North Reading homeowners and businesses may see about a 10 percent water rate increase in the next fiscal year.

This increase is on top of an 13 percent increase over the past year and is connected to the problems associated with North Reading’s annual water revenue shortfalls that got the attention of the Massachusetts Department of Revenue last year.

The town hired Tighe & Bond Engineers at the end of 2010 to conduct the first outside water study in North Reading in about 15 years. The engineers reviewed the town’s current system and proposed changes to create a better system and improve cash flow.

Department of Public Works Director Richard Carnevale presented the study’s suggestions as well as his own to the Board of Selectmen on Tuesday.

Carnevale proposed seven recommendations, including move more of the highest water users into the most costly tier, create a town delinquent payment policy to collect payments quicker and adopt a three-year payback period to fund the water stabilization and reserve funds.

Carnevale said the American Water Works Association noted the average residential water user uses 90,000 gallons per year. With that in mind, Carnevale suggested adopting a different system for the town that would include more people in the top tier.

 Here is the difference between the current tiering and the proposed system:

Under this plan, the most costly tier would go from including 5 percent of North Reading residents to 22 percent of residents. 

The plan that selectmen favor

The selectmen didn’t take a formal vote on a particular rate program on Tuesday, but a majority of the members spoke in favor of pushing the town to have a 95% collection rate of water bills and setting aside a $100,000 surplus in the next fiscal year to go into water reserve funds. If that is the plan ultimately supported, residents and businesses would see about a 10 percent increase depending on water use.

Here is a chart presented by Carnevale showing how the changes could affect residents’ and businesses' water bills:

Selectman Jeffrey Yull said the rate increase is something that must be done.

“We have to keep in mind that we’re paying for some sins of the past,” said Yull. “I understand that it’s a hard hit, but our responsibility is to make sure this town functions properly and has the funds to do it.”

Though a majority supported the plan, Selectman Michael Prisco said residents have already been hit with a 13 percent rate increase over the past year and the town is going to hit them again with another increase. This is especially problematic because the town may want the public’s support in a major wastewater project -- and may not get it because of these increases, he said.

“Do you understand we’re in a recession?” Prisco said to fellow board members. “Do you understand people in the community are hurting?”

Though he supported the plan, Selectman Stephen O’Leary said he is concerned that business owners could be hit hard by the increased rates. He said he is more concerned with businesses than residents who are high water users.

Selectmen upset with the current situation

Members of the board spoke out about the situation the town now faces because town leaders were not previously focused on the water reserve account shortfalls.

“I hope there are safeguards in place so this doesn’t happen again,” said Selectman Sean Delaney. “I don’t understand why in 15 years it hasn’t been looked at.”

Meanwhile, Prisco was upset that Carnevale said the Water Department faces a $175,000 deficit in the current fiscal year, which ends on June 30. Prisco said the town told people not to use water last summer, which meant the Water Department didn’t collect as much money. Now, people are going to use more water between now and June 30 as the weather gets warmer so the deficit may not happen, he said.

“Between now and June, there is going to be a lot of water,” said Prisco.

However, Carnevale said the biggest water use is actually between July and September, which is the next fiscal year, and stood behind his $175,000 deficit figure.

Board members were also upset with the town’s Water Commission. There was even disagreement among the Water Commission, which attended the meeting, as to whether the commission did or did not take formal votes on specific proposals.

Selectmen were especially miffed when they found out that the Water Commission didn’t plan to meet again until after the next selectmen’s meeting on Monday.

“Someone has to get their act together on the commission,” said Delaney.

Selectmen Chairman Robert Mauceri asked the Water Commission to convene on Monday so the commission would be able to bring its recommendations to the Board of Selectmen later that night before the selectmen make their decision.