Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Water Sewer Budget topic
No spam. Unsubscribe anytime.
Crossville finance director warns water/sewer fund squeezed by ARPA depreciation; staff floats possible 10% rate increase
Summary
City finance staff presented the draft budget and said depreciation on ARPA-funded capital projects and falling interest income have reduced the water/sewer fund surplus to about $12,000; staff recommended considering a rate increase (staff discussed 10%) to avoid state intervention if deficits occur.
City finance staff told Crossville City Council the water and sewer enterprise fund faces narrow margins because of depreciation on recent capital projects funded with American Rescue Plan Act (ARPA) monies and lower interest income, and staff recommended the council consider a rate adjustment to avoid future deficits.
Finance Director Nathan (last name not specified) told council the water/sewer budget for the coming fiscal year currently shows a roughly $12,000 surplus but warned that depreciation and contract increases will shrink that cushion. “We are really close on what this water sewer surplus is,” Nathan said. He cited anticipated depreciation increases (about $200,000) and an expected near‑$90,000 contract increase for the Viola contract as principal drivers of higher expenses.
Nathan reviewed revenue assumptions. He reduced projected interest earnings because market rates slipped from the prior year; interest income for the utility was about $738,000 in 2023–24, and was already down by roughly $200,000 in the current year, he said. He also noted unusual high summer usage last year (a drought period) inflated FY24 water sales and he did not assume the same level of consumption for the coming year.
Staff identified roughly $1.6 million in capital projects budgeted for next year (including pump‑station work discussed elsewhere in the meeting). Because state rules prohibit persistent deficits in utility enterprise funds, Nathan said the city must plan to avoid a deficit. “The first year, they’re going to give us a nasty gram and tell us how to fix it,” he said of the state comptroller’s oversight; “the second year, if you do it 2 years in a row, they’re going to come in and fix it for you,” he added.
Given those pressures, staff discussed two possible approaches: modest annual increases in line with state recommendations (roughly 2.5–3% per year) or a larger one‑time increase to rebuild reserves. Nathan said a 10% increase would provide more cushion and estimated impacts for typical residential customers: a minimal in‑city user billed for 2,000 gallons each for water and sewer would see about a $2.78 monthly increase; a heavier user (example: 9,000 gallons) might see roughly a $5 monthly increase.
City staff also explained accounting treatment for ARPA‑funded projects. Even when ARPA reimbursements are expected or received, the projects create depreciation expense on city books. Nathan noted that although the city has received ARPA reimbursements, “I can’t count that to cover our expenses” for planning because depreciation must be recorded and reduces the reported surplus.
Council asked about timing and implementation. Staff recommended any rate changes be adopted with the final budget and go into effect at the start of the fiscal year on July 1 so the utility does not change mid‑year. The council scheduled a special additional meeting for a final budget/reading and to consider rates (the council set a special meeting for June 24 at noon). Nathan said implementation of a rate change would follow the normal resolution process rather than an ordinance amendment.
Ending: City staff advised the council to consider a 10% increase as an option and promised more refined revenue and expense projections at the upcoming final budget meeting. Council members requested additional detail and asked staff to return with final recommended rates at the June final budget reading.
