At the last City Council meeting (on March 24th), members of the Council expressed concern that more people didn’t participate in the public hearing on the FY 21 budget. As a result, we decided to make sure every resident was informed about the availability of the budget document and provided multiple ways for them to make inquiries.
Three people expressed interest in doing so.
There were a number of questions raised by former City Council Members, Cheryl Channon and Jim Beran. Wendy Syverud has also asked for a copy of some budget preparation documents and I’ve tried to get them to her – although that hasn’t been as simple as it should be. I still look forward to hearing from Wendy with any questions or insights she might have.
The main focus of questions from Cheryl and Jim were about the sewer fees and sewer payments in the budget. These are big items:
• Sewer Fees and their projected increase are located on line 10 (Charges for Fees & Service). In FY19, we collected about $70,000 andour re-estimated FY20 collections are shown as $123,000. The FY20 number is close, but the FY19 figure seems to be missing about half of the revenue.
• Sanitary Sewer Costs and the improvements we’re making to the sanitary sewer in 2020 are shown on line 25. The figure for FY21 includes our estimated cost of operating the joint sewer line, the cost of service, the cost of financing improvements to our own sewer and setting aside some money to re-build our depleted Sewer Fund. The re-estimated cost of $0 in FY20 is wrong and the Actual FY19 costs of $123,122 looks to be about right (which is why I assume about half of the revenue is in the wrong line in the FY19 report).
All that being said, here’s a summary of the questions from Cheryl and Jim:
Q. What are the actual estimated costs for the sewer since we show such a dramatic increase in fees and costs in FY21. How do we expect citizens to pay for this?
A. The best I could do for the FY21 budget is estimate those costs based on notes I’ve taken at our joint sewerage committee meetings, notes from prior Council Meetings, a review of the current state of the Sewer Fund for the City and email correspondence with the State Auditor as to the best way to track and manage all of this.
The City uses about 150 million gallons of water in its sanitary sewer each year. The rate for that is around $1.86/thousand gallons – although we charge less than that currently. The difference is made up out of our Sewer Fund (more on that later). Under the new 28E agreement we signed, we will have some additional expenses associated with managing our sanitary sewer that relate to the operations of the sewage treatment plant in Davenport.
Remember, the alternative to paying our fair share for operating the sewage treatment plant is to build our own – and we have neither the space or the funds to do that.
In addition to the operating costs of the plant and our share of the plant upgrades, we have to work on our own sanitary sewer lines and in 2019, we arranged for the General Fund to loan the Sewer Fund $150,000 for the first phase of this work (which will get underway shortly). That money was loaned to the fund at a 2.15% interest rate (same rate we get at the bank), but it’s not clear to me when that money switched funds (if ever). To add to the complexity of “how much does it cost” we need to consider slowly re-building our Sewer Fund since we shouldn’t have to loan it money to operate.
When it’s all said and done, the cost for sanitary sewer service in Riverdale should be between $500 – $600k/year through FY27. For the FY21 budget, all I did was take the FY20 estimated revenue and multiply it by 5 and then round up a bit. This would increase everyone’s sewer bill from $15 a quarter to $75 a quarter ($25 a month) which, compared to Bettendorf (around $37/month) and Davenport (around $42/month) is still pretty competitive.
Here’s the silver lining, though. We’ll be getting a proposal from BFA to go through all of the records on this and build a clear, accurate financial model of what the costs are and where the rates really SHOULD be. My hope is that work will be done by the time we’ve been able to pull together a Utilities Commission made of residents and local businesses to review those costs and rates and help us set them at a level that’s considered reasonable by all.
For the budget, I estimated high so the Commission would have the latitude to come in with a lower recommendation if they felt it was justified. Budgeting low and then having to go through a number of additional hoops to revise the budget to accommodate higher rates seemed like a bad idea to me.
Q. Why aren’t improvements to the sanitary sewer line and operational/capital costs for the joint sewer line paid for out of the General Fund like any other public works project?
A. I spoke to the State Auditor about this. While sanitary sewers are “pipes in the ground” and one would think that makes them a public works project, the sanitary sewer isn’t a service that everyone in the City enjoys and, more importantly, the service itself is paid for by a user fee, not property taxes.
The Auditor agreed that the money used for sanitary sewer services (both the revenue and the expenses – whether their for our own local lines or our share of the jointly owned line – should be reported as an Enterprise Fund/Business Type Activity (Sewer Utility Fund). Here’s what Suzanne Dahlstrom wrote to me this past week:
Even though the City of Riverdale doesn’t operate the Sewer System themselves, they are still responsible for their portion of costs associated with ongoing operations, maintenance and upgrades to the sanitary sewer system through the 28E agreement. Therefore I agree it should be reported as an Enterprise Fund/Business Type Activity (Sewer Utility Fund). Chapter 384.84 provides for the collection of rates at least sufficient to pay the expenses of operation and maintenance of the city utility and requires rates to be established by ordinance of the council .
I’m not aware of anything that prohibits the City from paying for sewer improvements from the General Fund however, I wouldn’t recommend it in your case. As you indicated, the Council would essentially be budgeting sewer improvements through the General Fund tax levy, which not all your resident will be benefiting from. And since you’ve already established for the collection of non-tax sewer rates for the 2BE payments, it makes sense to budget for these improvements through the Sewer Utility/Enterprise Fund/Business Type Activity function.
You are handling this issue very appropriately.
Q. The line in the budget for Debt Service (Line 22) shows an amount of $316,813. Does that include the management fee?
A. I took that information from the debt schedule Ron Fullerlove had prepared years ago and the other numbers matched previous budgets and AFRs, so I believe it does.
Q. Why does the re-estimated FY20 budget show $0 for Business Type/Enterprises (Line 25)?
A. I have no idea why the budget was re-estimated that way. That’s where our sewer fees, etc. should be. Apparently, the budget was originally put together showing no costs on that line from the beginning – which is odd since this question came from the person responsible for putting that budget together with the Clerk.
The bigger point Cheryl is making with most of her questions, though, is valid. She raised a concern that we are over-spending on our budget and not amending the budget properly to avoid citizen complaints.
She has also pointed out that our capital projects budget in the current FY21 budget isn’t high enough to cover the road improvement project in Havens Acres and the sewer re lining project (Phase 1 of the Sewer Rehab project). The reason for that is that while part of the Road Rehabilitation project will occur in FY20, the Sewer Re-Lining Project is expected to occur in FY21 and be paid for out of the Sewer Fund and not the General Fund.
Q. What’s the plan for FY20 budget amendments?
A. Cheryl is right in saying we need to address possible budget overruns for FY20 sooner rather than later. In fact, my plan has been to take a look at the current budget once FY21 gets approved and prepare a series of budget amendments for either our next Council meeting (04/28) or the following one (05/12) to make sure time is allowed for a public hearing (if needed) and to get the amendments in to the State of Iowa by the May 31 deadline.
Q. Does the new budget include revised mowing and landscaping costs?