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Water and sewer funds face deficits

November 27, 2013 - Residents may be tapped to pay for a $2.3 million water-budget shortage in Independence Township.

That's one solution considered by Township Board to make up the deficit in the 2014 water budget.

The township will also lower spending, increase revenue, and draw from its fund balance, said Supervisor Pat Kittle.

"The one thing that is not in any of these numbers is McLaren," said Kittle. "That's the big wild card right now that might make this look wonderful."

If McLaren builds a location at Sashabaw and Bow Point additional revenue will be added to the budget through water and sewer tap in fees.

The water fund deficit will also draw net assets in the water fund down from $26 million down to $25 million.

Kittle said there are some things the township has identified for 2014 that could increase revenues including $300,000 in funds associated with a county project, a Comfort Inn projects coming to the township which could add another $90,000 and another project which may possibly add another $200,000 in revenues to the water budget.

Kittle said in the end the fund balance is going to look a lot better than it does in the current projections.

Costs associate with repair projects must be completed, and if repairs are not completed on time, things can start rusting and get extremely expensive, he said.

Budget analyst Rick Yaeger reviewed the water and sewer funds with the Independence Township Board of Trustees during their Nov. 12 meeting.

"Sewer charges from the city of Detroit continues to rise," Yaeger said. "A sewer re-lining project is projected to begin in 2014."

The model that was being used in the past is broken, and we are trying to come up with a way to fix it, Yaeger told the board.

According to the 2014 budgets, revenues for the sewer fund will continue to decrease while expenditures associated with the system will continue to rise.

"We can see that revenues are down but that is due to an accumulation of a lot of things," said Yaeger.

Usage in the township was up $113,000, but along with the increase in usage come expenses associated with services.

"We have things like tap in fees, interest, inter-fund interest, reimbursement insurance, all led to a $25,000 decrease in revenues in the budget," Yaeger said. "Sewage treatment costs is something we really don't have a lot of control over.,

Treatment costs have risen 4.5 percent while expenditures have risen over $446,000.

A grant the township will apply for in 2014 will help identify problems with the sewer mains that led to the $446,000 increase. Yaeger said the grant may also help cover the costs associated with repairing any problems found on the sewer mains.

Capital costs are down nearly $700,000 for 2014. In the 2013 budget carried a $900,000 budget for capital costs. Yaeger said there is about $700,000 included in the $900,000 budget that was not used including $500,000 worth of a sewer relining project costs included in the budget but not used.

Costs for a sewer jet truck totaling $250,000 was also include in the $900,000 budget, but only $50,000 of that was used to refurbish a vehicle rather than purchase a new one. An amendment to correct that number in the budget will be completed by the end of the year.

"We are having a deficit situation here of $2.2 million," said Yaeger. "It's basically drawing the net assets down from about $24.6 million to $22 million. Not a pretty picture at this point."

As costs from city of Detroit water and sewer continue to rise, operating costs also continue to rise. From 2013 to the 2014 budget there was a $320,000 decrease in water revenues.

"The $320,000 hit on the revenue stream there are some things we have identified in 2014 that will help that," said Independence Township Supervisor Pat Kittle.

Yager said part of the revenue decrease includes water usage being projected down.

Expenditures for the water fund are also up from the 2013 budget while capital cost in the fund are also up.

Some of the costs include a project in the township to replace some piping on Pear and Plum Streets in Independence Township which will cost $140,000 to complete.

Yager said like the sewer fund, the water fund also has a deficit which is projected to be $802,000.

"This $800,000 grand we are kind of getting hit with the perfect storm," said Kittle.

The township board of trustees continued to keep rates flat in 2013, but no decision has been made in regards to 2014 rates.

Staff writer covering Independence Township and Clarkston area.
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