November 24, 2015
Oh No, A Water Rate Increase
As a former MLGW board member, I have a history of praising and criticizing the Division. I follow and read the Division’s annual financial reports. The latest report is for the calendar year 2014 which ended December 31, 2014. The 2015 year report will not be out until well into 2016. However I am sure the Division knows what will be in the report.
Division President Jerry Collins went before the City Council to ask for a 22% water rate increase. He said that the rate increase is necessary to keep the water division from recording its second straight year of negative net income at the end of 2016. A state board is required by state law to step in and set rates after two straight years of negative net income. He said the board has consistently favored higher rates, including a 42 percent increase in Bartlett’s rates.
I have looked at the past financial reports and the Water Division has had a very slim margin (changes to net assets) in 2013 and 2014. Apparently they know that 2015 they are going to show a decrease in net assets (a loss) and without an increase they will lose more in 2016 due to losing a large customer, Cargill Corn Mill. Two years of losses would bring in the state board to dictate an increase in water rates according to state law.
The usual suspects on the City Council refuse to study the facts as they demonize the Division as heartless and cruel. Facts do not make any difference to them as they play to their voting base. Another fact is that the Water Division has been paying $2.5 million dollars per year due to the City Council agreement to finance the FedEx arena. The agreement is effective through the year 2028. During 2014 the Water Division was authorized and directed by City Council, per City resolutions, to make an additional annual $1.9 million transfer payment each year through fiscal year 2017. Transfer payments to the City for 2013 as compared to 2012 increased due to a City resolution authorizing and directing an additional payment of $1.8 million in exchange for the release of any rights the City may have had to receive water from the Water Division free of charge during 2013 under the MLGW Charter.
The MLGW has a history of being fiscally responsible and being run mostly by professional management. Their employees are well trained and do a tough job. However the City Council would be well advised to look in to areas such as MLGW’s OPEB program. They should bring their rules concerning the cost and availability of retirees and their spouces health care to match the same rules as Shelby County Government retirees. Shelby County has these rules in effect since 2007. The MLGW pension and OPEB funds are in good shape due to funds paid for by MLGW’s customers’ utility rates. Compare their pension and OPEB funds to those at the City paid for by property, sales and other taxes.
As a final note I have been informed by President Collins concerning Sewer Rate Fees. “Sewer fees are governed by Public Works. To the best of my knowledge Public Works is not planning a sewer fee increase.” MLGW is just used as a collection agency for 1) Sewer Charge, 2)Solid Waste Fee, 3)Mosquito/Rodent Control Fee and 4) Storm Water Fee.