Efforts to balance this year’s city water and sewer budget revealed the fund might not be on a sustainable financial path in the future.
“The difficulties we had balancing this year’s budget indicates there will be difficulties to come in the future,” said Utilities Director Johann Coetzee.
Coetzee contacted McGill and Associates to complete a water and sewer rate assessment to examine the financial footing of the department. The study found the water production expenses were expected to increase at a higher rate than the revenues, and that the water and sewer fund would deplete all cash reserves in the next five years.
To combat this, the study recommended the city incorporate the existing $10 water capital improvement fee into the water rate structure, that the minimum fee be increased and the usage rates be increased by 3 percent through 2019.
Coetzee said this would have a minimal impact on most customers, as the $10 fee was already in existence and the usage rates had already been increasing by 3 percent for the past five to six years because of an ordinance approved by City Council to help fund infrastructure improvements.
He noted the proposed plan would actually scale back increases on the sewer side of the fee structure. Under the existing ordinance, the sewer fees will increase by 5 percent each year until 2016. If council approves the proposed changes then the increase would continue, but at 3 percent instead.
“This is just restructuring the revenues that we already had,” Coetzee said. “We are working with tiny margins. The growth is projected at 2.5 percent each year and the usage increase would be 3 percent. We are trying a minimalist approach. We are looking to the future to see the needs and make the smallest adjustment. We don’t want to wait until the last minute and hit the customers over the head with a sledgehammer.”
City Manager Jerome Kitchens agreed the water and sewer fund would have financial issues in the future if steps were not taken to correct the cash flow problems.
“We don’t have that much revenue coming in given what the needs are,” Kitchens said. “We have good revenue coming in, but we have been pushing hard to make improvements. We balanced this budget without adding any new revenue but we are going to have to look at changes over time.”
He said the fund would need to have adequate cash flow available to handle any emergencies that may occur, such as a ruptured water line or equipment failure.
“We need to address this now,” Kitchens said. “If we wait until it all piles up, then we will be back where we were before.”
Kitchens said in the upcoming budget, the water department was able to continue with the water loss reduction plan but no money was available for sewer line improvements. He noted the sewer lines were in need of repair because they were aging and stormwater was getting into the pipes and being processed through the treatment facilities.
He also addressed the concern of the sewer addition to the Milligan annex area. Kitchens said the expected cost of adding sewer to that community was between $3.5 million and $4.5 million. He said the sewer lines are not funded through property taxes, but through sewer charges.
He said the sewer project was not “on the front burner” because those residents received all city services that were funded by property taxes. Because they didn’t have sewer services, they were not being charged a sewer fee, and the annexed area did not provide enough revenue to cover those costs.
“If we put the cost just on those that would be getting the new service, it would be a significant charge,” Kitchens said. “The only other way to do it would be to put it on all the customers, but they are already getting the service and are paying that fee. The problem is how are we going to afford it when the cost is so high.”
For the electric department, General Manager Rob Toney said the department would be focusing more on tree trimming in the next budget year. He said tree trimming helped eliminate outages for customers during bad weather and the program had fallen behind in the past few years.
Toney said there were also plans in this budget year to bring the customer service operations back to the office on Hatcher Lane. He said no firm details had been arranged yet and the move would be based around customer demand.