Marco Island City Council defers utility rate decisions hoping $4.2 million deficit can be explained

Consultant Michael Burton, president of Burton & Associates, explains his office's revenue sufficiency study to city councilors Wednesday at a special meeting. City Manager Jim Riviere, right, listens to Burton's report. Cheryl Ferrara / Eagle Correspondent

Consultant Michael Burton, president of Burton & Associates, explains his office's revenue sufficiency study to city councilors Wednesday at a special meeting. City Manager Jim Riviere, right, listens to Burton's report. Cheryl Ferrara / Eagle Correspondent

At Wednesday's special meeting, Councilor Bill Trotter, right, suggests utility surcharges should be handled as a separate fund. Council Chairman Jerry Gibson, right, and Vice Council Chairman Larry Magel consider his suggestion. Cheryl Ferrara / Eagle Correspondent

At Wednesday's special meeting, Councilor Bill Trotter, right, suggests utility surcharges should be handled as a separate fund. Council Chairman Jerry Gibson, right, and Vice Council Chairman Larry Magel consider his suggestion. Cheryl Ferrara / Eagle Correspondent

— Consultants told Marco Island’s City Council Wednesday it could consider postponing rate increases on water/sewer bills until Oct. 1. Councilors met in a special meeting to discuss a revenue sufficiency study received from Burton & Associates.

During that meeting, councilors also learned that an unexplained $4.2 million deficit could require further review before any rate decisions could be made.

The revenue study, a 10-year projection beginning with this year’s budget, showed the city had sufficient money in 2012 collections to cover the cost of utilities operations. City budgets are calculated from Oct. 1 to Sept. 30.

To operate past October, the city will need to raise overall utility rates by 6 percent in the following two years and 3 percent in subsequent years, said Michael Burton, president of Burton & Associates.

Based on lot size, a single family home using 15,000 gallons of water monthly could see a 10-percent rate increase using the Cost of Services M54 model, said Burton. The M54 study was presented to city staff in December. The model combines variables including customer type and water consumption for the basis of rate calculations.

Additionally, he reported a 12-percent surcharge levied on utility bills could be reduced by 6 percent. The surcharge supports a separate fund for Septic Tank Replacement Program road resurfacing. The surcharge fund has an excess of $2 million. Councilors previously agreed to move $800,000 from the surplus to the operating fund.

The decrease in surcharges could be applied as soon as April 1 without negatively impacting revenues, Burton said. He also suggested that the surcharge reduction could take the sting out of October rate increases by reducing the homeowner’s burden of 10 percent to an effective 4-percent increase.

Councilor Bill Trotter was first to suggest council deal with surcharges separately by April 1, but asked that council give the rate sufficiency study more scrutiny before making any assumptions about rate increases.

“We should look at capital programs, now and future projects, funded and unfunded to 2016,” he said. “We need to look at the rationality of this.”

Vice Chairman Larry Magel was concerned the revenue sufficiency study did not take into account the more than $4.2 million deficit in the utilities’ operating fund. Patricia Bliss, city finance director, said she believed the $4.2 million was a timing error in how funds were budgeted, not a shortfall.

The city’s bond rating for borrowing also worried Magel. Although 1.5 percent is the number rating agencies like to see, he asked what the effective borrowing rate would be at 1.3 percent or 1.5 percent.

“If it’s not significant than we can reduce coverage and cost to customers,” he said.

Councilor Chuck Kiester said he was very upset about the $4.2 million deficit and the reason for it.

“Yesterday, I found out what was going on,” he said. “We were buying with no money in the bank based on future bonds.”

City Manager Jim Riviere explained the practice as “ledger loans” confirming the loans had been approved in the past. In his tenure, he said, he had not approved any “ledger loans” and had never found cross-over between general and utilities accounts.

Council directed city staff to refrain from using “ledger loans” in the future. To better understand issues involving the $4.2 million deficit and how accounts were pooled and allocated, councilors discussed asking Collier County’s clerk to review Marco Island financial accounts.

Burt Saunders, city attorney, said he had spoken to Collier County Clerk of Courts Dwight Brock who said he would like to have an inter-local agreement with the city before any work is done by the county.

“The clerk would be more than happy to help,” Saunders said, “but the city would have to cover the clerk’s cost.” Councilors agreed to explore the option.

Without understanding how allocation of the $4.2 million deficit would be resolved, councilors felt it would be difficult to move forward on rate and surcharge decisions. Council agreed to select dates for additional discussion and workshops on the issues at its Monday meeting.

The next regularly scheduled meeting of Marco Island’s City Council is 5:30 p.m., Monday, in the city’s Community Room, 51 Bald Eagle Drive.

© 2012 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Comments » 18

blogsmog writes:

.....well all seems to be in order here....

Throat_Yogurt writes:

projections dont mean s***. they give us an idea of what it MIGHT be, but forecasts can change. Like they did for almost everyone in 2008.

Another waste of money on a "study"

1Paradiselost writes:

Time to sell the water/sewer department to professional public utility which is under the control of the state public service commission!

WizeOlMarco writes:

An excess of $2 million...hmmm...how about refunding it to the property owners? $4+ million shortfall...apparently temporary due to cash flow timing, understandable, however the comments from the City officials are not too confident. Hope these financial issues are clarified in the next round of statements.

RayPray writes:

in response to 1Paradiselost:

Time to sell the water/sewer department to professional public utility which is under the control of the state public service commission!

"an unexplained $4.2 million deficit....."

>>> Why not hire Goldman Sex Alumni Jon Corzine to run this operation.

>>> He is currently between jobs...and $4 million would be chump change for him to lose track of....

naples_rocket writes:

in response to 1Paradiselost:

Time to sell the water/sewer department to professional public utility which is under the control of the state public service commission!

sure... State of Florida knows so much better how to manage business and money

1Paradiselost writes:

in response to naples_rocket:

sure... State of Florida knows so much better how to manage business and money

Rocket please read what the PSC does!

http://www.psc.state.fl.us/

When the city bought the water department, the people of Marco Island gave up their rights to rate/price controls!

Cities owned water companies are exempt from wage and price controls!
In other words they (the city) can raise the price as high as they like without any oversight or customer protection.

Time to sell the water/sewer department!

happy6 writes:

let's see...wait until october to decide...that's when everyone is gone from paradise....an easy slam dunk then....what a bunch of baffoons....the entire buch needs to go...including the #1 baffoon....riviere....he's a real pile of crap.

marcofriend writes:

The City Manager has no credentials to be "City Manager". The City Council and past City Councils have no clue what the Finance Dept is doing, and it is obvious the Finance Dept has no clue as to what they are doing. Not a single STRP District can pay its debt, which is why there is no such thing as a "Cash Flow" statement. Have any of you accountants out there heard of "pooled" accounting? That is what our City does. I think that means dump everything in a slush fund and if we are lucky maybe we can afford to pay our bills.
It is time to wake up. A Utility that ended it's year with a -$4,000,000 and a City Council who wants to raise rates indefinately to pay off a debt that they can't define will certainly lead us into bankrupcy.
Stop this craziness. Get involved citizens. Let your voices be heard.

WizeOlMarco writes:

The City's 2010 annual financial report (see City website, Finance Dept) includes an award for 'Achievement for Excellence in Financial Reporting'. The 2010 report auditors is Mayor Hoffman McCann P.C. of Clearwater FL. I wonder if the auditors are aware of the reported current expected deficit/surplus. Do the auditors conduct quarterly reviews or only annual audit? The City needs to clarify the City's 2012 financials.

EdFoster writes:

"Councilor Chuck Kiester said he was very upset about the $4.2 million deficit and the reason for it.

'Yesterday, I found out what was going on,” he said. “We were buying with no money in the bank based on future bonds.'"

Going senile, Chuck? They've been doing this from the beginning and you've known it all along. This was the financial basis that CARES used to oppose the first sewer bond in court nad the State Attorney General's office supported us!

"City Manager Jim Riviere explained the practice as “ledger loans” confirming the loans had been approved in the past. In his tenure, he said, he had not approved any “ledger loans” and had never found cross-over between general and utilities accounts."

Oh goodie, goodie! Now y'all have a name for the deception! Big improvement!

In the words of George W. Bush: "Y'all miss me yet?"

Ed Foster
Founder and First Chairman of CARES,
Citizens Advocating Responsible Environmental Solutions, Inc.

vntgedrumz writes:

Why not get rid of that "money pit" you call the Marco Island Fire Dept.?? If they didn't have the Farmers Market on Wednesdays or Publix for lunch, they'd have no reason to take the trucks out. And to say "they have to take the truck in case of a fire" is bulls..t! When is the last time they even came close to putting out a fire? I mean other than stepping on a cigarette they were smoking? And 32 cops for a 24 square mile island? Are you kidding me?

deltarome writes:

Council cancelled all UAB meetings until further notice.
Perfect timing for Council to go it alone!

woozygirl writes:

Water on the Island is more expensive than oil. God help us all.

blogsmog writes:

in response to woozygirl:

Water on the Island is more expensive than oil. God help us all.

and oil taste better

marcofriend writes:

It is important we help our Finance Department understand some accounting principles. Let's see, let's start with debits are on the left and credits are on the right. (Well, we need to start somewhere.....)

dc5799 writes:

Did the finance dept. ever find the m54 file that they couldn't at the meeting last Weds.?

MrBreeze writes:

I said this three years ago that water will be one of the most costly items on Marco Island. And the reason is poor management of the utility and the budjet.

Hang on to your wallet folks, it only gets worse from here.

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