PORTLAND — The city of Portland should hire an outsider to investigate how Shipyard Brewing Co. was billed for only a fraction of its sewer charges for 15 years, City Councilor Ed Suslovic says.

Because the mistake involved two public agencies and a private company, an independent investigator would have more credibility, Suslovic said. He heads a task force that is looking at new ways to fund sewer costs in the city, which knew about the billing mistake nearly a year before it launched an investigation.

“The situation is murky enough that it helps to bring in someone who is unbiased,” he said.

But the brewery’s president, Fred Forsley, said Sunday that it would be “ludicrous” for the city to spend money hiring an outside investigator and that Suslovic should rely on city staff to do the job.

“If he doesn’t trust his own people, that’s a real issue,” Forsley said.

The billing error at Shipyard may have cost the city of Portland as much as $1.5 million in lost revenues, according to an estimate by The Portland Press Herald.

The estimate was derived from Portland Water District data released in response to a Freedom of Access request by the newspaper. The data show that Shipyard used 201 million gallons of water through a second line added at the Newbury Street brewery in 1996, for which a sewer account was never established.

The newspaper calculated the estimate using the city’s current method of determining sewer fees at breweries, with allowances for beer and soft drink production reported by Shipyard.

In an email Friday to City Council members, Forsley said it’s “irresponsible” for anyone to estimate the lost revenue before a city investigation is completed. City Manager Mark Rees declined to comment on the Press Herald’s figure but added that the city is preparing its own estimate.

City Hall discovered the mistake a year ago, while working with the brewery on a program to help businesses reduce their sewer costs. With the error corrected, Shipyard is now paying an additional $300,000 a year on its sewer bill.

Rees, who took office as city manager in August, ordered city staff in December to investigate and resolve conflicting information to get to the bottom of what happened.

Any questions about whether Shipyard should make back payments to the city won’t be addressed until after the investigation is complete, Rees said.

The city oversees the sewer system in Portland. The Portland Water District, a quasi-municipal agency that serves 11 cites and towns, provides water to city businesses and residents.

Because sewer bills are based on water use, the district sends out sewer bills on behalf of the city.

Ron Miller, general manager of the water district, said city officials never gave his staff instructions to set up an account for the second Shipyard line. When water district employees raised questions, he said, they were told by a city official that all the water in the line was going into bottles.

According to the brewers national trade association, however, figures show that for every gallon of beer that is bottled, about two to six gallons of water are used.

A senior wastewater technician who was the city’s primary contact with the water district on sewer issues during this period died in 2007, making it difficult for city officials to reconstruct what happened.
Rees said it’s evident that there was a communication problem between the city and the water district.

He said he is considering drafting a memorandum of understanding between the city and the water district to “make sure everybody is clear on what everybody’s responsibilities are.”

Portland Mayor Michael Brennan said he will ask Rees to finish the investigation as soon as possible because the public needs answers quickly. He said the city needs to take steps immediately to make sure nothing like this happens again.

“My hope is that this will be a discrete, isolated incident,” he said.

Brennan said he is not interested in seeking back payments because there is no evidence that Shipyard did anything wrong. Forsley, the brewery president, has said he was unaware his company wasn’t being billed properly, and that paying all his back sewer costs would be unaffordable.

But Suslovic, the councilor who heads the sewer task force, contends that the city should seek back payments from Shipyard through a “reasonable” payment plan.

Councilor John Anton, who chairs the council’s Finance Committee, said the billing failure at Shipyard raises questions about whether the city has adequate internal controls over its billing system.

“It appears we did not have a policy framework or management controls to call this issue out,” he said.

“That it has taken this long to identify the issue raises concerns to me.”

Although the error at Shipyard was found a year ago, the City Council was only informed about the mistake from city staff this month, after a newspaper reporter began work on the story, Suslovic said.

The issue has raised doubts about the credibility of the city’s sewer billing system, and that matter needs to come before the City Council, he said.

“There are questions that need to be asked and answered in a public format,” he said. “It’s been almost a year. Why haven’t we been able to figure this out?”

Staff Writer Tom Bell can be contacted at 791-6369 or at:

tbell@mainetoday.com