Robbins Still Struggling to Get Water Fund in Black
Despite great efforts and a rise in fees, Robbins still faces losses from its water fund.
Under state law, a town's Enterprise Fund -- such as fees for water and sewer -- cannot operate at a loss. Tax money cannot be used to cover losses, or state authorities could take over town systems and do whatever they think best, such as raise rates or impose assessments on water customers.
Last Thursday, Town Manager Brant Sikes told a called meeting of the Robbins commissioners that the town is still running in the red.
"The net assets of the fund continue to decline, despite all of the expenditure cuts we have made," Sikes said. "At the current rate, all Enterprise Fund cash will be depleted before the fund is self-sufficient. The Enterprise Fund will realize a net loss for the seventh year in a row."
Sikes estimated the loss at $58,000, before depreciation expenses are factored in. Last July, the fund had $361,127 on hand. This July, the fund had dropped to $277,959 because of a required loan payment to the state on a 1997 debt incurred to upgrade the wastewater treatment plant.
"The drastic drop in cash during the month of April 2008 is due to the required SRF loan payment of $135,780.14 -- the Enterprise Fund would be self-supportive, if not for the amount owed on the SRF loan," Sikes said. "Jean Klein, consultant, and I have studied several key financial indicators. Each of the indicators that we studied revealed the same alarming result -- that the town has made an enormous amount of progress, but the progress is still not being made at a fast enough rate."
Depreciation and maintaining Robbins' water and sewer systems has to be figured along with regular costs and income, because equipment has to be repaired and replaced from time to time.
"When the depreciation of the town's assets is considered, the net operating income shows a serious and significant loss," he said. "Though we have found creative ways to do more with less, I am extremely concerned because the costs of operation continue to rise. Operational expenditures cannot be reduced much further (if at all) without sacrificing services or compromising the quality of the services."
Soaring Oil Prices Hurt
The steep rise in oil prices has hurt Robbins. The town's fuel costs went up 21 percent over the last year. Many petroleum-based chemicals are used by the town, and that added to the financial burden.
"The total amount spent on chemicals, for the water and wastewater systems, increased by 37 percent during '07 '08, despite the fact that we reduced the amount used," Sikes said. "Chemical usage has been reduced to the bare minimum and cannot be reduced anymore. Further reductions will result in inadequate treatment. In additions to chemicals, increased oil prices are also affecting the prices of other supplies that are required to adequately treat water and wastewater."
Sikes projected a further increase in utility costs for the coming fiscal year. The town may need to adjust its tier pricing for water, as most customers use less than 3,000 gallons each month. Adding more tiers would effectively be the same as a rate increase.
"If additional tiers were set up, between 0 gallons and 3,000 gallons, the cost of production would be better indexed," Sikes said. "There are very few customers that use over 6,000 gallons per month, and the ones that do consume significantly more (so) it would be feasible to create additional tiers for amounts greater than 6,000 gallons.
"By doing so, customers that use a significant amount of water would be charged more for that use. If significant water users are not charged more for the amounts they use, customers who do not use large amounts of water end up subsidizing through the rates they pay."
The change could help those who use less than 1,000 gallons a month. They would pay less if that were set as the base level.
Another problem Robbins faces is loss from water the town pays for that is not covered by revenue.
Some is "real" loss from leaks and overflows, some is water used by the town itself, some is consumed by end-users but not accurately measured, creating an "apparent" loss.
Robbins is using a leak-detection system, which is helping.
"We are making significant progress in reducing the amount of unaccounted-for water," Sikes said. "The ultimate goal, however, is to reduce the amount of nonrevenue water."
Strategic Plan Options
Despite all the progress the town made over the past year, Robbins is still in financial jeopardy.
Another rate increase will likely be needed in the near future, but Sikes wants to do more research before recommending it.
He has made a number of changes to the town's strategic plan:
- Reduce faster the unaccounted-for-water and nonrevenue-water.
- Ask the county commissioners to add the wastewater treatment plant water reclamation project to the scope of the $400,000 grant.
- Request the state for another restructuring of the SRF loan.
- Consider recommending another rate increase.
- Continue to pursue the possibility of selling water to Moore County. The county has shown a desire to purchase 300,000 to 500,000 gallons per day, to supply the Seven Lakes area with water.
- Continue to pursue the possibility of partnering with Moore County. The project would consist of reinstating operation of the Robbins water plant, to provide a large volume of water to the northern end of Moore County, depending on results of comprehensive engineering study on the water plant that is funded by a planning grant Robbins recently received from the N.C. Rural Center.
- Continue to pursue the possibility of allowing another entity to assume ownership of the systems.
Most of those strategic steps are being executed simultaneously, Sikes said. He believes their overall goal of making water and sewer services self-sustaining can still be accomplished -- but it can be done only if the rate of progress is increased.
The most important step for Robbins will be quickly reducing loss from unaccounted-for water and nonrevenue water, he said.
"We slowed the rate of cash depletion, but the net assets continued to decline," Sikes said. "At the current rate, all cash will be depleted from the fund, before it is self-sufficient."
Contact John Chappell at 783-5841 or by e-mail at email@example.com.
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