It’s been a few years since the City of Smithville has increased water and sewer rates but an adjustment could be coming in the near future, if the aldermen take the advice of the city auditor, John Poole.
Poole, who is currently working on the city audit for the 2008-09 budget year, addressed the mayor and aldermen Monday night and explained why a rate increase may be needed. “The state recently changed the law regarding utilities. In the past, the utility system had to make at least a dollar of profit every three years. Now you (utilities) have to make a profit every other year and sometimes with utility systems that can be very difficult to do.”
“In the water and sewer fund, there’s a category called “change in net assets”. It’s a big number $1-million 897-thousand dollars, which says the city actually showed an increase in it’s net assets by that amount. We (city) were donated $1.9 million worth of sewer lines. That’s very common these days. You can get developers to build your sewer lines and it can save you (city) the cost of having to do that. We, the city accepted those (sewer lines), and we have to record those as revenues and put them on our books. The state says we have to do that. But if you back that out (remove donated sewer lines from consideration) the utility system in real dollars would have shown a loss of almost $22,000 (for 2008-09), For a district this size, that $22,000 loss is really insignificant other than you have a state law that says you have to show a profit.”
“When we accepted those lines, which is obviously the thing you want to do, we set them on our books, almost $2 million dollars, and we have to start depreciating that. You can figure these lines will last about forty years so we’re going to be adding an extra $50,000 worth of that depreciation expense (next year). So assuming everything happened just like it did last year, next year we’re going to show a $70,000 loss simply because we added these lines and the state wants you to set aside monies to make sure you can replace and repair those lines in future years.”
“We’re going to have to comply with the law, maybe as soon as June 2010, the fiscal year we’re in now. I know it has been several years since there has been a rate increase and I know in difficult times it’s hard to do those things, but you’re going to have to look at doing something. I don’t have the answer but that is something the board needs to start considering.”
Poole added that while the water and sewer fund might need shoring up, the city’s general fund is financially sound. “Even in this tough economy, the city saw surpluses in it’s general fund. That’s very unusual, a lot of cities are really struggling from the economy, the city of Smithville hasn’t gone down as much as others. We did show a surplus in the general fund.”
A more detailed report will be made available to the Mayor and Aldermen on the city audit for 2008-09 when it’s completed.
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