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Water and sewer FY26 expense budget approved; staff warns fund balance and MWRA charges drive rate risk
Summary
Town staff presented the Water and Sewer FY26 expense budget and explained impacts from MWRA charges, a Sharon emergency interconnection loan repayment and capital projects; the Board of Selectmen voted to approve the expense budget, and staff warned that low fund balance and external debt may cause future rate pressure.
Town finance and DPW staff presented the Water and Sewer FY26 operating budget to the Board of Selectmen on March 25 and the board approved the expense budget after discussion about MWRA pass‑through increases, intermunicipal agreements and fund balance policy.
Staff described the primary drivers of the FY26 expense request: MWRA wholesale water and wastewater treatment charges, capital debt service related to approved projects, and ongoing operating costs. The presentation noted revenue projections on the budget cover expected sales but that actual sales and weather cause variance; the staff explained the fund balance (reserve) is the town’s buffer when annual consumption or revenue is lower than expected.
Two items were highlighted for board awareness: an emergency interconnection installed for the town of Sharon several years ago (funded with about $1.5 million of borrowing per the DPW memo) and a “high strength” discharge charge for a single large local customer (shown as both revenue and expense in the budget because MWRA levies the fee). Staff said Sharon reimburses the town for the interconnection debt service and that the accounting treats those inflows and outflows consistently.
Staff warned the board about fund‑balance risk: under the town’s accounting, a shortfall in the enterprise fund would have to be closed from the subsequent year’s free cash (general fund) if rates and revenues do not cover expenses, so building and maintaining a healthy reserve in the water/sewer fund is prudent. The staff said the board will set final rates later in the spring after more precise usage and revenue data is available; the presentation noted a possible projected rate increase in July (staff estimated a potential 4% figure as an example) depending on final numbers but that the board would review formal rate action later.
Board action: the Selectmen moved, seconded and approved the water and sewer expense budget for FY26. Staff indicated the department will monitor usage, coordinate with large customers and keep the board updated as the town finalizes borrowing and any SRF (state revolving fund) project timing.
