A Surprise Depletion Of The Town's Sewer Fund Prompts Select Board To Reluctantly Approve A 20 Percent Rate Hike

The Select Board on Wednesday voted to increase base sewer rates by 20 percent, along with an additional $10 per month fee tacked on top, and an extra 5 percent charge added to the tiered usage rates that apply to heavier users. The average user can expect to see an increase of about $22 a month, according to a presentation given to the Select Board by the consulting firm Hazen and Sawyer.

The rate increase was motivated in part by inflation, surging construction costs, upcoming sewer projects, and the impacts of tariffs and ongoing wars. However, it was also driven in part by drought conditions that have plagued the island over the last year and led to decreased demand for water as island residents sought to abide by the state’s drought restrictions.

Town staff said that the increase was necessary to ensure continued operation of the town’s sewer system and rebuild the emergency fund that the sewer department holds in reserve. Without the increase, they said, the sewer department wouldn’t have enough money to cover operations through the end of the fiscal year.

“Regardless of when this should have happened, and it absolutely should have happened already, these are increases that are needed to maintain this fund because of sewer expansions, cost increases, and all of those types of things that go into maintaining an expensive sewer system,” Town Manager Libby Gibson said.

But some Select Board members and island residents worried that it essentially amounted to a penalty on sewer users for following the town’s recommendations and reducing their water use.

“You’re asking to conserve water, not water our lawns, and then we’re going to get surcharged because we’re not using the water,” island resident Amy Eldridge said. “We’re just getting nickel and dimed to death on everything in this town.”

The town tries to keep the sewer enterprise fund balance above $2 million as insurance to cushion against unexpected expenses. This year, it has fallen well below that level. As recently as 2024, the reserve fund was nearly $6 million. Now, it is barely over $400,000, a 93 percent drop in just two years. A condition added to the motion to approve the rate increase stipulates that once the fund reaches the $2 million level again, the $10 surcharge on user bills will be eliminated.

“The goal of this rate increase is to re-establish financial sustainability and increase this fund balance over time back to a sustainable target to ensure ongoing operations at the sewer department,” said town sewer consultant Olivia August, from the firm Hazen and Sawyer.

The Select Board also agreed to back a warrant article for the 2027 Annual Town Meeting that will seek to reestablish the $2 million contingency fund through the town’s budget or a budget override, rather than attempting to build the fund back using even higher fees.

In part, the decrease in the enterprise fund is the result of a steep drop in water usage: amid a drought that led the town to sharply limit outdoor water use and lawn care, water usage fell around 25 percent, or nearly 100 million gallons so far in 2026. Since sewer users are billed based on how much water flows through their pipes into the sewer system, that also led to a significant decline in revenue.

The Select Board was ultimately unwilling to adopt the full increase proposed by town staff and Hazen and Sawyer. The consultants had initially presented two options: a 60 percent base rate increase divided into two hikes in the next six months coupled with a 6 percent increase to tiered usage rates, or a 20 percent base rate increase coupled with a 5 percent increase to tiered usage rates and a blanket $20 per month surcharge on all users.

In the end, the Select Board chose the second option, as recommended by staff, but cut the surcharge in half.

“I want to maybe slow our roll a little bit,” DeCosta said. “I’d like to try to spread it out a little if we could.”

August, the town’s consultant, estimated that this would be enough to cover the sewer department’s expenses, but not enough to meaningfully increase the amount of money held in reserve.

The size of the increase was unexpected. As recently as last month, town staff had told the Select Board that they expected a more modest 15 percent increase, with an additional 3.5 percent bump to the usage tiers and no further surcharge. That would have left 70 percent of users with a $5 to $10 rate hike.

“We need to get to a point where we’re having small increases every year, across the board with fees,” Select Board chair Dawn Hill said.

This isn’t the only recent substantial increase to sewer rates. Last year, the Select Board approved a rate hike and established the tiered system that charges heavier users more. That hike was supposed to increase revenue by 29 percent, but despite the higher rates, a combination of increased costs and decreased demand led the reserve fund to collapse.

Hazen and Sawyer found that, after the rate hike, Nantucket’s sewer rates will be higher than six of the seven other towns and cities in Massachusetts included in their comparison, including Oak Bluffs, Plymouth, and Boston. Only Bourne has higher rates.

Over 83 percent of sewer department revenue comes from sewer user charges. Essentially all of the budget is paid, in one way or another, by the users of the system.

Island residents with septic systems and private wells have experienced the drought very differently. The water usage restrictions imposed by the town did not apply to them, and now they will not have to pay the increased sewer rates that resulted in part from sewer users abiding by those restrictions. In one way, that makes sense: they don’t use the sewer system, so there is little reason for them to pay for its upkeep. From another perspective, however, the discrepancy is more notable. DeCosta pointed out that other town services, including the Our Island Home skilled nursing facility, are paid for by all island residents, even non-users.

“I firmly believe that sewers and clean water on Nantucket are everybody’s responsibility, including mine, who doesn’t benefit from any of it,” he said.

If Town Meeting backs the warrant article the Select Board will support, then all residents, including those not on town sewer, will have to pay to replenish the sewer department’s contingency fund.