March 27, 2019
By: Dwayne Page
The Alexandria Mayor and Board of Aldermen are facing a decision they would rather not have to make. Raising water and sewer rates!
For at least four years Alexandria’s water and sewer fund has operated at a deficit which is in violation of state law.
During Tuesday night’s regular monthly meeting, Alexandria’s auditor, CPA John Poole addressed the mayor and aldermen with the concern.
“Our water and sewer systems combined have to show a profit at least every other year. In other words you can’t lose money two years in a row. That has occurred. You (city) lost money in 2017 and 2018. One of the things I know is going to be very difficult for this board is reviewing monies that are being spent and charged but right now we (city) are not in compliance with state rules,” said Poole.
If a utility continues to operate at a loss for more than two years, the state has the authority to force rate increases to make it solvent.
Alexandria is currently under an order from the state’s water and wastewater financing board to come up a plan for addressing the concern by April 19.
In the meantime, Alexandria has asked the municipal technical advisory service (MTAS) to prepare a rate analysis to essentially give the city guidance on how much rates should be adjusted.
Alexandria purchases the town’s water supply from the Smith County Utility District.
Over time revenues have not kept up with expenditures and the city has had other factors which have contributed to the problem including leaks in the system and a leak adjustment policy.
“We have a three and a half percent increase every year on the water we have been purchasing and we have not passed that on to the consumers,” said Elizabeth Tetlow, the city’s municipal financial officer and city recorder.
“We haven’t done it (raise water and sewer rates) in years and it is falling in our lap to correct it,” added Mayor Bennett Armstrong.
“We also had a leak adjustment policy which left the town holding the bag for money because we buy our water and it has to be paid for so we changed that policy and went to an insurance company that now covers the leaks exclusively,” said Tetlow.
In its minutes from a meeting in March, the state’s water and wastewater financing board addressed what it is seeking from Alexandria by April 19:
“Association of Utility Districts (“TAUD”), or another qualified expert to perform an updated rate analysis to include the following:
*A review of the $6.00 depreciation charge and the 11% overage increase that the Town recently implemented;
*A review of the cost of capital improvement projects and a rate structure to fund such projects;
*Creation of a capitalization policy;
*Creation of a five-year capital asset budget to be taken from the current capital asset list and to include future anticipated needs and a plan for implementing said budget; and
*A review of the current leak adjustment policy.
* The Town shall provide an update to Board staff with the updated rate analysis and an implemented or proposed plan of action by April 19, 2019”.
MTAS is expected to have the rate analysis study completed and in the hands of the mayor and aldermen by April 11.
A special meeting will be held that night (April 11) to determine what the city’s response will be to the state.
Meanwhile, the city’s engineer Jerry Warren of Warren and Associates said the city might be able to qualify for financial assistance in making improvements to the city’s water and sewer infrastructure.
“We have talked about several things regarding a plan of action. We have sent a priority ranking request letter in to the state’s revolving fund program. Hopefully we can get on their priority list which could open opportunities for funding through grants and loans. We have also discussed reviewing what is needed at the waste water plant to make improvements in meeting discharge requirements under the new permit. Another consideration is installing automatic read meters because what we have found generally in other places where they have been installed is you realize an increase in revenue almost immediately upon putting them in because you start catching all the water that you lose through old meters and leaks at the meter,” he said.
In response to a question by aldermen Lloyd Dyer, Warren said the city has little choice but to adjust rates to satisfy the state’s order.
“If we can get the information in from the rate analysis and see what that says and if it is something we can manage as a town and implement that is what they (state) are looking for. They (state) really want you to do it (raise rates) without them having to direct that action. We don’t know exactly what that study is going to say yet but its never pretty when the state has to do it (raise rates),” said Warren.