By Karen Middleton
karen@athensnews-courier.com
September 06, 2008 09:19 pm
—
If the Limestone County Water and Sewer Authority fails its annual bond test, officials are taking cost-cutting measures to avoid rate increases.
Friday, interim General Manager Tammy Smith said the eight measures approved by the authority board in May out of a nine-point cost-cutting proposal made by former general manager Tony Sneed have been implemented. But whether it’s enough to convince investment bankers that the authority is turning finances around remains to be seen.
The authority pays debt service on $70 million in bonds.
Auditors perform bond tests annually to determine a utility’s eligibility for construction bonds and determine the rates the utility must charge customers to repay the bonds. In a mid-year review certified public accountants Cecil Armstrong Jr. and Annette Barnes of the local firm of Christopher, Durham, Pepper and Armstrong, reported to the board in March that the authority would not pass its September bond test.
In a letter to the board dated May 1, Scott Bamman of Thornton Farish Investment Bankers in Birmingham, the authority’s bonding agent, Bamman wrote:
“… without some improvement in results over the second half, there is a possibility that the Authority might have to report the covenant problem to the trustee shortly after the end of your fiscal year. I believe that it is quite important that actions be implemented to attempt to mitigate the magnitude of any problem at the end of your fiscal year.
“There is still a full five months of operations during which the effects of any changes might be felt … In looking at the financial data from the meeting last week, the ratio of total expenses to recurring revenue of 109 percent is the relationship that needs to be examined.”
In mid-August the board voted to fire Sneed, citing a decision to “go in another direction” on the general manager post. The board then named 15-year authority employee Tammy Smith as interim director. Three days later the authority fired comptroller Harvey Cooper.
If the nine-point plan that Sneed proposed in April that was designed to save the authority a total reduction in annual operating expenses of $517,787 were:
• No raises for grades 8 and above until the bond test is passed, saving $31,559
• Discontinue paying (board legal counsel) Mike Cole for lobbying services, saving $48,000
• Hire Melissa Green as in-house engineer and no longer use Hethcoat & Davis for ancillary services or subdivision review and inspection, saving $73,611
• Discontinue residential radio read meter program for large replacement projects, saving $85,000
• Continue to strictly monitor overtime and look at ways to reduce it, saving $106,633
• Reduce accounting fees by bidding out auditing services, saving $30,000
• Discontinue Grade 5 employees and one Grade 6 employee driving vehicles home, saving $16,413
• Salaried employees to begin paying larger portion of insurance coverage, saving $11,759
• New city of Athens Water Department agreement and purchase points, saving $114,812
Eight of nine OK’d
The board approved eight of the nine proposed measures, omitting the $48,000 cut in Cole’s lobbying services.
While the board had already engaged CDPA to conduct the 2008 autit at an uncapped fee of $40,000, the board sent out requests for letters of proposal to five CPA firms in accordance with the sixth of the nine proposed measures.
CDPA proposed doing the audit for $30,000. Of the five requests for proposal, one firm declined, one was higher and two were lower than CDPA. One firm, Dyer & Smith of Huntsville, proposed doing the 20008 audit for just $5,000. Professional services are not bound by the state’s competitive bid law, and the board voted 4-to-1 to remain with CDPA. Alton Robison cast the lone dissenting vote.
Interim General Manager Smith said Friday that the hiring of in-house engineer Melissa Green is showing financial results.
“Hiring Melissa was a great asset to our team,” said Smith. “She handles all the line extension work and is our liaison with the County Commission. She coordinates work with the contractors on small jobs. We are in the process of bringing our water model in house (monitors usage) and she will be over that. Inspectors are under her and she is working to get them all educated and understand the jobs they are doing.”
Smith said engineers Hethcoat & Davis of Nashville are still employed to work on large capital projects.
In further reductions, salaried employees who previously paid just $1 toward medical insurance coverage, are now required to pay $99 per month.
“That $1 really should have been looked at before,” said Smith. “We may have to look at asking salaried people to pay more for coverage. I feel strongly that salaried people should pay their fair share of insurance costs.”
Smith said she had also discussed a cutback with the three vendors who provide professional services, Cole, CDPA and Hethcoat & Davis. “I let them know we’ll be very conservative in our use of them to cut expenses,” she said.
Smith said she monitors overtime expenses.
“Overtime is inevitable in this business when you have all those water mains,” she said.
Smith said savings should begin to show up in 2009 for the new point of purchase with Athens Water Department at Tillman Mill Road and Alabama 99.
Smith said most of the field force works four days, 10 hours a day to save fuel. She said office staff remains on a 5-day week, 8-hour day.
Smith said she anticipates no cutbacks in either salaried or hourly employees.
“I don’t see any staff cutbacks, but if someone leaves, we’ll look at whether we can move existing staff into their job and not hire a new person,” she said.
Smith said if the authority fails its bond test, there are options for dealing with it.
“If we prove to them we are making strides to improve our numbers, that might be in our favor, but it’s possible they will look at us and say we have to raise our rates,” said Smith.
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