On July 25, the Cassville City Council reviewed a water and wastewater rate analysis conducted by the Missouri Rural Water Association (MRWA). Over the last few weeks, the report has generated many questions from the local community.
"I would like the citizens to understand that there is value in every service that they receive," said Eugene Dilbeck, city administrator. "This is the value of Cassville's water and wastewater services in costs.
"As long as the public understands that we need to do something and is interested in helping us get there, we will be flexible on how we get there," said Dilbeck. "Anybody interested in stepping up and helping in this process is welcome."
Dilbeck hopes the local community and the Cassville City Council see the MRWA report as a starting point in the process. He also hopes to see the council arrive at a decision on the water and sewer rate changes by October or November of this year.
"It should be Cassville's goal to try to get its water and wastewater systems to be self sufficient," said Dilbeck. "Both have been losing money for years. Even when the rates were raised, they were not raised enough to cover the costs."
According to a report generated by Darelyn Cooper, city finance officer, Cassville's water and wastewater operations have operated in the red for the last 10 years. From 2001 to 2007, the water and sewer operations lost nearly $1 million. In 2008 and 2009, the systems lost $364,913 and $447,951 respectively, and last year, the systems lost $584,018.
"Cassville has never had money set aside for any major repairs or equipment replacement," said Dilbeck. "Everything has a lifespan. It is good business practice to depreciate out the lifespan of equipment and set aside or assign funds for replacement costs."
Much of Cassville's water and sewer system is over 50 years old, said Dilbeck. Industry standards suggest that water lines are more costly to repair than to replace after around 40 years. The city has spent over $300,000 in water and wastewater repair projects this year.
"We are having water leaks on a daily basis," said Dilbeck. "Our wastewater treatment plant runs 24 hours a day, seven days a week. Much of that equipment has reached its lifespan and is starting to fail. We cannot fix it. We have to replace it, and nothing is cheap in this business."
Financial pressure of operating the city's water and wastewater systems has been compounded over the last two years by a decrease in sales tax revenues.
"Part of the critical issue with revenue is that for two consecutive years we saw a drop in sales tax," said Dilbeck. "We were flat in 2009. We took a big hit in 2010 and have been dropping at about the same rate in 2011. We have lost around $60,000 or $80,000 in the last two years."
Even though sales tax revenues have decreased, the city must continue to meet its financial obligations, such as bond payments. In order to meet those financial obligations, the city has used general revenues intended for parks and streets to pay for water and sewer operations.
"Look at the parks," said Dilbeck. "Look at the faded paint and deteriorating surfaces. Look at the streets. They are not being fixed, because we don't have the money. The money is going to subsidize the water and sewer systems.
"We would love to fix the streets and have a better maintenance program for the parks," said Dilbeck, "but the money must be obligated to the water and sewer, because those are essential, critical services that we have to provide."
If a rate increase is approved and the city is no longer required to use general revenue funds to subsidize the water and sewer systems, the money will be used to improve streets, parks and other public facilities, said Dilbeck.
Although some cities can use the sale of bonds or loans to generate funding for water and sewer improvement projects, the issuance of bonds is based on the city's credit rating.
"When they sell the bonds, they find someone interested in investing in the city by buying the bonds," said Dilbeck. "We have no money in our current revenue stream to bond against.
"The last of that money was used during the Glenwood Circle sewer project," said Dilbeck. "That used up the last of our bond capability."
The city could also look at a sales or property tax issue. Placing a tax issue on the ballot would require the city to pay election costs.
"There is no guarantee that the people would approve a tax increase," said Dilbeck. "Right now, the only thing that the city council can control are the rates."
The city did approve the sale of $1 million in certificates of participation (COPs) last year. Those COPs, which have been used or committed to water and wastewater improvement projects, must be spent by the end of 2012.
"We also previously had $500,000 in reserve funds for our water and sewer accounts," said Dilbeck. "Our auditor suggested we lower that amount to $360,000. Our council approved that, allowing us to move $140,000 of water and sewer reserves into the capital budget.
"We have raised our own resources and applied those funds to our water and sewer system needs," said Dilbeck. "We have used all the options we had. There is not another nickle available for projects. If we had a major blow up that cost $200,000 to fix, we would be in big trouble, because we don't have the money."
The city's infrastructure task force was reconvened on Aug. 9. The members plan to meet every other week for several weeks to discuss the rate analysis and develop a rate increase proposal.
City staff members will use the proposal developed by the infrastructure task force and input received from members of the Cassville community to develop an official rate increase proposal that will be presented to the Cassville City Council later this year.
If the proposal is approved, the revenue generated by the rate increase will dictate which projects the city is able to complete over the next few years.
"We don't want people to feel this requires a lifestyle change," said Dilbeck. "A lot of our residents use 1,000 gallons or less, but even when looking at the average bill, which is 5,000 gallons of usage, the increase is less than $1 day."
The City of Cassville will host at least one public hearing to present the rate analysis and discuss the proposed rate increases over the next few months. All residents will be invited to attend.