What's Really Driving Nantucket's Sewer Rate Hikes?

Why was Nantucket’s sewer reserve fund nearly depleted, prompting the Select Board to hike sewer rates 20 percent last month? The drought may have less to do with the decline than was initially suggested.

Instead, sewer revenues have come in significantly lower than anticipated for three years in a row, dating back well before the state placed Nantucket under drought restrictions and the town began to push residents to conserve water. Water usage affects the sewer department's revenue because sewer users are billed based on how much water flows through their pipes into the sewer system.

In the 2024 fiscal year, the sewer department budgeted for $12.86 million in revenue, but received only $10.88 million, a $1.98 million shortfall. The next year, it budgeted for $13.95 million in revenue and received just $10.84 million, a $3.11 million shortfall. Then, in the most recent fiscal year, the department budgeted for revenues of $14.59 million and received $12.63 million, a $1.95 million shortfall.

Those three consecutive shortfalls, totaling $7.04 million, depleted the once-robust sewer fund reserve by 93 percent, leaving barely more than $400,000. The town tries to keep the fund above $2 million.

The Select Board reviewed the situation at its meeting on Wednesday.

“It’s not as dire as was perhaps viewed when you last discussed this,” town manager Libby Gibson told the board. “But there are some things we definitely need to keep an eye on.”

Town of Nantucket finance director Aleesha Nunley Benjamin suggested liquidating the town’s $1.1 million privilege fee reserve, established in 2013, to help rebuild the fund. According to Nunley Benjamin, that reserve no longer serves an active purpose.

“That will take that $420,000 and make it $1.5 million in retained earnings,” she said.

While spending came in under budget each year, it was not far enough under budget to account for the revenue shortfalls.

A change to the fees adopted last year did increase revenue, and the new rate hike approved by the Select Board is expected to stabilize, if not replenish, the reserve fund. While it’s unclear how much of an effect the drought status had on the fund, as revenues came in under budget even more significantly before the drought began, revenues could also climb if the state ever eases Nantucket’s drought status.