BY BRIAN JONES
COLUMBUS – At its Sept. 17 meeting, the Columbus Light and Water Board approved the FY16 water budget, which includes a 2.5 percent water rate increase, approved a 1.5 percent TVA increase to the electric rates, discussed plans for long-term growth and discussed hiring someone to help crack down on electrical theft.
FY16 Water Budget and Rate Increase
The FY16 budget includes $10,720,397 in income and $9,644,050 in expenses, with a projected profit of $1.076,347.
Projected income includes:
Forfeited Discount: $120,000.
Private Fire Service: $85,000.
Projected expenses include:
Administration and Taxes: $2,246,100.
General Manager Todd Gale explained that current revenues were not enough to keep the Water Division from eating away its reserves.
“Overall the current rate increase, which was adopted in December 2014, falls short of adequately providing the necessary cash flows to sustain the operation of the water and sewer system,” he said. “The bottom line is that we are going to run out of cash reserves in 2018-19. That assessment comes from a third party. We are going to have to do something along the way: cut expenses, increase rates, whatever that may be.
“We talked last year about annually putting in a 2.5 percent rate increase per year,” he said. “That will prevent our customers from going into sticker shock. This budget includes a 2.5 percent rate increase. That comes to about 75 cents water and 75 cents for sewer, so about $1.50 per customer. [The average water/sewer bill is about $42, not including the increase. – Ed.] That will get us about $220,000 in increased revenue. One thing we’re going to get hit on is that TVA came in here and looked at how much of my salary and (Comptroller Mike Bernsen’s salary) goes to electric and how much goes to water. They want to make sure that electric pays for electric and water pays for water. The auditors came in and said the water needed to pay the electric $220,000. That’s about equal to the rate increase.
“The budget we’ve set up looks very similar to what we did last year,” he said. “This budget does not include maintenance and other items that we’ve deferred. If you added up all the projects it came to about $1.7 million. We’ve deferred $775,000 worth of work. Some of the projects we’re talking about are a loop feed to increase water pressure and volume in East Columbus, and some manhole rehabilitation, so some of this stuff we’re talking about is deferring maintenance. Some of it is we’re not buying new trucks and equipment. It’s things that we don’t need today, but a lot of it is work that is eventually going to have to be done. But you’re still looking at capital improvements of about $950,000.
“If we spend everything we have right now on (capital expenditures) and everything goes the way we think it’s going to go, you’re going to be $800,000 into your reserves,” Gale said. “I’m not trying to scare anybody. That’s similar to what it was last year, but we just didn’t spend any money last year. Everything that we’ve put up here this time we feel like we’re going to need to spend.
“The budget that is before you today has a 2.5 percent rate increase in it,” Gale said. “I’m asking you to go ahead and approve this budget today so we can publish it with the city’s budget this weekend. I’m also asking for three or four month to figure some things out. We are drowning in debt. On one bond alone you’re spending $2.1 million a year. The total debt balance is a little over $27 million. I want to look at this long term, and get a 10 year plan and earmark some money and start paying down debt. It may take a rate increase, but what you’re doing is paying today to buy down that debt for the future. I’d also like to look at capital expenditures. Then I can come back in three or four months and we can look at the budget and make changes at that time.”
“I thought we were also going to look at cutting expenses,” said Chairman Andrew Colom.
“We’re going to look at the hard facts as far as cutting expenses,” Gale said. “That may include payroll. Everything’s on the table. We’re going to look at any way we can cut and then come back to you with some options.”
“I would prefer not to eat into that reserve,” said Commissioner Jimmy Graham. “It just doesn’t feel good to be eating your reserves, especially when we have declining finances. I’d rather hear you say that we’re not getting into the reserves because we’re not spending money on new trucks and whatever. The two things I want to hear is that this rate increase is sufficient and we’re not going to eat into our reserves.”
“I think at 2.5 percent we can’t say that,” Colom said. “It’s going to take more than that.”
“It would take a 12 percent rate increase to make that up,” Gale said.
“If we eat $700,000 this year, what’s going to change for next year?” Graham asked.
“I think the plan to stop what you’re talking about in the long term is that we’re going to have to cut expenses,” Colom said. “We’re going to have raise rates more. Not 12 percent, but we’re going to have to raise them run. And we’re going to use some of the rate increase money to pay down debt so in the future the debt is lower.”
“I’m all for paying down debt,” Graham said. “What you’re telling me is that in two or three months you’re to give us a scenario where we don’t have to eat into our reserves.”
“I’m going to come back and give you options,” Gale said. “There are going to be hard choices because some of that (maintenance and capital work) has got to be done. If the board doesn’t agree on price cutting or raising rates, I can’t tell you that we’re not going to be in the reserves.”
“But long term we can’t keep going into reserves,” Graham said.
“I think our sales losses have hit the bottom,” Gale said. “Residential sales have shown a small increase.”
“How much have our new meters recaptured for us?” Commissioner Charlie Newell asked. [One of the selling points of the new meters is that the old ones were no longer accurately measuring consumption, and the new ones would help pay for themselves by capturing that loss. – Ed.]
“It has increased revenue,” Gale said. “I know one commercial customer has gone up several thousand dollars a month.”
Commissioner Michael Tate asked about paying down debt.
“We’re paying about $3 million a year in principal,” Bernsen said.
“Should we start seeing an increase as we pay that down?” Tate asked.
“No, sir,” Bernsen said. “The first debt doesn’t come off until 2019, and it’s a small issue. It won’t affect us that much.”
“The 2025 bond is the big one,” Gale said.
“Can I explain all this and maybe put it in context for y’all?” asked Board Attorney Jeff Smith. “Between 1994 and 1998 this board decided that they would fund annexation. It cost $44 million. It was state revolving fund money. It was costing y’all two fortunes. Right now y’all have $3.25 million in reserves. At that time, when I came on in 1999, you had $800,000 to the negative. When Mr. Graham came on in 2002, you had $95,000 at that point. In 2007 we paid off all that we could, you refinanced for 18 years, that makes it go off in 2025. Y’all are in so much better shape now than you were when Mr. Graham came on the board. All we’ve got to do is get through the next three or four years and we ought to be in pretty good shape. But you have no idea how good you look compared to how you used to look. Y’all had to borrow bucket pickers from East Lowndes. You had to rent from Rex Rentals because you didn’t have any equipment. It looks like a lot of gloom and doom now, but it’s not. If you’re driving a 2015 Lexus and you have to go back to a 2010 Lexus, you’re still doing a whole lot better than the guy driving the ’77 Chevrolet. We used to have a ’77 Chevrolet, y’all. You are in good shape now compared to where you used to be. I’ve been here through it all. We’re going to make it through this. I know the paper’s sitting over there, writing all sorts of things, and that’s freedom of the press, but it’s not gloom and doom. I’ve been in board meetings where you wanted to go home after and take a shower and kick your dog and drink a bottle of liquor. We’re going to be all right, y’all, I promise.”
The budget, which included the 2.5 percent rate increase, was approved unanimously. Gale will report back in several months with some suggestions to cut costs.
TVA Rate Increase
In related action, the board approved a Tennessee Valley Authority electric rate increase.
“TVA met the same time we did last month,” Gale said. “They approved a rate increase in the amount of 1.5 percent that takes effect Oct 1. We kicked in around in June when we talked about the electrical budget whether we wanted to add to that at a retail level. We are not recommending any kind of additional increase.”
The board voted to approve the increase, with Commissioner Brandy Gardner, Graham and Newell voting yes and Tate abstaining.
“What is the cost to the consumer going to be between the 2.5 percent water and the 1.5 percent TVA?” Graham asked.
“It’ll be $1.50 on water and sewer and about $1.50 on electric,” Gale said. “For a typical home, that’s 1,500 square feet using about 1,000 kWh.”
Colom said that he wanted the board to be more focused on the future, and laid out some ideas for future growth.
“What I do for a living is I buy apartments and houses and remodel them,” he said. “I do that here in Mississippi, I do it in Michigan and New York. I have lots of ideas for technology and how to expand and streamline. I’m looking toward the future and taking advantage of technology. When I look at this utility, and I look at the team we have in place and the area, I see that we have an enormous potential to benefit the area in a very positive way. In some ways we’re the only entity that can do that because we have the stability to really invest in opportunities to benefit the City of Columbus. I think we can work together to create and vision and a plan and we can achieve that.
“Eventually, instead of constantly having to raise rates as sales decline we can implement a strategy to stabilize our revenue so that we can just have a flat rate,” he said. “This a new world we’re looking at, and we need to be at the forefront of the charges. We need to come up with a mission and values and a strategic plan. We have infrastructure that we need to fix. We can’t delay that for too long because that has a cost associated with it. Other than that we need to look at what we want to accomplish in the next five years. One thing for sure that I’d like to do is work with other municipalities in joint ventures in water distribution.
“I’d like to see us use technology,” he said. “In my ideal world, in a couple of years people will be able to pay their bills on an app. Most people will not be inclined to come up here and pay a cashier. We want to use technology to streamline everything. Once we do that, I would still love to work on fiber and activating some of that fiber we have. I think the future is using (smartphones) to streamline everything. When I’m in Detroit, the entire city of Detroit communicates completely through an app, and they’re still behind.”
The board took no action.
Electric Theft Policy
“We’ve seen an increase in electrical theft,” Gale said. “I’ve been trying to handle that myself. I’ve been filing charges and going to court. I’ve asked my meter readers to try to get involved a little bit, but I don’t want to put their safety in jeopardy. I want to hire someone with some experience in law enforcement who would go out and investigate and go to court. I want to transfer the cost back on the people who are stealing. The rate payers shouldn’t have to pay for that. You’re already got tampering charges. You’ve got loss of electricity charges. That’s state law. I’d like to add the investigative charges along with those costs.”
“I like the idea of a professional law enforcement officer handling this rather than our men,” Graham said.
“It’s not their job,” Colom said. “It’s not their training. We need someone who is trained to do that.”
The board authorized Gale and Smith to hire someone for the post.
[There was much more at this meeting than what I was able to write. The board spent nearly an hour wrapping up the epic employee relations discussion that has dominated the last two meetings, but I am out of time. – Ed.]0