April 30, 2009 · Updated 12:50 PM
Utility fund comes up millions short in 2006 revised budget
By Dennis Box
The Bonney Lake City Council took a look at the revised 2006 city budget and came away with a case of shock and awe when the sewer utility was discussed.
All was going well until financial consultant Alan Doerschel pointed out the sewer fund was woefully short of revenues.
Doerschel said the water fund was “very strong,” but the sewer fund was “in trouble.”
In the budget report, the sewer utility is described as being annually short and “in 2007 a negative restricted fund balance of $436,000 which increases to $3,256,000 by 2011.”
Some of the reasons for the red ink, according to the report, are high basic operations cost, high debt service due to Public Works Trust Fund Loans, large capital expenditures and a high cost to replace the sewer trunk line ($10 million).
Doerschel said one remedy might be a 22 percent rate hike, which was not the happy news the council members were looking for at the workshop.
“I was shocked,” Councilman Mark Hamilton said. “I'm still reeling from what transpired. I was under the impression the sewer fund was healthy. This just blew me away. I have some questions and I want answers. I was told when I got on the council this fund was healthy. I want to know where that broke down.”
The city contracted the Bellevue consulting firm HDR/EES to review the water, sewer and storm water rate structure in the city.
The firm suggested a 2 percent increase for three years. At the time the council wanted to avoid a dramatic hike, which happened in 1994 when the sewer rates jumped 50 percent.
Mayor Neil Johnson said the problem with the 2004 rate study was the information provided by the city to HDR/EES. Many of the projects were funded by system development charges (SDCs) that developers pay when new projects are built, but replacement projects and repairs to the system cannot be paid with SDC funds. SDC money can only pay for growth related projects.
Johnson said when he was on the council in 2004 if the members were given accurate numbers “we might have caught this. In the past the budget was like a big mystery.”
Councilman Jim Rackley said he would “absolutely not vote for a 22 percent rate increase. I don't care what happens, it's not going there. But we need to find out how this pile of money went from green to red. Possibly (former finance director John) Weidenfeller put it all in one pile and started spending it.”
The revised budget was on the Tuesday City Council agenda for consideration.
A basic budget was passed in December with the idea Johnson would revise the numbers once he took office Jan. 1.
Johnson said a key element of the budget was the six-year forecast.
“The main focus was to get a tool put together that looks five to six years out,” Johnson said. “In 2007 I would like to go with a biennial budget. We would pass a budget every two years and refine it the other years. I want to give the council all the information they need to make decisions.”
The mayor said despite some problems with the sewer fund, the city is in good financial shape.
Interim Finance Director Joe McGovern and Doerschel completed the revised budget.
Dennis Box can be reached at email@example.com.