WELLFLEET — The Cape Cod and Islands Water Protection Fund may be running dry. Financial models in last year’s annual report projected that the fund would be in arrears by fiscal 2026 if it maintains its current level of subsidies to wastewater projects.
The fund gets money from a 2.75-percent excise tax on stays in hotels, campgrounds, and short-term rentals on Cape Cod, Martha’s Vineyard, and Nantucket. That money goes to the state as part of the rooms tax and is deposited directly into the Water Protection Fund, which is managed by the Cape Cod Commission.
Since its inception in 2018, the fund has provided a 25-percent subsidy to all Cape and Islands wastewater projects listed on the state’s Clean Water Intended Use Plan or IUP.
As more Cape and Islands communities move forward with expensive wastewater management projects, the $20 million or so per year that the fund takes in from the rooms tax is no longer keeping up with the subsidies the fund is supposed to deliver.
The draft IUP for 2023 includes $167 million in eligible wastewater projects. A quarter of that would be $41.75 million — almost double the $21 million that the fund is projected to receive this year.
Meanwhile, a draft proposal from the Baker-Polito administration last year to add $200 million to the fund as part of the fiscal 2022 supplemental budget was dropped after a little-known state law called 62F required that $2.9 billion be returned directly to taxpayers rather than spent through the budget.
For towns across the Cape with swelling wastewater management problems, alarm bells have begun to ring. In Eastham, a plan to hook up 600 homes to a centralized sewer system is set to break ground in 2025 at a cost of $80 to $150 million, according to Health Dept. Director Jane Crowley.
Town Administrator Jacqueline Beebe, who is Eastham’s representative on the Water Protection Fund’s board, said that the bleak outlook is “a proverbial nail in the coffin” for Eastham. “Unless we can figure out how to get some federal or state money to come through, we’re kind of back to being on our own,” Beebe said.
In Wellfleet, town officials are waiting to hear back on a permit application to the state Dept. of Environmental Protection (DEP) for the town’s targeted watershed management plan, which has an estimated cost of $106.6 million.
Wellfleet already has two projects listed on the fund’s draft 2023 IUP that are connected to its watershed management plan, according to the Cape Cod Commission. The wastewater treatment and collection system at 95 Lawrence Road has an estimated cost of $6.3 million, and the list price for the town’s enhanced innovative and alternative septic system program, which would help homeowners upgrade their septic systems, is $3 million, said select board Chair Ryan Curley, who is Wellfleet’s representative at the fund.
“The fund’s diminishing revenue is something that the Cape as a whole is going to be dealing with,” Curley told the Independent. “These projects are just getting more expensive over time, but they are projects we have to do.”
One value of a targeted watershed management plan for towns in nitrogen-sensitive areas (which includes Wellfleet, Eastham, and Truro) is that homeowners would not have to install individual wastewater systems to reduce nitrogen loads, as would otherwise be mandated by new draft Title 5 regulations from the DEP. Those systems can cost up to $35,000, experts say.
“The draft regulations put an added level of pressure on towns to come up with funding for wastewater projects,” said Beebe. “The towns agree that we have a clean water issue, and that we have to do what’s necessary to keep our water clean. What we’re struggling with is how to pay for it in a way that doesn’t break the backs of our taxpayers.”
Water Protection Fund management board Chair Kevin Galligan of Orleans told the Independent that the board is going to have to come up with a solution for the fund’s finances or else “eventually we will have a train wreck down the line that we don’t want to get to.”
Galligan said that the board discussed the possibility of future infusions of money from state or federal grants like the American Rescue Plan Act or the Bipartisan Infrastructure Law. “We need a boatload of money infused in this fund to get us back on solid footing,” Galligan said.
He also said that the $200 million the state had been preparing to put into the fund in 2022 is not off the table. “Two hundred million, with the billions and trillions they’re talking at the federal government, is a drop in the bucket,” Galligan said.
State Sen. Julian Cyr, who helped spearhead the creation of the fund, told a different story. “That $200 million is not realistic, and it’s not coming,” Cyr said. “I have urged the communities not to count on it.”
Cyr added that he had secured a $15-million earmark in last November’s economic development bill for wastewater management projects across the Cape. “The legislature continues to deliver on this issue, arguably more than any other stakeholder,” Cyr said. “I am urging towns to have more skin in the game here. They need to partner with us in coming up with revenue.”
The most likely solution is to lower the current 25-percent subsidy rate, Cyr said. “There was never a promise of any subsidy level when this fund was established,” he said. “I think the management board is going to have to lower the subsidy percentage a bit.”
Curley said that the subsidy level could be lowered to as little as 10 percent.
“It would be devastating if we had to cut the percentage down,” Beebe said. “These projects are so expensive, so when you start talking about the difference between 10 percent and 25, it’s a huge difference.”
Galligan said that lowering the subsidy level to 10 percent “would definitely be the last resort.”
But Cyr said that he doesn’t “buy that a modest reduction in subsidy will be determinative for these projects.”
The current 25-percent subsidy is “quite generous,” Cyr said. “It’s an unprecedented level of subsidy that no other community in the Commonwealth is receiving.”