The Crossett City Council says that the Crossett water commission must resume paying a $30,000 annual obligation that was stopped in recent years, but a representative of the commission said that in order to do that they must raise water rates.
The Crossett Water Commission’s 1983 contract says it is supposed to pay the city of Crossett $30,000 per year to go towards a salary for a city engineer.
Greg Sivils with the Crossett water commission spoke to the council during the council’s finance meeting and the regular meeting on Monday night about the water department’s budget to explain why the department had quit paying the fee.
Sivils said the commission had met with late Mayor Scott McCormick and reached an agreement to put the payments on hold because of dwindling finances at the water company. The agreement wasn’t done in writing and has gone unpaid for a lot longer than what the mayor could have authorized without permission from the council.
“He may not have realized the length of time you were talking about because had it been a month or two — I believe — that would be at the mayor’s discretion, but at this point I think it’s outside of the (purview) of my office,” Mayor Crystal Marshall said.
Sivils told the council the commission simply didn’t have the money to pay it.
“We’ve been losing money for quite a while but we hoped the new meters would pick that up,” Sivils said.
The new meters were installed and the first full month of revenue with meters was June, during which the company saw a $27,000 profit. Sivils said that revenues started dropping again and though they don’t know exactly why, he believes that it’s because people are being more conservative with water or the new meters helped them locate unknown water leaks that have since been repaired.
“Our water sales are steadily dropping — and I don’t know if it’s COVID related — but nevertheless, our water sales are getting back to where they were,” Sivils said.
The gross receipts for October show $109,218.76 in revenue. Sivils went over the budget and what the money was spent on before saying that the water company is slipping into the negative.
The outgoing funds Sivils reviewed included monthly expenses, what he called “unusual expenses” and two deposits that he said the commission is required to make. Sivils said that $2,184.38 has to be deposited into a depreciation account each month and $27,225 in a bond account and that’s done before any of the other expenses are paid.
Currently the number three and number five water wells are down for repair, costing an additional $35,000 in expenses, and the water company reportedly spent around $25,000 to repair Martin Luther King Drive. Councilman Cary Carter asked why the state wasn’t paying for the MLK repairs since state crews reportedly broke those water lines.
Marshall said that the city would pursue getting reimbursed by the state for those repairs, but she didn’t know if legally they would have to pay it.
Sivils said it is also time for the commission to pay its annual audit fee of $11,000 to Maxwell and Associates. They also have to pay $6,000 for roof repairs; $3,000 for backhoe repairs; and $3,700 for a lime mixer repair.
Sivils said that the state also required the commission to make a $2,500 purchase to meet a new chlorine requirement and that they also owe $17,000 on a new computer program that was purchased.
“That totals up to $112,126,63 and we’ve got $79,000 to pay for it,” Sivils said. “That’s kind of where we are and that’s why we asked Mayor McCormick to excuse this.”
The commission has approximately $500,000 in a reserve account, but Sivils said it is his understanding that it can’t be used because it was used to secure an approximately $4 million bond.
Marshall asked that he check on that and make sure that the money is in fact still frozen because it was only by word of mouth that Sivils had heard that the water company couldn’t touch those funds.
Carter said he believed that regardless of the financials that the water commission has an obligation to pay the money just like any other bills.
“It’s an obligation for the water commission, and I think we’ve been really lenient so far and it’s quite a bit of money out of our budget, so to me the only other option is for you to start meeting your obligations,” Carter said.
Marshall said the city has seen losses in various areas over the year and is projecting a $200,000 cut in the budget for next year and that the $30,000 is something that the city doesn’t need to have to go without.
“We’ve got to take the money from somewhere and if we aren’t going to get the money back from the water commission, then thats $30,000 that has to come out of next year on top of what’s already come out of this year which will translate to real items for the city of Crossett,” Marshall said.
Sivils told the council that the water commission had no problem paying it, but they simply couldn’t and that if the water commission’s obligations were going to be brought to light then he thought the city’s should as well.
“Is the city not responsible for their end of it?” Sivils said. The contract reportedly stated that the city was to hire an engineer and that this money would be a portion of the salary.
“The reason behind that is because the water commission is required by law to use a licensed engineer on all of their projects,” Sivils said.
Marshall said that the definition of engineer in 1983 is much different from the definition now and that she believed that the obligation had been met.
“I believe that it’s been happening for 30 years and I believe the requirement was met or there would have been complaints in the last 30 years,” Marshall said.
Carter said that he had lived in Crossett for 25 years and he never knew of a licensed engineer on staff and he felt like the water company was using that as an excuse to not pay it because they couldn’t meet their obligation.
Sivils said he didn’t have a problem with the money and hasn’t had a problem with the commission paying it, but if the council was going to throw up legal obligations he felt like the city’s obligation should be discussed as well.
“If you say that the water commission by our contract is legally obligated, then the city should be legally obligated to supply an engineer and by law you cannot call a person an engineer unless they have a license,” Sivils said.
Marshall said that 30 years ago that wasn’t the case and Sivils agreed.
“Thirty years ago you could come in town and be a plumber too, but now you have to have a license,” Sivils said, to which Marshall responded, “In my opinion we are providing the same thing we’ve been providing for 30 years and it hasn’t been a problem.”
Sivils said that it hasn’t been a problem because the commission has had the cash to pay it. He said they can’t continue to operate the water system up to standard without raising rates.
“We’ve got an outstanding plant out there, but if we don’t have the cash to maintain it then we don’t have the cash to maintain it,” Sivils said.
Councilman James Knight asked about the incoming revenue since Georgia Pacific switched to city water, and Sivils said that because of the way commercial rates are set up they really aren’t paying as much as people might think.
“In my opinion they are being undercharged, as the water usage goes up, the water rates go down so when you get over 200,000 gallons your water is free basically,” Sivils said. “What I pay per gallon at my house if I had GP’s water usage my bill would be $300,000 a month, but it’s not,” Sivils said.
Marshall said that a high amount of usage such as that probably wasn’t considered when the ordinance was written. However, Carter pointed out that if rates were raised commercially it would be for all businesses in Crossett and not just GP.
Sivils said that the meter size would affect the rates and so that it wouldn’t necessarily affect all water customers, only commercial ones with a four-inch meter.
Knight said the city was already facing sales tax, property tax and other incomes going down and he didn’t see where the city could go without the $30,000 that the water company owes it.
“Sales tax, property tax, that kind of stuff and we know all that’s going down and we’ve got to get this locked down where we all can live with it,” Knight said. “Our income has gone down, but you’re asking for us to go down again, “Knight said.
Sivils said that to keep the water company to standard and to keep Crossett from having major problems or losing their water company like other cities have, they can’t afford to pay the city bill.
“Both of us can sit here and make excuses all day long and both of us make the right excuse, but still we’ve got to somehow overcome this and that’s what we need to do instead of making excuses we need to start finding solutions,” Knight said.
Councilwoman Kirsten Mondragon asked why the water commission hadn’t planned for some of the “unusual expenses” as Sivils called them.
“We can raise rates at some point in time,” Sivils said. “And we can do that in generate more money, but the water commission hates to do that with Covid and all of the cut backs at the paper mill, so in our opinion it’s just a bad time to charge people more.”
Mondragon said she didn’t believe the rates needed to be raised because of the $30,000 the city was asking for, and that the rates appeared that they needed to be raised anyway.
“Are you not going to have to raise your rates even though you’re only making $5,600 per month?” Mondragon said. She also said that some of the expenses Sivils called unusual weren’t unusual and should have been better planned for.
“Your yearly audit isn’t unusual if you pay it every year, and the computer software is also not unusual because when you put the new system in you knew it was going to cost this much,” Mondragon said.
Sivils said the compnay had hoped that the new meters would offset the cost, but so far it has not. Sivils said he wasn’t calling the expenses unusual because they weren’t expected, he was calling them unusual because they aren’t usual monthly bills.
Sivils said that he didn’t believe the commission were bad managers.
Mondragon said that she wasn’t trying to say they were bad managers, she was just trying to voice that raising rates might have been something they needed to do anyway. Other council members agreed with that and said that this $30,000 should not be used as the reason to raise rates, because it appeared the rates needed to be raised to maintain the water plant.
Marshall said that the water company needed to be able to accumulate funds to cover things such as repairs and as it stands right now the water commission is barely getting by much less setting a reserve for usual repairs and expenses.
The council voted that the money had to be paid by Jan. 1. Sivils said he would get with the commission and they would get a proposal together for a rate increase.