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Six Facts for Thought

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June 30, 2011 by wcobserver

We commend the 50 or so people who attended the June 14 public hearing on the city’s 14 percent water and sewer rate increase. It’s hard to come forward in a small town and speak on any side of an issue. Trust us, we know.

If you’re a regular reader of this paper, then you know we’re all for transparency and a public hearing certainly attempts to let citizens better understand the issues at hand. We’re guessing from the murmurs in the crowd and shaking of heads last Tuesday that some of you went home disappointed that city officials couldn’t provide more specific details on a number of issues surrounding the events that have led to the water and wastewater utility’s $25,000 loan from the city’s general fund and now a 14 percent rate increase.

Mayor Frances Hime, the city council and the Water and Wastewater Utility Commission, are in a tough place right now. The man at the helm of the city’s utility is a 30-year, plus, employee and by many accounts has worked tirelessly to serve the city. But he was also a man without a lot of specifics last Tuesday night about what happened and when. Even his 14 point management plan for the utility mostly lacked measurable tactics or a timeline. He admitted at the meeting many of the items are not new action items.

Believe me, we don’t claim to have all the answers either and given the amount of time we’ve dedicated to trying to find out, it may be a while before the true extent of this thing is known. But here’s our attempt to provide depth to some of the questions you posed last week.

For the woman who asked about the city’s sinking fund:

She was referring to the utility’s bond funds. We are no experts on bonds, but theoretically, the city should be making regular monthly payments to its bond funds that covers not only the balloon payment at the end of each year, but also builds and maintains the required reserves.

FACT:  The city has a 1973 bond fund and an associated depreciation fund that lack its covenant requirement. Together, they’re supposed to have $40,500 in reserves. That account should also have half of the needed $26,000 bond payment that will be due in December. As of last week, the balance was $1057.23. On March 5, 2011, financial records show that an $8,000 transfer was made from this fund to the utility’s operating fund.  The water commission didn’t approve this transfer either. The utility’s secretary, Kristie Drymon, said the last regular monthly payment to that fund was made in October, 2009, 21 months ago. She said money was transferred into the bond payment account at the end of the last year from the utility’s operating fund to ensure the bond payment was met.

For the woman who asked if a budget had been given to the city council:

FACT: No budget for 2011 for the Water and Wastewater Utility has been presented or approved by the city council OR the utility’s commission. Jim Kennedy, Manager for J. Timothy Fulmer, the city’s auditing firm did present an unaudited profit and loss statement. He told council members in May he could see no evidence of the misappropriations of funds. In other words, it may not be managed well, but he says there are no signs someone has dipped into the till.

For the same woman who asked what portion the utility’s budget is represented by salaries and benefits:

FACT:  The utility’s salaries and benefits represented 40 percent of revenue in 2009 according to utility’s auditor. Salaries, alone, comprise $212,000 of the utility’s $596,000 unapproved budget and nearly equal the line item the utility pays the City of Fayetteville to purchase the water it sells. West Fork pays 100 percent of the health benefits for all of its employees AND their families.  The percentage of salaries and benefits does not include a lifetime annual payment of $5,000 to two utility employees, which is paid by the city’s general fund as a “make-up” for retirement benefits that didn’t exist when they first became employed by the city more than 30 years ago. The $5,000 benefit was approved by the city council in 2010.

For all of those who had questions about utility employee raises:

FACT:  All utility employees received a 3 percent raise in 2011; they did not receive a raise in 2010. Treasurer Kristie Drymon said utility employees also received raises in 2008 and 2009, but that neither she nor Bartholomew received raises those years, making 2011 the first time in three years since they saw a raise.

For the woman who said she wouldn’t support a 14 percent rate increase until the city addresses its water loss issues:

FACT: The city has seen a decline in water losses over the past two months. May records show the loss is down to 25 percent, which is a huge improvement from March’s high of 42.5 percent. However, before you pop the champagne, the utility was able to get unaccounted water losses down to 26 percent last June and then it steadily increased throughout the year. The target is 15 percent. The auditor’s calculations on turning the utility’s finances around are based on a 2010 average water loss of 30.5 percent.  The city’s average up until May has been above that.

For the woman who asked about the number of people serving on the water commission:

FACT: Greg Tabor, who served as its chairman, resigned last week, leaving two new members at its helm. One of those members, Virgil Blackmon, previously served as Mayor, so he doesn’t come to the table without ​experience. Blackmon said at a water commission meeting last week, the commission will expand to five members. If you’d like to be considered for appointment, call city hall at 479-839-2342.

For those of you who asked about accountability:

We have no good answers for you here. There are at least two or three years of events that have led to this financial crisis; it didn’t happen overnight. The auditor’s cash flow analysis shows a steady financial decline over the past five years. The utility ended 2006 with $225,449 in the bank. From where we sit, it appears that many things broke down along the way and lots of things went unchecked for a long time…by the water commission and the city council. So far, the city’s administration has strayed from “blame,” but dissecting what happened, by who and when is the only way the city will  find itself on a path forward. It’s not about “blame,”​ but about accountability.

We think the auditor got it right when he told the council they need to develop policies and procedures to strengthen internal controls and provide accountability. And although it’s not easy in a small town with limited staff, he says more segregation of duties is needed. If West Fork’s leaders get these things right, that might bring on the champagne.

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