PATA History Pages

CITY DEBT REALITY SINKING IN

Millions of dollars in Tap Fee Waivers will cost Citizens

Finance committee
Projections show wastewater system losing money

Thursday, April 22, 2004

MICHAEL J. MAURER
ThisWeek Staff Writer

Pickerington City Council's finance committee met April 15 to discuss the city's debt load, including the prospect that the sewage fund will go into debt regardless of whether a long-awaited sewage treatment plant is built.

According to city documents, Pickerington will begin losing money this year on sewage services, with expenses exceeding revenues by $320,000.

The upshot is that the city will have to re-examine user fees and plans to expand the sewage treatment plant, said Councilman Ted Hackworth.

Hackworth blamed the deficit on failure to collect sufficient tap fees for past construction.

"We've got $10-million of existing debt on the sewer plant," Hackworth said. "What happened to the tap fees? It should have been part of paying this debt down."

Hackworth said the loss is cushioned by a reserve account of $1.8-million, which gives the city time to address future construction and changes to fee schedules.

"(The reserve) is a little more than I thought it would be," Hackworth said.

According to reports prepared by Acting City Manager Frank Wiseman, there are two main components to yearly surpluses or deficits to the city's sewage utility balance: operations and annual debt service.

Considering operating expenses alone, he said Pickerington is currently running a surplus of approximately $90,000 annually, collecting $1.24-million in user fees and spending $1.15-million in daily operations.

Wiseman said monthly user fees are approximately $28 per home.

Under a no-growth scenario, with no new homes and no changes in monthly user fees, the city would begin to run a deficit in 2008 in the amount of $10,000, less than 1 percent of total user fees of $1.24-million.

By 2010, the operating deficit would increase to about $60,000 or about 5 percent of total user fees of $1.24-million, Wiseman said.

The capital side of the equation shows larger deficits. Tap fees and miscellaneous income for this year are projected at $430,000, compared to debt service of $721,000. He said this contributes to an expected deficit of about $290,000 in the long-term capital account.

The capital deficit worsens next year, when projected tap fee collections drop to zero under a no-growth scenario but debt service reaches $723,000. Wiseman said the debt service would gradually decline during subsequent years to $630,000 in 2010, but since there are no offsetting tap fees under the no-growth scenario, the entire amount contributes to an overall deficit on the existing plant.

By 2007, this deficit will use up the current reserves, resulting in a net loss to the city of $143,000, he said. If there is no change in tap fee collections or user fees, the annual deficit would reach $2-million by 2010.

Wiseman emphasized that the projections are only tentative and could be affected by many policy choices, including decisions to raise monthly user fees, increase tap fees, build larger or smaller expansions to the treatment plant and allowing larger or small rates of residential growth.

Hackworth said he would not support a no-growth alternative.

"You have to have a little bit of growth," he said. "Your credit rating improves when the city is growing a little bit. It shows you're not shrinking away to nothing. And the other issue is that, if we start overflowing our treatment plant, the (Ohio Environmental Protection Agency) is going to be all over us."

However, Hackworth said he hopes to work toward a growth rate of approximately 1.5 percent annually, instead of as much as 5 percent annually, which he said would be required to pay for a proposed $9-million plant expansion.

Reducing the rate of growth would allow Pickerington to build a much smaller treatment plant expansion, he said.

"What we're being offered now (in daily treatment capacity) is just too much," Hackworth said.


mmaurer@thisweeknews.com

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