PEABODY — Facing “severe financial challenges,” the South Essex Sewerage District is proposing special legislation that would leave Peabody residents with a potential for their water and sewer bills to triple, or maybe even quadruple, if the state approves a Proposition 2 ½ debt relief.
SESD treats the wastewater of approximately 190,000 people and businesses located in Beverly, Danvers, Marblehead, Peabody, Salem, and portions of Middleton and Wenham.
SESD Board Chairman Mike Parsons stated that SESD will be unable to produce a balanced budget for FY28 without a Proposition 2 ½ debt relief, and he pointed to two reasons why: rising operational costs and expensive, yet necessary, capital upgrades.
Parsons noted that this is the SESD’s final year in an 11-year contract for residuals disposal, which refers to the removal of solid, organic matter in the wastewater.
He added that, with residuals disposal costs increasing at a rate of 7% per year, he projects that the costs could increase by $1-2 million with the new bid, which “is going to be a problem” for FY28.
Additionally, costs of chemicals have nearly doubled since the pandemic, having increased by 90% since 2020, and labor and health insurance has increased by more than 20%.
The Centennial Plan, SDSE’s road map for the next 20 years, details the upcoming capital improvement projects needed to maintain and/or upgrade the decades-old equipment and pipelines.
The plan, which is divided into four stages, states that there are 42 projects slated for the first two stages, or 10 years, equating to a $390 million price tag. Parsons said it’s still too early to estimate the costs associated with the latter 10 years.
“Without relief for that debt, we just can’t make the improvements,” Parsons said.
Parsons noted that the SESD is subject to Proposition 2 ½, but many other utility entities — like Massachusetts Water Resource Authority and Springfield Water and Sewer Commission — are not. Hence the special legislation for the state to review.
The proposed legislation would establish a non-exempt budget ceiling of $30.5 million for FY28 with 2.5% annual increases after. It would also authorize work for the first 10 years of the Centennial Plan with an exempt debt limitation of $390 million in principal and remove the $2 million limit on SESD’s existing stabilization fund. Further, the legislation would update outdated references.
“Ultimately, the legislative delegation has requested that each community, each legislative branch of each community, pass a resolution in support of our request for relief from 2 ½,” Parsons said.
He will be coming before the City Council, and the other municipality boards, at another time to bring forward a suggested resolution, with the hopes of filing legislation by the end of July. This comes as an alternate solution for SESD to receive the debt relief without five override votes from each municipality.
Acknowledging Peabody’s portion of the annual debt services, Parsons confirmed that the $390 million price tag means that Peabody would be required to pay $1.9 million per year for the first five years and then $5.1 million per year for the next 25 years.
“We recognize that communities such as Peabody and the other members of the district face really significant financial challenges, and even though that’s the situation, we’d be remiss if we didn’t come forward and present to you what our challenges are and work with you to try to find a solution,” Parsons said.
Ward 5 Councilor Dave Gamache highlighted that the annual debt services would be a total of $135 million for the City of Peabody. He also asked whether the state would be able to provide some relief to take some of the burden off the municipalities within the SESD.
“The short answer is: There is not a huge amount of money,” Rep. Thomas Walsh said. “As you are all facing fiscal challenges, the state is as well.”
When asked what SESD’s next steps are if the state does not grant it the relief it’s looking for, Parsons simply said they would start the special legislation process over again.
“There just isn’t an opportunity to reduce our expenses by the amount we need to stay within Proposition 2 ½ without doing serious damage. It might not be on day one, but it certainly will come where we can’t perform our function,” he said. “So we’d have to try again.”
When asked how the annual debt contribution would affect the average homeowner’s water and sewer bill, Finance Director Mike Gingras stated that the “ballpark is three or four or five times what they’re paying now.” Gingras then confirmed that he is expecting a 300-400% increase in perpetuity, or at least for 30 years.
Ward 3 Councilor Stephanie Peach candidly stated that she did not think the SESD will receive support from the municipalities.
“I think we all understand there’s levels of this that are a necessity. It’s a public service. Just from speaking to colleagues in Beverly and Salem, I have no idea where we even find the money,” she said.
