Discussion regarding the proposed water, sewer and trash rate increase continued Monday evening as the Excelsior Springs City Council heard resident concerns about the potential higher costs to their bills.
Resident Andrew Kowalski said he came to the meeting to help discuss the challenges facing the community. He said because the utility funds do not raise enough money to cover costs, they all have “revenue shortfalls.”
“I was also told there’s virtually no money available in either the city’s general fund or capital improvements fund to help fund things like rehabilitation of our existing utility infrastructure,” he said. “However, the city’s budget tells a different story.”
Kowalski said the City used approximately $800,000 in capital improvements funds for the golf course in 2017. In his research, he said he found a total of $1.67 million in capital improvements used at the site.
City Manager Molly McGovern said the City invested in the golf course because of its potential to make money in the future and stand on its own. In addition to this, the City created a tax increment financing fund for the new subdivision and the new clubhouse. The TIF will take all the new property taxes generated from the new homes once built and revenue from the sale of lots to repay the money invested by the City. McGovern said the TIF will also use a portion of sales tax generated in the clubhouse in the same manner.
Kowalski said he sees a few potential solutions to the shortfall in the utility departments. Although one solution would be to raise rates because the previous rate increases resulted in customers using less water, it remains unclear whether raising rates alone would increase revenues.
A second potential solution Kowalski offers would be to look for funding solutions within the existing City budget. According to McGovern, Kowalski said the proposed raise in residential rates would raise approximately $832,530 per year. He said spending the $500,000 of general and capital improvements fund money currently being spent on the golf course each year could cover almost 60% of the proposed increase.
McGovern said the City does not spend money on the golf course from their annual revenues.
“Golf has borrowed money from general fund reserves when they had a shortfall, but is required to pay the general fund back,” she said.
She said the City requires golf to pay back the borrowed general funds because they want the department to stand on its own and not require any supplemental income from the City.
McGovern said unlike most funds found within the City’s budget, the law does allow the general fund to pay for anything with a public purpose. However, the general fund does not have the money to pay for everything. The general fund supports those departments that cannot fund themselves.
“Average cost per person (to fund the general fund) is $62 per month to provide public safety (which includes police, animal control, fire and ambulance), planning and development (which includes inspection, neighborhood services, codes and economic development), street maintenance and transportation, support services (which includes the City Manager, finance, court, building operations and human resources) and the City Council,” she said. “These are necessary services, but not money generators.”
Because many of the departments funded by the general fund only contain one or two employees, essentially, to free up money in the general fund to fund water and sewer, the City would have to significantly reduce personnel within public safety, i.e., police, fire and ambulance, or eliminate entire department functions, McGovern said.
As far as the Capital Improvement fund, McGovern said voters decided 30 years ago they wanted to create the fund for enhancements for the city.
According to an issue of The Excelsior Springs Advocate, published Spring 1997, City officials proposed voters approve an extension of the fund.
“If approved by voters April 1, the two-year program will raise approximately $900,000,” the article said. “Four funding areas have been proposed, including 1) a school pedestrian and safety program (at) $234,000, featuring one mile of new sidewalks near our middle and elementary schools where children are having to walk in the street; 2) building and road projects totaling $286,500; 3) downtown improvements to assist small merchants (at) $100,000; and 4) recreation projects including major improvements to the Sunnyside neighborhood park, and a new tennis court at Regent Park near Roosevelt School.”
According to The Advocate, the fund, originally approved by voters in 1991, funded improvements including the widening of city streets and Missouri State Highways, upgrades to intersections and enhancements to city parks. McGovern said the fund appeared before voters in two-year increments and later four-year increments before voters finally made it a permanent fund.
“While the Capital Improvement Fund has completed some water and sewer projects over the years, to dedicate funds for ongoing maintenance needed annually by these utilities would eliminate any funds that are now dedicated to maintaining city buildings, replace equipment and fund community enhancements,” McGovern said. “I would say that seems like changing course (from what the voters approved).”
Another solution Kowalski proposed involved the City selling the water and sewer utilities to a private company.
“Currently, the highest rate they charge in any community for 5,000 gallons of water is $40.23,” he said. “That’s slightly more than we pay now, but it’s around 30% less than we would pay after the proposed rate increase. Missouri American has about 1.5 million customers, so they’re able to average any rate increases over a broad base of users.”
McGovern said before this could happen, the voters would have to approve the sale of assets and bear the cost of the election.
“This course of action is shortsighted and does not take into consideration the additional costs that the remaining city departments would be responsible for because of our diminished purchasing power and the need to share costs over fewer service centers,” she said. “When I reviewed the feasibility, there was an increase in costs without a corresponding source of revenue; there was an annual loss of almost $10 million currently spent locally that would leave the community impacting all of the businesses that we currently rely on for goods and services and the personal spending from jobs that would be lost. The loss of local control that is needed when recruiting economic development expansions is concerning; I have seen firsthand our ability to win large companies because of our local control. Additionally, the proposed rate will not be one of the higher rates among our neighboring communities for very long.”
She said although rate increases could be spread across a greater number of customers in other communities, the rate increases for those other communities would also spread to Excelsior.
Kowalski said the Commission limits the amount of any rate increase that can happen in a given year. Any proposed rate increases, he said, would have to go through a thorough 11-month review process by the Commission before being approved or denied.
McGovern said it would also be more likely a company would want to purchase the City’s water system and not the sewer system. Operating the sewer department without the water department could potentially cause issues because both currently share equipment, materials and personnel when needed, she said.
McGovern said the City tried to develop a plan to prepare for the future.
“The proposal is intended to slow the practice of deferring maintenance and keep future costs from escalating by making improvements when needed,” she said.