Here's part two of last Wednesday's hearing:
One of the deal's loudest critics has been Jim Kummer, the water utility's fiscal manager, who voted against Veolia during the selection committee process back last fall. He is out of town, but Daily RFT obtained a copy of the memo he forwarded to the Board of Aldermen in his absense. In it, he tackles the six percent rate hike issue:
To: Chair Dionne Flowers and Public Utilities Committee MembersFrom: James A. Kummer, Fiscal Manager, Water Division
Date: June 27, 2013
RE: Public Hearing on Proposed Veolia Contract **********************************************************************
It is my understanding that the Public Utilities Committee of the Board of Aldermen is holding hearings to discuss the advisability of the proposed Water Division contract with Veolia. Unfortunately, I am unable to attend these hearings but would like to submit the following statement for your consideration.
As Fiscal Manager of the Water Division, I believe it is my fiduciary responsibility to present the accurate financial status of the Water Division when so much misinformation is being presented by both internal and external sources.
In July, 2010 the Mayor's Office mandated a moratorium on any water rate increase for at least two years. A 12% rate increase had just been enacted to keep the Water Division financially solvent. This increase was necessary due to unprecedented chemical and pension cost increases. At the same time the recession was in full swing with many businesses dramatically reducing metered water usage and with home foreclosures impacting residential customers.
In 2010 the Water Division had zero monetary reserves. We were essentially broke. Water Division management and employees reacted to this financial crisis creatively and appropriately with various cost containment efforts. Those Water Division efforts, along with the July, 2010 rate increase and the improvement of the general economy led us out of our financial crisis.
Today, three years later, the Water Division has been able to accumulate $11 million in cash which was transferred into sorely needed capital improvement ordinances. We are working closely with the Comptroller's Office and the Missouri Department of Natural Resources to secure a low interest bond issue of approximately $9.4 million to fund needed capital improvements.
We have also been able to build a 90 day cash reserve of over $12 million. This is a financial "best practice" recommended in our latest Water Revenue Sufficiency Study completed by Black & Veatch, Consulting Engineers. Working closely with Water Division management, that report also recommended a 3% water rate increase in FY 2016 and FY 2017. These increases would primarily fund a $30 million capital improvement bond issue and keep cash reserves at the recommended level. And, really, does anyone want a water system that doesn't renew its infrastructure?
So, Water Division employees have taken a system with zero reserves three years ago and built it back into a financially healthy state. This was accomplished internally. No management consultant had a hand in this success story.
Does the Water Division require outside assistance to manage your water system? Others will decide that question. But these are the financial facts.
Thank you for the opportunity to present this statement. Copies of the Water Rate Sufficiency Study are available at your request. I am available to answer any questions from July 8th forward.
cc: President Reed All Board Members
The hearings resume tomorrow evening -- Daily RFT will be following closely. Click through for a copy of the report explaining the possible rate hike in 2016.
