Thursday, August 24, 2023, Water Rate Advisory Committee meeting proved how statistics can be made to lie.  Finance director Kate Zawadski presented only half of the staff report on the water system financials, that of the accounting balances in four separate funds, to illustrate the supposed dire financial condition of the city run water system.

Left out was the staff report on yearly revenues versus expenses which tells quite a different story depending on a person’s expertise in digesting this material.  While Zawadski claims that the system had an “operational loss” in every year, the truth of the matter is depreciation, a non-cash expenditure which is an accounting tool for tax purposes and which does not reflect the true replacement cost of the assets involved, was the “expense” driving these losses.

Starting in 2013, there were also transfers of revenues to a “reserve” fund or funds as directed by council policy.  Reserves were to accumulate for daily operations and also for capital improvements.  Zawadski failed to inform the committee of either the difference or limitations for either reserve.  Operating reserves were set at 50% of annual operating costs while the only limitation on capital projects was that defined by recognized projects.

An extremely confusing presentation was made on city overhead costs which came in at a whopping 76.19%.  Co-chair Kevin Johnson asked “76.19% of what?”  The answer from Zawadski devolved into an explanation of a cost allocation study determining what part of city staff salaries are charged to the water enterprise fund with the additional 76.19% added when projects outside of the normal staff time allotment occurred.

Most of the committee bought into Zawadski’s presentation rather than questioning ways to bring expenses down.  Only co-chair Johnson pulled out the portion of the staff report, which was unavailable to the public during the meeting, about revenues versus expenses.  Co-chair Bogue did ask for “additional cash flow information” which is the crux of the water fund alleged shortfall.

The conclusion of many of the members was exactly what has been pushed by city staff.  “Rates must go up.”  The committee then was pushed to start another rate study, to be funded by an already depleted water fund at a cost estimate of over $100,000.  While Johnson initially stated this was “too early” and committee member Frank Drayton also argued against it, committee member Herb Cross asked for city manager Jim Lindley’s opinion and desired direction which was expectedly to begin the process.  A vote was taken with Drayton pausing before voting then voting affirmatively to go down the rabbit hole with only co-chair Thom Bogue voting no.

What had been asked for and what was not presented was an explanation of expenditures during the years from 2008 to present.  A pertinent example was contained in the staff report where separate operations and maintenance expenditures leapt in 2018 to 2019, both by around $350,000 for a total of $700,000 while revenues climbed only $300,000 due to the first of three rate increases.  Considering that in 2017 operations expense was almost $600,000 lower this needs to be questioned.

Josh Hudson, a city water operator, gave the community a little more information on the current problem with our city water system.  The new well at Valley Glen had its pump motor seized and has been taken off line for repair or replacement.  His estimate on removing the pump and the pipe, ascertaining the problem with the pump, remedying the problem, and replacing the equipment will take up to 4 weeks as a best-case scenario.  Hudson is asking residents to reduce their demand for water by 50 to 75% during this time.