‘Exceeding what was predicted.’ Cape, Islands dedicated sewer fund stretched thin.

The Massachusetts State House at night. Photo Courtesy of J. Graham Pearsall/BU News Service.

By Suryatapa Chakraborty

Boston University News Service

The Cape Cod and Islands Water Protection Fund, established in 2018 to help communities pay for wastewater infrastructure and water quality projects, is facing a severe funding shortage as it struggles to keep up with the rising demand for subsidies.

“The number and cost of projects are exceeding what was ever predicted,” said Erin Perry, the Cape Cod Commission’s deputy director. The fund awards a 25% subsidy to eligible wastewater management and water quality projects in Cape Cod and Islands towns, according to the commission’s website.

Since the fund was created, revenue has largely kept up with projections, but localcommitment to projects and eligible project costs have exceeded expectations, according to a Jan. 12 letter to the chairs of the legislature’s Joint Committee on Environment and Natural Resources and the Cape Cod and Islands legislative delegation from Kristy Senatori, the executive director of the Cape Cod Commission.

The 2023 proposals for clean water state revolving fund loans, listed by the state Department of Environmental Protection, call for over $167 million in local projects, more than $100 million above the assumed project costs for the Cape and Islands fund and “the greatest amount that we had seen for Cape Cod in a single year,” Senatori wrote in the letter.

The state environmental agency’s draft 2024 list of projects proposed for the state revolving fund loan program — known as intended use plan projects — includes over $248 million in Cape projects, Senatori noted.

The management board of the fund has voted to reduce the subsidy to 12% in 2024 without any additional funding, board Chair Kevin Galligan, an Orleans Select Board member, wrote in a June 30 letter to Gov. Maura Healey.

“It could potentially be lower depending on the final intended use plan,” said Perry.

In his letter, Galligan said an additional $5 million is needed in fiscal year 2024 and approximately $66 million in revenue spread over the following three fiscal years to allow the fund to support continuing the 25% subsidy through the end of the decade.

What’s the source of money for the Cape, Islands Water Protection Fund?

The fund’s dedicated source of revenue is a 2.75% excise tax on short-term rentals in the 15-member communities. Perry said this will continue to be a source of revenue while the board’s executive committee has devised a two-fold strategy to seek new revenue sources.

“In this decade, we are looking at roughly $2.5 billion worth of projects,” said Mark Forest, a member of the Barnstable County Board of Regional Commissioners and a Yarmouth Select Board member, referring to the “significant commitment of investment in wastewater.”

Yarmouth approved a $207 million project involving wastewater collection along Route 28 and a treatment plant last year, said Forest.

“What I’m worried about is the loss of momentum on wastewater investment,” he said, adding that promised funding has not yet materialized while construction costs are rising.

Yarmouth has been prepared to move faster with its projects, but “it’s the state that’s been holding us back,” Forest said.

What are possible solutions?

As a short-term solution, the fund managers have requested the Massachusetts Clean Water Trust to use funds from the federal Bipartisan Infrastructure Law to provide an additional 9% subsidy to disadvantaged communities on the Cape in 2023 and 2024.

Perry said this would require a vote by the board of trustees at the Massachusetts Clean Water Trust.

“The proposal has been put forward to them, and we have requested that they consider it,” he said. “The long-term strategy includes pursuing bond fund authorization for approximately $300 million, which could be included in one or more state legislative vehicles.”

There could be an opportunity to request a dedicated allocation through an environmental bond bill, spread over years, which would replenish the fund, Galligan said in an interview.

What has the fund paid for so far?

Since its inception, the fund has awarded approximately $140 million in subsidies to Cape Cod communities for their wastewater and water quality projects, Galligan said in his letter to Healey.

The 25% subsidy has “spurred action” in the communities and has garnered community support, Perry said.

“Without significant additional revenues to the fund, the management board will be forced to limit subsidies for critically needed wastewater and water quality projects on Cape Cod,” said Senatori in the Jan. 12 letter.

Massachusetts Clean Water Trust responds

During a Board of Trustees meeting on Feb. 17, the Massachusetts Clean Water Trust approved clean water loans and financing agreements of $38,169,258 and $3,610,054 to Yarmouth.

“It will underwrite a portion of Phase 1 wastewater management plan approved at last year’s annual town meeting,” Forest said.

“We’ve been working with the Cape since the inception of this fund and will continue to do so … we expect to have an update at a future board meeting on ways we may be able to assist,” the trust Executive Committee said.

This story originally appeared in the Cape Cod Times.

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