Questions about how to secure the long-term financial health of the Columbus Light & Water’s water division surfaced Thursday as board members approved the fiscal year 2016 budget.
CLW General Manager Todd Gale presented the budget, which includes $10.72 million in income and $9.64 million expenses. The overall budget is similar to the FY2015 budget, which had $10.1 million in revenue and $9.46 million in expenses.
However, the department’s cash on hand is lower than it was a year ago, continuing a trend that Gale said could present problems if no action is taken.
“If we keep operating like we’re operating, we’re going to run out of cash in reserves by 2018-2019,” Gale said.
CLW had about $3.25 million cash on hand in July. In July 2012, the department had $4.12 million. That fell to $3.74 million in 2013 and $3.69 in 2014.
“We’re going to have to do something along the way,” Gale said. “Cut expenses, increase rates — whatever that may be.”
A 2.5 percent rate increase for water and sewer services — previously approved as one of several for the next few years — is packaged into the budget. The increase works out to about $1.50 per month for customers.
“We talked last year about annually putting in a 2.5 percent rate increase so our customers aren’t hit with sticker shock,” Gale said. “Two-and-a-half percent will only get us $220,000 in revenue.”
The increase alone won’t be enough to keep the CLW from dipping into cash reserves for funds during the budget year. The department will have to draw more than $700,000 in cash for FY2016, which will further drain its coffers.
Gale said it would take a 12 percent rate increase to generate enough funds to keep from drawing on cash reserves.
He said everything has to be on the table as CLW looks to areas to cut expenses — including cuts to payroll.
The board also approved a 1.5 percent rate increase from the Tennessee Valley Authority that will take effect on Oct. 1. The board voted 3-0, with Micheal Tate abstaining.
‘Drowning in debt’
CLW’s water division is wrangling with more than $27 million in debt.
Dealing with the debt is eating up nearly a third of the department’s budget, and Gale said it puts severe limits on what CLW can do to maintain its systems.
“We are drowning in debt,” he said. “By the time we pay debt, and pay our expenses, we have $12,000 for capital. Principal and interest are killing us.”
Gale said the department is dealing with a lot of bonds, the first of which will roll off in 2017, and the last of which will currently last through 2027.
“A lot of them were created in the ’80s, when they borrowed over $40 million for annexation. We’re still dealing with that,” Gale said. “Over time, we incurred more and more debt to where basically, anything left over after expenses goes toward that. We have very little operating funds to do preventive maintenance.
“If we could get ourselves out of debt, we’d be way ahead of the game,” Gale said. “There are always things that break, always sewer lines to repair or tanks to paint and things like that.”
During the meeting, Gale asked board members to allow him to spend three to four months looking into the issue and coming up with a way to address it. Board Attorney Jeff Smith said the situation isn’t as bad as some CLW has been through.
“Right now you have $3.25 million in reserves. When I came on in 1999, you had $800,000 negative,” Smith said. “…Y’all have no idea how good you look compared to how you used to look. You had to borrow bucket pickers from East Lowndes. You didn’t have any equipment. It looks like a lot of doom and gloom, but it’s not.”
Alex Holloway was formerly a reporter with The Dispatch.
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