Smaller transfers, higher rates recommended
BY MARK J. CRAWFORD
Telegraph Editor
STARKE — City commissioners received a reality check during the first workshop on their 2023-24 budget.
While counseling commissioners about the state of the city’s aging infrastructure and the need to invest in capital improvements, City Manager Drew Mullins also provided a plan to turn things around.
That plan requires transferring less revenue from the business side of its operation — utilities — and using it for capital projects.
Mullins told commissioners that costs are soaring and that money spent on patching problems and maintaining its aging fleet would be better spent on a genuine capital improvement program.
It could also help the city offer competitive pay to employees who are critical to its utilities, such as linemen and water/wastewater operators. These are positions the city is having difficulty filling,
In addition to a fleet with vehicles that are decades old or at the end of their lifespan, Mullins said the city’s utility infrastructure has endured 20-plus years of neglect. From leaking water lines and terracotta sewer lines to lead joints, and old or inappropriately sized transformers, the needs continue to amass. He talked about vehicles breaking down in the street and seven lift stations with a single pump running.
The longer the problems go unaddressed, the more costly the solutions become. Four years ago, it cost about a million a mile to run water and sewer lines, Mullins said. Today, it’s around $1.7 million a mile. Electric transformers have increased 40% in price. Specialized vehicles are up 25% to 35%. The wastewater plant project went from an original estimate of $16 million to $27 million, only around half of which is grant funded.
The patch-as-you-go approach has not served the city, and it needs to be more forward thinking, he said.
“We are at a critical crossroads here. We’ve got two choices: continue the status quo or actually get serious about everything. To me, it’s time to get serious,” Mullins said.
Mullins’ five-year plan totals $7.25 million. Year one amounts to $1.25 million, and this would increase 5% a year over the next few years. They can get there by reducing the amount of money transferred from utilities to the general fund — usually around $1 million a year. The transfer was budgeted at $890,000 this year, but $150,000 was also pulled from reserves to cover additional costs.
The plan includes investing in advanced (automated) metering infrastructure for accurate billing of all utilities, which in Mullins’ experience enhances revenue. For wastewater, water treatment and water distribution, it includes equipment replacement, line replacement or extension, manhole replacement, pump installation, generator upgrades, water main replacement and emergency equipment replacement. In electric, it includes pole, transformer, and small and large equipment replacement. In gas, it includes line extension and replacement as well as equipment.
A 5% across-the-board pay increase is built in, as well as money for 5% performance pay when earned.
With the assistance of information from City Clerk Jimmy Crosby, Finance Director James Hughes and consultant Jim Farrell, Mullins projects utility revenue of $19.5 million next year, up from $14 million.
Investing in infrastructure would reduce funding available to transfer to general government to $500,000.
“Here we are transferring $1 million a year to shore up the general fund. You can’t keep doing that and letting your business fail, because that’s what’s happening: Your business is failing,” Mullins said.
Rate increases of 5% for water and sewer will increase customers’ bills, but the city must also raise funds to begin paying down the debt incurred in rebuilding the wastewater plant. Five percent annual increases are proposed for the foreseeable future. The annual increase for gas has already been approved.
Staff shared information on infrastructure needs with commissioners in the past, but an action plan was never funded. While not always easy to hear, commissioners were appreciative of the work, saying it was the most detailed information they’ve had to date. They gave the green light to base the rest of the budget around the infrastructure plan moving forward.
“We’ve got to rebuild our enterprise,” Commissioner Shannon Smith said. “We’ve got to put our money back into the system that’s making the money to help move the city forward. We’re getting growth. We’re getting everything coming this way, so we’ve got to be ready. We’re not ready, and I think this is a hard step, but it’s a step we’ve got to take.”
The budget will be addressed in future sessions, the next of which is May 9 at 5:30 p.m.
