Starkville administrators downplayed a department head’s prediction of future water rate hikes by saying the forecast is premature before the city receives its Fiscal Year 2013-2014 audit in early 2015.
Public Works Director Doug Devlin made the prediction at Tuesday’s board of aldermen meeting as he discussed an upcoming $400,000 Mississippi Capital Improvements (CAP) Loan application that could fund a lengthy sewage pipe replacement near the southern industrial park.
When asked if this and future infrastructure projects would force increases for either water or sewage rates this fiscal year, Devlin told the board he believes higher debt service would force a hike.
A hike could be needed, he said, since a number of rehabilitation projects will be possibly funded through similar CAP loans. Starkville Public Works is continuing to evaluate its infrastructure and identify future projects.
“I think once we get a good idea of the scope of what our borrowing is going to be and our debt service, then we’ll have a better idea of what that rate increase will be,” Devlin told aldermen Tuesday.
Starkville Chief Administrative Officer/Finance Director Taylor Adams walked back Devlin’s comments yesterday by saying Devlin’s prediction is “putting the cart ahead of the horse” before the city fully studies SPW’s financial standing.
“All comments that department heads make in their capacity are for informational purposes only and are just recommendations. In that specific situation, (Devlin’s comments) were related to an item we haven’t had an opportunity to examine yet,” Adams said in reference to the upcoming FY 2013-2014 audit’s release in the first quarter of 2015.
“At that point, we’ll look at where water is operationally, make an assessment where that department is from a cash flow standpoint and make that presentation to the board,” he added. “To forecast any rate increase at this point is premature, and that’s simply because we don’t have the firm data to make a statement of that magnitude.”
Last month, aldermen approved an $18 million operating budget for FY 2014-2015, which began Oct. 1. In that document, combined water and sewer revenues were budgeted for a decrease from $10.03 million to $9.77 million. Water sales alone were forecasted to drop from $3.2 million to $3.1 million, while sewer sales are expected to increase from $1.9 to $2 million.
Those streams only constitute a portion of the department’s combined revenues, which are also derived from tap fees, material sales, wastewater revenues and miscellaneous income.
As of Sept. 11, year-to-date figures show sewer sales exceeded its FY 2013-2014 forecast by $130,000, while water sales were only about $150,000 shy of hitting its predicted mark.
The water department’s general expenses are budgeted about $500,000 shy of last fiscal year’s $3.82 million level. It will also add a $290,608 line item to help purchase automated metering systems.
Workers are expected to replace Starkville’s 13,002 electric and 11,037 water meters with automated, usage-measuring devices in 2016 after aldermen approved an implementation plan in August that was said to not increase either utilities’ rates.
Combined, both SPW and Starkville Electric Department will pay about $3 million for new meters and the automated service for four years. Devlin previously told The Dispatch his organization will use its cash reserve to finance its own portion, while SED General Manager Terry Kemp said SED will utilize its own capital improvements stream.
After the four-year period, the city’s contract with German manufacturer Elster will continue at least a decade.
Devlin previously estimated his department will save about 33 cents per meter after cutting meter-reading services.
SED will handle its own meter replacements, but Devlin said his department will outsource the project due to the increasing workload SPW already faces.
An initial deployment of the infrastructure is expected to begin this year, and city employees will begin training for the new system in 2015. The full deployment is expected in 2016.
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch
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