June 5, 2011 by wcobserver
Council Puts Brakes on Rate Increase
By Susan McCarthy
WEST FORK- City Council members approved rescuing the city’s financially strapped water and sewer department with a $25,000 loan on May 18, but said more information about the department’s finances was needed before they could get behind a 14-percent rate increase.
Water Superintendent, Michael “Butch” Bartholomew, appeared before both the water and sewer commission and the city council in two emergency meetings. In both meetings, Bartholomew sought approval for a $25,000 loan from the city’s General Fund to meet expenses through June 1.
The amount requested included a $10,000 transfer from the General Fund that had been made on Friday, May 13 without prior approval. It also included $6,838 in past-due invoices, some dating back to 2010. Bartholomew said help would be needed to cover nearly $12,000 in payroll on May 31 for its two part-time and two full-time employees, which includes Bartholomew. Kristie Drymon, who serves as the water and sewer secretary as well as the City’s Treasurer and City Clerk did not attend either meeting. Drymon transferred the funds on May 13 to cover the water and sewer payroll at Bartholomew’s request.
Bartholomew also proposed a 14-percent rate increase which he said was necessary for the department to stay solvent. He said the last rate increase was in 2008 and that the city’s unaccounted water losses, increased expenses, and uncollected water customer debts of about $20,000 have contributed to the department’s financial situation.
Commission Pushes for Rate Increase
Bartholomew first met with the water and sewer commission during a two-hour meeting in which the commission ultimately voted unanimously to request a $25,000 loan from the city council. The commission also voted 2-1 in favor of a 14-percent rate increase with Commissioner Greg Tabor voting no.
All three commission members, Greg Tabor, Mike Mitchell and Virgil Blackmon were present. Wednesday’s meeting was the first for Blackmon, former mayor, whose appointment had just been approved by the city council the week before. The noon meeting was also attended by three city council members, Misty Caudle, Charles Rossetti, and Joan Wright.
About 45 minutes into the meeting, it became clear that Tabor, who serves as chairman, wasn’t aware that money had been transferred to cover payroll on May 13 or that it had been done without prior approval. Council member Caudle said she’d called all three commission members, but hadn’t left a message for Tabor or called him back.
Tabor expressed a number of concerns throughout the meeting including the fact that this was the first time a rate increase had been discussed in a public forum. Tabor said a 14-percent rate increase is tough when citizens themselves haven’t seen a raise and don’t have their employer paying 100 percent of their insurance plans. Bartholomew confirmed during the meeting that water and sewer employees had received a three-percent raise this year and that the city is still paying 100 percent of health benefits for its employees and their families.
Tabor said he didn’t feel like he could support a rate increase without taking a closer look at the water and sewer expenses to see if cuts could be made to reduce the amount that would be needed in a rate increase. “I’m in favor of a rate increase and I’m in favor of this one,” said Blackmon. Mitchell wanted to know if the rate increase “would pull us out.”
Mayor Frances Hime said a 13.5-percent increase would “make us level,” but would not provide any cushion. She said a 15-percent rate increase would “give us a little padding.”
Hime presented a written statement to the commission and said a recently completed audit of the city’s utility shows a five-year decline in year-beginning cash from $225,000 in 2006 to $75,000 in 2009. The 2010 water and sewer audit has not yet been completed.
“I can see your rate increase if there is a long-term plan for accountability,” replied Hime, who charged the commission with developing a plan for the June city council meeting.
Council Says it Needs More Information
At 6 p.m., Bartholomew was back at city hall to present the water and sewer commission recommendations to city council members and a citizen-packed conference room. Mike Mitchell and Virgil Blackmon were also in attendance. Council members spent about two hours seeking to understand the scope of the department’s financial problems.
The council approved the commission’s request for a $25,000 loan, but deferred a decision about a rate increase until a more in-depth review of the utility’s finances could be presented. John Foster was absent.
Bartholomew requested the loan and rate increase without presenting a utilities financial report and couldn’t answer council member’s questions about how much money was in the water and sewer accounts or the amount and timing of upcoming bond payments.
“To sum it all up, we have kept our rates at the same level while costs have increased,” said Bartholomew, before explaining some of the financial challenges the utility has faced in the past couple of years.
The $25,000 loan will help the water department meet its expenses until June 1, according to Bartholomew, adding that the loan will help the utility to catch up and that, with a rate increase, it should be able to meet its expenses.
Council Member Misty Caudle pressed Bartholomew for a time frame in which the loan would be repaid to the city, but after some discussion, it was agreed that a time frame could not be determined until the full extent of the financial needs had been examined.
Bartholomew said the rates should have been raised on at least two other occasions, but that the water commission had not agreed to “bring a rate increase forward.” He said the last rate discussion was for a nine percent increase in 2009.
“This situation has been like I said, it has been long going. It has been a downward slide because we haven’t had the rates raised in time as our costs increased and so, you know, it has been a long time coming,” said Bartholomew.
“Fourteen percent will cover operational costs. It will not cover funding your reserve accounts and capital-improvement accounts but will cover everything else,” Bartholomew said.
Well into the meeting, it was discovered that the city council never saw or approved a 2011 water and sewer budget. Mayor Hime recalled that at the time the other city budgets were approved Bartholomew had said the water budget was being approved by the Department of Agriculture.
Tom Kieklak, the city’s attorney suggested the council should insist on a monthly profit-and-loss statement that shows the financial activity of the previous month.
“It’s their money; you’re the fiduciary for it,” said Kieklak who added that the city council would not be here had they had insight into the water and sewer’s finances on an ongoing basis.
“Somebody’s got to be accountable, ” said Sam Caudle, one of five citizens who spoke during the public forum. “There’s absolutely no reason for you not to know about a problem like this at 5 o’clock on a Friday afternoon. You sat there and said in three months you might be here asking for $50,000, so I mean before the city can loan you money to get your butt out of a ringer, to me, somebody has to do a better job,”
A public hearing will be set in June ahead of a vote to pass a rate increase. The city council met again Wednesday, May 26, to review financial reports for the water and sewer department. The meeting will be covered in next week’s issue.