 cents). This average annual revenue stream of about $4 million is submitted to the general treasurer’s office. Money for the Rhode Island Water Resources Board’s annual budget comes out of this funding, about $420,000 a year.

An administrative cost of (0.00202 cents) is kept by water suppliers that collect funds.

The 0.0292-cent surcharge went into effect in 1989, and for the next two decades the money generated by the fee largely went to pay off water infrastructure bonds, to fund water-related projects and support a once-influential Rhode Island Water Resources Board with nine full-time employees.

Beginning in 2007, however, under then-Gov. Donald Carcieri, the financial setup began to change. As bonds were repaid, more and more ratepayer money was being appropriated into the general fund, and the Water Resources Board’s influence was being neutered — for the past several years the board has had only one or two employees and the board’s 15-member board has several vacancies. And since at least 2015, Rhode Island water districts have seen little to none of the money deposited into the first two surcharge buckets.

This year, water districts are again concerned that the governor’s proposed budget is scooping funds paid by ratepayers into the penny fund for watershed protection to cover other things — perhaps even to fill the car-tax gap.

The Ocean State’s 31 water suppliers operate under a variety of organizational frameworks, including municipal departments, regional water authorities, quasi-municipal authorities with their own governing boards, special districts created by the General Assembly, independents such as the University of Rhode Island and the Quonset Development Corp., and one private supplier, United Water of Rhode Island.

These water suppliers serve an estimated population of 942,000, have some 282,000 service connections, maintain about 4,000 miles of water mains, and are responsible for more than 24,000 fire hydrants.

Some water districts, such as Providence Water, directly manage their portion of the penny fund.

ecoRI News recently spoke with two concerned water district officials — James DeCelles, chief engineer for the Pawtucket Water Supply Board, and Henry Meyer, district manager of the Kingston Water District — at the Pawtucket Water Supply Board headquarters on Branch Street. Neither district manages its water-quality-protection money.

In fiscal 2016, the Water Quality Protection Fund and Water Resource Operating Fund surcharges on Pawtucket Water Supply Board bills generated $250,950 and $396,238, respectively. In fiscal 2017, those surcharges produced $245,942 and $387,620.

During those same fiscal years, those two surcharges on Kingston Water District bills produced a combined $14,832 and $23,417, respectively.

Both DeCelles and Meyer said their departments haven’t seen any Public Drinking Water Supply Protection surcharge funding in more than five years. They’re worried that this money, paid by ratepayers for specific water-system-related purposes, is being transferred into the state’s general operating budget with little concern for the long-term needs of water systems statewide.

Rhode Island is looking at $148.2 million in drinking-water infrastructure needs over the next 20 years, according to the 2017 Infrastructure Report Card, a report published every four years by the American Society of Civil Engineers.

DeCelles has attempted to speak with the governor’s office about this issue, but hasn’t been able to get a response, never mind a meeting. To address the issue, the Statehouse recently created the Legislative Commission to Study the Rhode Island Water Resources Board and Water Supply, of which DeCelles and Henry are both members.

“The General Assembly doesn’t want to address the issue that much,” DeCelles said. “It needs the funding for the general fund.”

In Gov. Gina Raimondo’s fiscal 2019 budget, $1,050,339 of Water Quality Protection Fund money from the Water Resources Board Corporate escrow account is being transferred into the general fund. The millions in the Water Resource Operating Fund are also being used to fill fiscal 2019 budget holes.

Raimondo’s budget of $9.4 billion cuts Medicaid programs and generates new revenue through sports betting and increasing access to medical marijuana. Her administration proposes to cut the budget for health and human services by about $100 million. The proposed budget also introduces new co-pays for a third of Rhode Islanders on Medicaid, and gambles on $23.5 million in new revenue from sports betting at Twin River. The U.S. Supreme Court, however, would first need to legalize sports betting.

Both DeCelles and Meyer noted that money from the penny fund helps protect water quality by funding pipe replacement and land acquisitions. The 0.01054-cent surcharge also helps fund interconnections.

“Land protection and acquisition is critical in protecting water quality,” Meyer said. “Utilities need to think long term. This money is collected for specific purposes, but it’s being used in ways that are not related to water at all.”

In recent years, both the Pawtucket Water Supply Board and the Kingston Water District have taken money from their stressed operating budgets to buy land to help protect their drinking-water supplies — money that in the past came from the penny fund.

For the past five years DeCelles has repeatedly asked the general treasurer’s office and the Department of Administration where that water-bill surcharge money is going. He’s even filed public record requests.

“They can’t tell me what it’s being used for,” DeCelles said. “They can’t tell you. I’ve been told they don’t track it. It’s basically a tax on ratepayers.”

The last sentence in a March 24, 2014 letter DeCelles received from a Department of Administration attorney confirms as much: “Additionally, the Department does not maintain a record with a detailed accounting tied directly to the surcharge funds.”

ecoRI News wanted to interview the general manager of the Rhode Island Water Resources Board or a Raimondo administration official on this issue, but the Department of Administration (DOA) wouldn’t make anyone available.

Instead, DOA spokeswoman Brenna McCabe told us to submit questions by e-mail to her. We submitted, on March 29, one main question: Where is this money, raised for specific water-system-related purposes and deposited into two “buckets” — the Water Quality Protection Fund (0.01054 cents per 100 gallons) and the Water Resource Operating Fund (0.01664 cents per 100 gallons) — being allocated?

ecoRI News received this e-mail reply from McCabe a half-hour later on March 29: “Thanks for your question. I’ll circle back to you tomorrow on this.”

DOA never answered the question before the noted deadline: the evening of April 2. This story was published at 5:05 p.m.