Little Rock Wastewater's 2015 budget, approved Wednesday, foresees a slight increase in operation and maintenance costs to $25.5 million and includes funding for a new sewer rate study that the utility's new chief executive officer said he hopes will guide the agency over the next decade.
The Sanitary Sewer Committee -- a seven-member panel that oversees certain finances and operations of the utility -- approved the budget as proposed Wednesday with little discussion. The committee also approved entering into a contract with Raftelis Financial Consultants Inc. for $96,960 to study future sewer rate increases.
Little Rock Wastewater's former CEO Reggie Corbitt had planned to ask the Little Rock Board of Directors to approve four rate increases this year that would start in 2015 and last through 2019. But when Corbitt was fired in January, interim CEO for Finance and Administration John Jarratt announced that the agency would revisit the idea and re-evaluate Corbitt's proposal.
Under Corbitt's proposal, which was based on an outdated 2008 study, there would have been a 10 percent increase in sewer rates next year.
Corbitt was fired after a police investigation confirmed information reported in a series of Arkansas Democrat-Gazette articles regarding his business practices, use of public funds and what a police memorandum called "questionable expenditures."
Greg Ramon was hired to take over in August.
Since 2000, 12 sewer-rate increases have been approved -- including one that is to go into effect in 2016 -- to meet requirements of a 2001 Sierra Club lawsuit settlement. That settlement requires the utility to correct several problems tied to citywide sewer overflows by 2018.
Ramon said he wants next year's rate study to help guide the agency in years to come.
"I wanted to make sure we are doing everything we need to do this coming year to set us up to five years, to 10 years down the line," Ramon said. "It will help us not only so far as capital, but how we best manage and use funding to get where we need to be."
Ramon said he gave his staff directives on the budget. It reflects a decrease in spending on supplies, vehicles, and training and administration.
Finance Director Debbie Williams said the decreases were a result of reviewing this year's expenses and budgeting based on need.
"It's a balanced budget. I'm confident it will meet the needs of the utility. And it's bare-bones. Bare-bones is what this budget is," Williams said.
The majority of the utility's $25.5 million operating and maintenance expenditures cover salaries and benefits for its 215 employees. Those two items total $16.2 million.
Employees will get a 1.7 percent cost-of-living increase in their salaries next year, which will cost about $160,000. Health insurance costs to the utility will increase by 7.2 percent, and officials plan to spend an extra $17,000 on programs that will help manage health care costs. Those include health screenings and a smoke cessation program.
Little Rock Wastewater expects to take in $51.3 million in revenue in 2015, while its total expenses are estimated at $83.9 million -- a figure that includes the operation and maintenance budget, debt services, and capital project costs for property and equipment. The rest of the revenue to pay 2015 expenses comes from the proceeds of 2012 and 2013 bonds.
Also on Wednesday, the sewer committee finalized the utility's policy on how much operating reserves it should keep on hand. Little Rock Wastewater has had an unwritten policy to keep enough reserves to cover 60 days of operations, maintenance, debt and capital projects funded from cash revenue at all times. A resolution approved Wednesday sets a minimum reserve balance of 45 days, but a goal of 60.
The rule has a positive impact on bond ratings and ensures that adequate funds will be available during emergencies, Ramon said.
Metro on 12/18/2014