Auditor recommends water rate increase
September 20, 2017
WORLAND — Following a recommendation by the auditor, the Worland City Council is considering a 10 percent to 15 percent rate increase for water.
James Seckman, certified public accountant, presented a clean annual audit report to the city for the fiscal year that ended June 30. He said the general fund cash position is “fairly strong” and general fund reserves and enterprise fund reserves were healthy.
“I’ve been doing the audit for the city for years. And we do most of the cities and towns in the [Big Horn] Basin. The City of Worland still remains one of the most healthy cities in the whole entire Basin. You’re the only city that has no debt. You’re in very good position with your cash reserves,” Seckman said.
However, regarding the water fund, he added, “One of the things that I want to update you on is that state statute actually requires that for a municipality that has a population over 5,000 people that it shows an operating income in each one of its enterprise funds (water, wastewater and sanitation).” He noted that city has had an operating loss in the water fund and has been operating with a loss over the past few years.
Operating expenses exceed revenues by $309,000. “One of the things that we’d like to do over the next two to three years is that we’d like to sure up that gap,” Seckman said.
He also noted that while revenues are at $1,756,000, they are down $17,000 from the previous year.
He said the reserves are not abnormally low but in a reasonable range. “What’s happening now is our expenses are exceeding our revenues by a pretty significant amount. It won’t be long before, if we don’t make some changes in our water rates, that we’ll be in a deficit position,” Seckman said.
HEALTHY RESERVES
During his report, Seckman said that the cash reserves for the water fund were at $3,974,000, down about $68,000 from the previous year. The wastewater reserve funds were $2,207,000, down $269,000. The sanitation reserve fund is at just over $1 million. He said there were significant capital purchases in each fund during the year.
He said accountants, when conducting audits, like to see enterprise (water, wastewater and sanitation) reserve funds at one to three times operating expenses, depending on the age of the infrastructure. He said for the city of Worland’s water and wastewater they would like to see about a two-to-one ratio.
The water reserve fund is at 1.92 times operating expenses, wastewater is 1.93 times and sanitation is at a one-to-one ratio but is not heavy on infrastructure. He said the sanitation reserve fund generates enough to replace trucks every three to five years.
Regarding the general fund, there is a 1.18 times reserves to operating expenses which he deemed “very healthy.”
RATE PROPOSAL
Worland Clerk/Treasurer Tracy Glanz presented some figures to the council to show how much 10 percent, 12 percent, 14 percent and 15 percent increases would raise. The proposal would be increases on the base rate, currently $8.62 for residents, and an increase on the consumption rate.
A 10 percent increase would raise approximately $94,025 and 15 percent would raise about $147,436.
“My take is that with that deficit in that fund, we don’t need to recover it all in one year, but over the course of two to three years we would like to sure that up,” Seckman said. “Before a rate would take effect it would be down the road a little ways, so my recommendation is that we seriously look at the 15 percent.”
Glanz said a typical resident per month in fall and winter would use about 4,000 gallons so the rate would go from $19.94 per month to $22.91 or an increase of $2.97 under the 15 percent increase.
“I know 15 percent sounds like a lot but it’s not really a lot when you break it down that way,” Glanz said.
She added that the city has not had a rate increase in water since 2009.
Seckman said, “We’re very cautious about recommending rate increases. With the local economies being what they are and state revenues being what they are it’s hard to propose those but we do see some distress in that water fund and that’s why our recommendation is an increase. It’s up to the council to decide what their tolerance is, what that level is. If you feel 15 percent would have too much impact maybe you lower that, but we would like to close that gap up as much as possible as soon as possible.”
The council members were mixed on a preference of 10 percent or 15 percent with Mandy Horath noting, “We’re going to take a hit [from the public] no matter what.”
Dennis Koch said it would be wise to go middle of the road at 12 percent or 14 percent.
Gary Gerber said while he wouldn’t mind starting lower he would hate to have to raise rates again in two to three years. “If we’re going to do it we should go all the way in my opinion,” he said.
Keith Gentzler said he would prefer the 10 percent noting, “I received an awful lot of stuff concerning sanitation [rate increases].
City Attorney Kent Richins suggested that he and Glanz work on two to three resolutions to add to the water ordinance for the council to consider at their next regular meeting, Oct. 3.
In other business Tuesday night:
—There were no comments during the public hearing for Stogie Joe’s. Glanz said the application was for a new bar and grill license and the owners would not receive license until the bar and grill is open. Stogie Joe’s is located at 800 North 10th, which is the former A&W location.
The council then unanimously approved the application.
—The council approved the bid for $22,768 from Fremont Motors of Cody for a new Dodge Charger police cruiser. Three bids were received.
— The council approved a request from Goose’s Liquor to serve beer at an adult softball tournament Saturday and Sunday in Worland to benefit the junior and senior Babe Ruth teams.
—The council approved a business loan for $85,000 for SSID Properties (Cloud Peak Chiropractic) to renovate the building at 618 Coburn. The application process was started before the council entered into an agreement with Washakie Development Association for a Grow Worland revolving loan fund.
—Ordinance 843 to increase court automation fee to $35 with $25 going to the state, was approved on first reading.
—The council approved Ordinance 840 updating the water ordinance on third and final reading.