Published: October 01, 2008 12:43 pm            

Put off too long

Waurika eyes raising rates to correct financial status, credit standing

WAURIKA — If someone has a workable formula for restructuring city finances, without raising utility rates, Waurika’s city administrators would love to hear it.

Otherwise, city officials are about to bite a bullet they feel should have been bitten years ago.

During a regular meeting Monday of the city commission and Waurika Public Works Authority, a citizens’ forum is on the agenda. City officials will explain a proposal to institute a two-year, incremental plan for increasing city water and sewer use rates for residential and business customers.

The forum, which will be early in the 7 p.m. meeting at City Hall, is an opportunity for residents to ask questions. They can also recommend options that would allow the city to rework a financial structure that’s been described as “topsy-turvey,” without raising rates on city utilities.

“We don’t want to raise rates, and if someone can tell us how we can stop losing money selling water, and how we can protect our credit rating, we’d love to hear it,” said City Manager Chuck Brown.

“But,” Brown added, “the fact is: We have to do this. It should have been done before, because we can’t go selling water and losing money — that just doesn’t work.

“We’re losing money on sewer as well as water, and people are wondering why we keep taking $100,000 out of the tax base to pay for the WPWA”

Time for Action

Water is the city’s most viable revenue-producing commodity, and a rate increase is just one component of an overall plan to reorganize Waurika’s financial structure.

Members of the current council — none of whom have been in office more than two years — aren’t comfortable with the prospect of creating anxiety and anger among residents and utility customers. However, there is unanimous resolve that corrective action must be taken.

“This has been put off too long, and somebody finally had to do this,” Mayor Gayle Johnson said. “Sooner or later, some other council will take over. If we can get things the way they should be, there will be a smooth structure in place for them to carry on with.

“We are committed to making sure the single income-producing entity we have is actually producing income. The money we make from the WPWA should be how we pay for the other services we provide — police, streets, the (Rock Island) Depot, parks and those other things citizens expect to have in town. But it’s not been that way for years.

“We also can’t go any longer in a situation that puts our credit rating in jeopardy.”

Correcting the WPWA’s status isn’t the only factor at play in the proposed rate increase. At present, the city is not meeting a required debt service percentage that was a commitment made when Waurika received a loan for over $1.825 million. That loan, which led to construction of the Waurika Water Treatment Facility on U.S. Highway 30 in 2002, came from Rural Development program of the U.S. Department of Agriculture.

City officials feel it’s imperative to meet the USDA’s requirement, or the federal agency will mandate a rate schedule that will put even more burden on utility users. (See accompanying story.)

Resurrecting the WPWA

City officials say a rate increase can provide capital needed to reverse a financial structure aberration, one that’s mystified city planning consultants, investment bankers and other economic experts: Waurika’s public utilities authority should generate city income; instead, the WPWA is being financially “carried” by the city’s General Fund.

Last year, Rick Smith, a consultant for Municipal Finance Services, Inc. of Oklahoma City, described the situation as “exactly opposite to any system” he’s encountered in decades of assisting communities in structuring income production.

“Your public works should be the city’s cash cow,” Brown pointed out. “Public works is what drives the city, but ours is losing money and we’re supplementing it from the General Fund.”

Waurika’s historic tie to water has been a blessing for the community for generations, especially since Waurika dam was completed in 1973. The U.S. Corps of Engineers’ structure created Waurika Lake, a huge water reserve for the community, and it allowed the city to go into the business of selling water.

However, city officials say, years of relatively low water and sewer rates in Waurika, improvements at the Waurika Water Treatment Facility that were financed by grants and loans, and low rates for water sold to outside entities have had a “perfect storm effect” on the Waurika Public Works Authority.

In November 2007, consultants Ronnie and Matthew Morgan presented city officials results of a water rate study they were commissioned to compile. At that time, the Morgans’ study showed Waurika’s base rate for water should be $2.03.

Recommendations from that study and recommendations outlined in USDA letters of remediation the city received in 2005 and 2008, were models for the fee plan that will be presented at Monday’s meeting.

The plan includes:

• An incremental hike in water and sewer rates for residential and business customers that would go into effect on Jan. 1, 2009 and continue on a six-month cycle until July 1, 2011. (See accompanying chart.)

While the proposed fee schedule would raise rates on most water and sewer users, provisions have been made to reduce the impact on customers with low or fixed incomes.

• An incremental hike in the price of bulk water Waurika sells to the City of Ryan and Rural Water and Sewer District No. 1 in Hastings, as well as commercial buyers.

“Our basic rate stays the same, which is $34.50 combined for basic water and basic sewer rates, then the cost goes up for those who use more than the basic amounts,” Brown said. “We think it’s fair for the people who use more water to pay more than those who keep their use under the basic amount (2,000 gallons per month).

“We also think those fee numbers will take us to where we’re making money from water and sewer, which is how it should be. Our situation with the WPWA is at the point where we have to make some money or we’re going to have bigger problems.

“We can’t keep putting this off and saying we’ll take care of it in the future. Reality is staring us in the face, and the future is getting here rapidly.”

        

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