Disagreement over water authority pipes going to court

12:17 AM EDT on Tuesday, May 1, 2007

By Philip Marcelo
Journal Staff Writer

CUMBERLAND - The town's decision five years ago to tax water pipes owned by its water supplier, the Pawtucket Water Supply Board, appears to be heading to trial.

The two sides have been trying to settle the dispute out of court, but no deal has been agreed to. Now an appeal filed by the Water Supply Board in 2003 is set to be presented to Superior Court Judge Mark A. Pfeiffer at the end of the month, with the object of scheduling a trial, according to Mayor Daniel J. McKee.

What's at stake is $2.5 million in disputed taxes that came as a result of raising the assessed value of the Water Supply Board's distribution system from $8.5 million to $20 million.

The town last week retained experts in tax appraisal and asset evaluation that will be prepared to testify on its behalf, McKee said yesterday. Those experts have requested information from the Water Supply Board in preparation for a trial.

"It is imminent that this issue will be heading to trial," he said. "The responsibility of the town in this situation is to be fully prepared and do the best we can to protect taxpayers."

Calls to James L. DeCelles, chief engineer and superintendent of the Water Supply Board, and Joseph A. Keough, the board's legal adviser, were not returned yesterday.

The Pawtucket Water Supply Board serves more than100,000 customers in Pawtucket, Central Falls and the Valley Falls section of Cumberland.

The Water Supply Board owns and operates the water systems in Pawtucket and Valley Falls, but the City of Central Falls owns and operates its system.

In 2002, McKee directed then-Tax Assessor Michael W. O'Leary to assess a tangible property tax on the water board's pipes in an effort to alleviate the tax burden on residential property owners.

"We felt as though for taxpayers there should be more equity," he said. "You don't want your neighbors getting a free ride at your expense."

The result was an annual $230,000 tax increase for the Water Supply Board, who complained that neither of the other two communities it served taxed its pipes.

Cumberland is among nine communities in the state that classify water pipes as tangible property, according to a survey conducted by the town in 2004.

That year, the Water Supply Board appealed to the Cumberland Board of Assessment Review and was rebuffed. In 2003, the board tried to create a two-tiered water rate structure, with much higher rates from Cumberland residents, in order to offset the tax increase. That move was rejected by the state Public Utilities Commission.

The board then sought a ruling from Superior Court.

Town Finance Director Thomas Bruce III said that an unfavorable ruling in Superior Court would not have a devastating impact the town, since the town has been building up its financial reserves since 2004 in anticipation of a potential settlement.

The town has in its fund balance, or surplus account, $1,246,718 - or just under one-half of the disputed amount - earmarked for the water board suit, Bruce said.

And McKee said the town has been putting the Water Supply Board's tax payments into an escrow account and has not used it to cover municipal operating expenses.

He said: "There is good, proactive financial planning happening."

pmarcelo@projo.com / (401) 277-7493