04/21/2025
Below is a summary, followed by a more detailed analysis of the important warrant article to be voted on at the May Cohasset Town Meeting pertaining to converting the Recycling Facility (aka Town Dump) from direct town government management to an Enterprise Fund. Be educated on issues like this and attend Town Meeting to make your voice and vote count on important issues like this:
Summary : Cohasset can convert its recycling facility into an enterprise fund by accepting M.G.L. c. 44 § 53F½ at Town Meeting, adopting a dedicated budget and rate structure, charging users directly for disposal and recycling services, and accounting for all revenues, expenses, indirect costs, and capital needs in a stand‑alone fund. Doing so isolates losses from the general fund and creates transparent incentives to raise fees or cut costs, but it also exposes the facility to volatile commodity prices and may increase administrative overhead. Below is a step‑by‑step roadmap tailored to Cohasset, followed by a balanced assessment of the key pros and cons.
1. What an Enterprise Fund Is
An enterprise fund is a separate accounting and financial reporting mechanism that treats a municipal service “like a business,” recovering its costs primarily through user charges while retaining any surplus for reinvestment. The legal authority in Massachusetts is M.G.L. c. 44 § 53F½.
Municipalities typically use enterprise funds for water, sewer, solid waste, recreation, and similar proprietary services.
2. Roadmap for Cohasset to Create a Recycling Enterprise Fund
2.1 Feasibility & Baseline Analysis
Quantify current losses —compile three‑year operating results, including indirect costs such as HR, IT, and insurance currently borne by the general fund.
2.2 Draft Warrant Article & Acceptance Vote
Warrant language must (a) accept § 53F½ and (b) designate the “recycling facility” as the enterprise.
Town Meeting vote—simple majority is sufficient unless local charter requires more. The vote establishes the fund beginning the next fiscal year.
2.3 Establish Initial Budget & Capital Plan
Direct costs —staff, hauling contracts, equipment maintenance.
Indirect cost allocation —apply a written policy each year (e.g., share of HR, finance, facilities). DLS “sound practices” bulletin recommends documenting the calculation in the budget.
Capital reserve —appropriate retained earnings or borrow inside the fund for large items (compactors, scale upgrades). The IGR allows retained earnings for capital or to offset rates.
2.4 Rate‑Setting Mechanism
User fees —bag stickers (PAYT), disposal permits, commercial tipping fees, resale of recyclables. Rates must be high enough to cover all costs plus amortize deficits within the next year.
Rate review usually occurs annually by the Select Board (or Board of Public Works if delegated) during the budget process, similar to Lexington’s storm‑water fee model.
Lexington
2.5 Accounting, Auditing & Reporting
Use full accrual accounting (GAAP) and include the fund in Cohasset’s audited financial statements and DOR Schedule A.
Track retained earnings; any structural deficit must be raised in the next tax rate if not eliminated through fees.
2.6 Ongoing Oversight
Quarterly performance reports to Select Board & Advisory Committee comparing actual vs. budget.
Five‑year pro‑forma updated each budget season to test fee adequacy under commodity price scenarios, taking cues from GFOA best‑practice guidance on business‑type activities.
3. Arguments For Converting Recycling to an Enterprise Fund
Cost Transparency & Accountability Separating the fund shows residents the true net cost per household and highlights inefficiencies that may be masked in the general fund.
User‑Pays Equity Fees can be structured so heavier users bear more cost (e.g., PAYT bag fees), aligning with the “benefit principle” and encouraging waste reduction.
Financial Flexibility Retained earnings stay within the fund and can be used for equipment without competing with schools or public safety.
Benchmarking & Rate Adjustments Enterprise fund format makes it easier to compare to peer towns and adjust rates annually without a Proposition 2½ override.
Incentive to Innovate Managers can pilot new revenue streams (e.g., e‑waste fees, compost sales) knowing they keep savings.
4. Arguments Against Converting Recycling to an Enterprise Fund
Fee Volatility & Commodity Risk - Recycled‑material prices fluctuate; sharp drops can force sudden fee hikes or deficits the general fund must cover.
Administrative Overhead - Separate accounting, audits, and indirect‑cost studies add complexity and staff time, potentially eroding savings.
Equity Issues for Low‑Income Users - Higher disposal fees may disproportionately affect seniors or lower‑income residents unless offset programs are adopted.
Loss of General‑Fund Economies of Scale - Purchasing fuel or insurance through the larger town budget can be cheaper than through a small stand‑alone entity.
Political Sensitivity - Annual rate hearings may become contentious; refusing to raise fees risks recurring deficits that still hit taxpayers indirectly.
Lexington
5. Balanced Assessment & Recommendations
Short term: Adopt § 53F½ at the next Annual Town Meeting with clear warrant language, simultaneous approval of an indirect‑cost policy, and a preliminary fee schedule that closes at least 80 % of the projected FY‑26 deficit.
Medium term: Conduct a PAYT pilot like Northborough to diversify revenues and reduce tonnage. Track quarterly KPIs (tons diverted, revenue per ton, retained‑earnings balance).
Long term: Re‑evaluate after three budget cycles. If the facility consistently breaks even and maintains a 15 % retained‑earnings reserve (mirroring GFOA guidance for liquidity), keep the enterprise fund. Otherwise consider regionalization or reverting to general‑fund status, as Longmeadow debated when it folded its recycling enterprise in 2022.
Done right, an enterprise fund can stop the recycling facility from bleeding the general fund while giving Cohasset residents a transparent picture of what the service really costs. The key is disciplined rate‑setting, rigorous cost allocation, and regular performance reporting.
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