Westerly council pauses decision on up-to-$85 million sewer overhaul after councilors demand alternatives

The Westerly Town Council on Feb. 2 heard a detailed presentation on a proposed up-to-$85 million upgrade to the town’s wastewater treatment system and the financing plan to pay for it, then voted to set the matter aside for further study.

Town staff and municipal adviser Steve Maseroni of PFM told the council the project is out to bid at roughly $85 million and recommended issuing revenue bonds through the Rhode Island Infrastructure Bank in two tranches — roughly $45 million, then $40 million — to take advantage of subsidized rates and avoid paying interest on undrawn funds. Maseroni said the infrastructure bank typically offers a subsidized rate by taking about one-third off market tax‑exempt yields and charging a modest annual fee.

The presentation and the attached additional‑bonds‑test (ABT) modeling showed the sewer enterprise would need substantially more revenue to meet the trust indenture covenants the bank requires. Maseroni summarized the key legal and financial constraint: “You have to raise the rates,” saying the RIB will require certification of sufficient sewer enterprise revenue for the near‑term debt service before lending. He described an example model showing total sewer‑system revenues rising from about $5.8 million to $8.8 million under the proposed financing schedule.

Councilors pressed staff on alternatives. Several members objected to the size of the projected increases in the town’s flat sewer fee and the regressive nature of that flat charge. Council discussion ranged from using additional transfers from the town’s general fund, to shifting a larger share to ad valorem property tax, to phasing and splitting the loan in different proportions. Councilor Petra said breaking the borrowings into two tranches could save money, while others said the council should explore more general‑fund transfers or targeted ad valorem options to blunt impacts on lower‑income households.

The modeling presented by PFM projected a notable rise in household costs under the full two‑step plan; one example in the presentation suggested a roughly 9% overall increase in the all‑in charge for a $600,000 house after the first tranche and larger increases if the second tranche is issued without other offsets. Councilors repeatedly asked whether the state mandate and DEM/EPA consent agreement required the town to undertake the full scope. Town staff said the regulatory requirements and a negotiated consent agreement substantially drive the scale of work, and the state could require enforcement action if the town fails to meet obligations.

After several hours of questions and debate — including sustained objections about fairness and the speed of moving major tax changes into effect — the council voted to continue the two linked items (the bond authorization and the accompanying rate‑setting resolution) to the next regular meeting so staff can return with concrete alternative revenue scenarios. The continuance was approved so the council could weigh options such as greater general‑fund transfers, alternative mixes of ad valorem vs. flat fees, and different tranche timing.

What happens next: staff and the municipal advisor will prepare alternative revenue and rate proposals for council review. The council’s decision to continue means the town will not ask the Rhode Island Infrastructure Bank to approve loans until the council reconvenes the matter with additional options on the table.