A multimillion-dollar legal victory over the City of Worcester is not expected to reduce the need for a proposed $5.5 million Proposition 2½ override, according to town officials, who say state financial rules restrict how the funds can be used. Holden voters will have already decided yes or no on the $5.5 million override request at the Annual Town Election, which was held on May 11, before this issue of Wachusett Free Press was sent to the printer. See our web page and FB page for updates on the Holden, Paxton, and Rutland town elections, which were all held on Monday, May 11.

The Town of Holden is set to receive $35.5 million following more than a decade-long sewer rate dispute with Worcester. However, Town Manager Peter Lukes said the money that was awarded to the town’s water and sewer enterprise fund cannot be used to support general government operations or offset the override amount on the ballot.

“The sewer transport award will have no impact on the override or the Fiscal 2027 budget regardless,” Lukes said.

Why the Funds Are Restricted

Enterprise funds are a specific type of municipal accounting structure used to manage services such as water and sewer systems. According to the Massachusetts Department of Revenue website, these funds are designed to “account separately for all financial activities” tied to a particular service and are primarily supported by user fees. 

This means revenue generated within an enterprise fund from fees, charges, and other income is generally expected to be used for that same service.

Because Holden’s lawsuit was funded through its water and sewer enterprise fund, the resulting judgment was awarded to that fund rather than the town’s general budget.

“DOR officials have explicitly advised us that the money is intended for the water/sewer fund and cannot be moved to pay for non-water/sewer operations at this time,” Lukes said.

While the funds from the settlement are tied to the enterprise fund, state guidance indicates that enterprise revenues can include additional sources such as interest earnings and other financing mechanisms. 

Lukes said the town is currently exploring whether any portion of the award - such as accumulated interest or potential borrowing strategies - could eventually provide broader financial flexibility.

“These are complex legal issues that have never been dealt with before in this manner,” Lukes said.

The town’s Water and Sewer Department has received less than 30 percent of the total award so far, with the remainder expected to be paid over the next three years.

Override Proposal and Budget Impact

Considering the funds being given to the town of Holden as a result of this case, residents have questioned whether the proposed 2 ½ override might be offset in any way. 

The proposed $5.5 million override for the town of Holden is aimed at maintaining current service levels and addressing rising costs across town departments.

According to Lukes, the override would fund:

• The annual assessment for the Wachusett Regional School District

• Restoration of three police officer positions

• Restoration of three firefighter/EMT positions, including two partially funded through a federal SAFER grant

• Restoration of three Department of Public Works employees

• Full operating hours for the library and senior center

• Capital improvements, including school security upgrades and building repairs

Without the override, officials say the town would face service reductions, including cuts to public safety staffing, reduced library and senior center hours, and the potential loss of library certification.

One-Time Funds

vs. Ongoing Costs

Even if the settlement funds could be used more broadly, Lukes said using them to fund ongoing operations would create long-term financial risk.

“Using the award money for capital purchases or capital investments is much more prudent,” he said, noting that relying on one-time revenue for recurring expenses could create a “much higher fiscal cliff” once the funds are depleted.

State guidance supports this general approach by emphasizing that enterprise fund revenues should align with the costs of the services they support, reinforcing the separation between enterprise activities and general municipal spending. 

Potential Impact 

on Ratepayers

While the settlement is not expected to affect taxes, it may eventually benefit sewer ratepayers.

Lukes said the funds could help reduce the amount of money borrowed for future infrastructure projects, which could lower sewer rates over time. The town is also exploring whether it can provide direct rebates to residents who were overcharged, though that process would be complex and require additional analysis.

“We don’t have an estimate as to how much rates will decline,” Lukes said, adding that future rates will depend on upcoming negotiations with Worcester, involving the help of rate experts.

What Remains Unclear

Although state guidance and local officials point to clear restrictions on how the settlement can be used, several questions are still unresolved, including whether any part of the funds could eventually be used to provide measurable financial relief for town residents.

At this time, it is unclear when a detailed public plan for the funds will be released. 

For now, the settlement and the override remain separate issues; one tied to long-term infrastructure and ratepayer costs, the other to the town’s immediate operating budget and services.  W