Deacon Perrotta, the water superintendent for Tisbury and Oak Bluffs who has come under scrutiny the past two years for an unusual contractual agreement with both towns, unexpectedly resigned from his job in both towns last month.

Mr. Perrotta first announced his plans to step down in early June, and his last day on the job was last Wednesday. He resigned after negotiating an agreement with the Tisbury Water Works and Oak Bluffs Water District stipulating that each town pay him a severance package of $45,000 plus unused vacation time.

Mr. Perrotta’s resignation brings to a close a protracted struggle between the Tisbury selectmen and Tisbury water department dating back to 2006. It started when selectmen learned that both Mr. Perrotta and water administrator Lois Norton — who also works for both towns — each held contracts that paid them over $100,000 combined from the two towns, making them among the highest paid public officials on the Island.

Selectmen also learned the water commissioners from both towns ratified a five-year contract with Mr. Perrotta in 2005 that paid him $100,000 plus benefits. The cost of the contract was split equally between the two towns.

Around this time it was also revealed that the water department held a $1.5 million surplus in their budget, prompting selectmen to launch an internal investigation to answer questions about management and financial practices within the department.

The probe resulted in a legal opinion from the town labor counsel which found that the water department lacked the legal authority to administer its own payroll system, maintain separate bank accounts, retain profits and surpluses monies, and negotiate contracts with employees.

Selectmen tried to reduce both Mr. Perrotta and Ms. Norton’s salaries at the 2006 annual town meeting, but were unsuccessful. However, they did manage to reduce the salaries at the 2007 town meeting, and at the recent annual town meeting in April, selectman Tristan Israel proposed an amendment to reduce the salary of Mr. Perrotta and Ms. Norton by just under $28,000.

The motion to reduce the salaries passed by a wide margin.

Neither the Oak Bluffs water commission or board of selectmen have ever disputed the terms of the contracts and have continued to pay Mr. Perrotta and Ms. Norton their negotiated salaries.

David Schwab, chairman of the Tisbury water commission, said yesterday that after two years of scrutiny and pay cuts by selectmen, Mr. Perrotta simply felt it was time to leave.

“I have heard some selectmen say this was not personal, this was town business. But when you cut a guy’s salary two years in a row, he can’t help but take it personally,” Mr. Schwab said.

Mr. Schwab said Mr. Perrotta did a good job for the town, and did not deserve difficulties he was made to endure the past two years.

“Nobody ever questioned his professionalism or ability to oversee and run the water systems [of two towns]. As a licensed operator he was remarkably capable and dedicated,” he said.

Mr. Schwab disputed the notion that either town was overpaying for Mr. Perrotta. He said the unique arrangement actually saved the towns money because otherwise each would likely have to hire a full-time water superintendent and assistant superintendent. He also said selectmen failed to consider that Mr. Perrotta essentially was working two full-time jobs for Oak Bluffs and Tisbury by running two water systems at once.

“Remember, [Mr. Perrotta] was on call for both towns 24 hours a day, seven days a week. Every time he had to fill out paperwork in Tisbury he had to do the same in Oak Bluffs . . . we always maintained the position he held was worth more money,” he said.

Michael deBettencourt, chairman of the Oak Bluffs water commission, agreed the work Mr. Perrotta performed justified his salary.

“For almost 10 years this arrangement worked and worked well. [Mr. Perrotta] did a great job as far as his knowledge and expertise were concerned. But after all that has happened he made a decision that I respect, and we decided to work with him with that decision,” Mr. deBettencourt said.

Several town officials this week also confirmed that an internal investigation had taken place into alleged misconduct by Mr. Perrotta. The investigation was initiated by the joint water commission between Tisbury and Oak Bluffs. Ms. Norton said she was aware of an investigation into Mr. Perrotta, and that a private investigator had been hired. She declined to provide further details about the nature of the investigation.

When reached by phone, town administrator John Bugbee said he was also aware of an internal investigation that involved a private investigator from off-Island. “I am aware of an investigation and a written report that came out of that investigation, but that is all I can say,” Mr. Bugbee said.

Water commissioners from Oak Bluffs and Tisbury are expected to meet in the coming weeks to discuss a strategy for replacing Mr. Perrotta. Department of Environmental Protection regulations require two full-time licensed operators to manage the water systems, and the combination of Mr. Perrotta and Ms. Norton filled that requirement through a special exemption approved by the state agency.

In the meantime, the Auburn-based firm of White Water Inc., has been hired to provide licensed personnel during the transition period. Ms. Schwab said that an operator will be paid a rate of $90 per hour, plus travel costs to the Island. The two towns will split the cost. A special consultant has also been hired to review the two water districts and recommend possible operational changes as well as changes to the superintendent position.

Mr. Schwab said is quite possible the consultant will recommend that Tisbury and Oak Bluffs separate management of their water operations.