NORTH ADAMS -- New city water and sewer rates that went into effect July 1 are being applied retroactively, a billing practice the city's attorney says shouldn't be in place.
Fixing the problem could cause the city to fall thousands of dollars short of its projected water and sewer revenue in fiscal 2015.
In June, the City Council approved Mayor Richard Alcombright's proposal to raise water rates by 10 percent and sewer rates by 8 percent on all city homeowners and businesses effective July 1. But the new rates were applied on quarterly invoices mailed out July 15 and billed homeowners for water and sewer use in April, May and June -- before the new rate took effect July 1.
Alcombright proposed the increases in conjunction with his fiscal 2015 budget to generate an additional $370,000 in revenue for the cash-strapped city.
Earlier this week, Alcombright asked the city's attorney for a legal opinion: Should the new rates be retroactive based on the quarterly billing cycle or on actual water and sewer usage?
"The adjustment of the rates must be based upon when the usage occurred," city solicitor John B. DeRosa stated Wednesday in a letter to Alcombright. "The charge for such usage [prior to July 1, 2014] shall be based upon the rate in effect prior to July 1, 2014."
Based on the city's calculations when Alcombright introduced the new rates, the average four-person home would have been overcharged roughly $13.
When reached Friday, Alcombright declined to comment on the matter.
Although the premature rate hike may be insignificant to some homeowners, it could be substantial when aggregated across the city.
The administration's initial estimates were likely based on the assumption it could back-bill, which would be in line with past practice, according to DeRosa's letter. Now that the practice has been flagged as potentially illegal, the city now stands to lose as much as $35,000 in projected revenue from water and sewer. It's unclear what impact will be on projected revenue from Williamstown and Clarksburg hookups to city lines.
DeRosa's opinion noted that the practice of charging increased rates for past usage has been common practice after hikes in the past. The city based its rate on the billing date, not usage dates.
"The fact that past practice was to implement similar increases based upon the billing cycle rather than when the usage occurred does not make it correct," DeRosa stated.
The issue was brought to the city administration's attention on Monday by a resident who noticed the increased rates on his recent water bill.
In emails obtained by The Eagle, city officials initially defended the practice.
"The rates that were set for the council are for all bills in FY 2015 (July 1, 2014-June 30, 2015) and are based upon the billing cycle and is not based on when the usage was therefore you were correctly charged at the new rate for your first bill in FY 2015 and you will receive 3 more bills at that rate during the fiscal year of the city," City Administrator Michael Canales wrote in a response to the resident.
Councilor Jennifer Breen, who was the lone vote against the rate hike, said she's received multiple phone calls about the retroactive increase.
"We didn't vote on that," Breen said.
Breen said residents should receive a refund in the amount they were overpaid. If the issue isn't remedied, she said, she may bring the matter before city council.