City Off State Probation for Water/Sewer Mismanagement

Nearly four years ago, I stood in front of the Water and Wastewater Financing Board at a hearing by the State Comptroller’s Office to present a plan to get the city off the state’s distressed water system list. The board approved the plan, but warned us that the terrible increases we had to implement might not be enough.

Why were we on the distressed water list? Because the city experienced at least two consecutive years of negative change to its net position in the water/sewer fund. Technically we had three years of negative change – and yes I’ll say it – caused by poor decisions of the administration prior to my time as mayor.

We made difficult decisions. The state approved the city’s recovery efforts. And then two weeks ago Ralph Cross of the Municipal Technical Advisory Service again addressed the Board of Mayor and Aldermen, this time to deliver the news that the city was finally off the state’s distressed list. He confirmed the water and sewer fund are now in good financial shape.

The chart below shows the losses and then the recovery that was made in the last three years because water/sewer customers paid the price of a zero rate increase policy for years.

Water - Net Position Change

You can see in 2008-09, 2009-10, and 2010-11 the city was bleeding money. That’s why the hearing was held at the State Capitol. You can also see that once the changes were put in place – and yes they were terrible – we finally climbed out of the hole we were in.

The great news is that as a result of the last few painful years (and NONE of us liked paying the increased bills), water/sewer rates in the coming year do not have to increase. The caution in this, however, is in order to keep from going BACK ON the distressed list, the rates will have to go up for the next two years after this fiscal year.

Why?

Water - State Requirements

If the city does not increase the rates after 2015-16, we will again face a negative change to our net position. Mr. Cross said the city essentially has two choices. Do no rate increases for the next three years and be back in the same shape we were in when I took office in 2010 – and back on the distressed list. Or Option 2 is to not increase fees this year, then do a 2% increase in water and a 2% increase in sewer in each of the two following years after this one.

Water - Case 2

What does this mean? It means that citizens who are hoping for their water bill to GO DOWN because they are “getting soaked by high water bills” will not get a rate cut if the board follows the recommendation by MTAS. It means that the board MUST increase rates the next two years to keep our city from again spiraling down into the same situation we faced in 2011, going on the distressed water list.

My Board and I took a beating for our work to position the city so we could again have a solid financial status in the water/sewer fund and in the general fund. Those years were some of the most difficult of my life, but I feel vindicated that the city’s finances are now healthy and we are fiscally sound because of the decisions our board had to make to save the city. While we are healthy, we are still in a vulnerable position.

Be warned… rates will go up. If they don’t, someone will again have to go before the state hoping to prevent a state takeover of our system. I would suggest if that happens, do not vilify these future leaders if this current board makes poor decisions that will again imperil the city. I would also suggest you consider whether future campaign promises are truthful or self-serving.

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