Wednesday, June 17, 2009

June 17, 2009 City Council: 2010 Budget, Sewer Rate Increases, Amendment to 2008 Budget, 2008 Audit

If City Council planned a routine meeting yesterday, it turned out to be anything but routine.

No one spoke during the public hearing on the 09-10 city budget. The budget was adopted on first reading 7-0.

A budget amendment to amend the Fiscal Year 2008 budget passed with four "aye" votes (Mayor Barile, Frank McGuffin, Doc Rooney, and Kay Senter) and three abstentions (Gene Brooks, Bob Garrett, and Claude Jinks). And no, "2008" is not a typo. The council in June 2009 was actually still "amending" its budget for the year that had ENDED on June 30, 2008. Nobody discussed the amendment. With all the computers and staff around, no one flashed the amendment on the screen so that you could see what it was.

A vote on an Ordinance to increase sewer rates was postponed. During the public comments portion of the meeting, I spoke on this issue and asked that the City discontinue its current policy of charging "outside" customers TWICE as much as is charged to "inside" customers until and unless the City conducts a cost study to show that there is a reason to charge outside customers TWICE as much. Currently, the city has no cost study showing that there is any extra cost whatsoever for serving its outside customers more than its inside customers.

I provided the Mayor, Council, City Administrator, and City Attorney Dick Jessee with a letter, legal opinions from CTAS (County Technical Advisory Services) and MTAS (Municipal Technical Advisory Services), and court cases on this subject. In a nutshell, MTAS and CTAS attorneys say that rates for sewer customers must be fair and equitable. You can charge different rates but only where the costs or expenses of providing water and/or sewer justify differential rates.

The City has NO cost analysis showing that there are costs or expenses to justify higher sewer rates for outside customers. In fact, sewer lines for many of the city's outside customers were paid for by the county through a grant for the Russellville area. By agreement, the lines were then given to the city. There are other outside customers who simply hooked onto existing city lines.

The CTAS attorney noted that the law requiring that rates and revenues must be related to costs makes a cost analysis to justify differential rates "a practical necessity." However, the City has no cost analysis to justify different rates for inside vs. outside customers. What the City does have is a "policy" that says it will automatically (without a cost basis) charge outside customers TWICE as much.

In concluding my remarks, I asked the city to end the policy of arbitrarily setting the rates for outside customers at twice the rate of inside customers until a cost study is completed showing what, if any, additional costs are incurred in providing sewer service to outside customers as a group.

After several other individuals spoke on others topics, Patricia Stephens, an outside sewer customer who has being paying DOUBLE sewer rates for 10 years now, asked the council to consider the impact of sewer rate increases with the current policy of DOUBLE rates for outside customers.

No one is saying that the City can not charge higher sewer rates to different groups where there are different and additional costs involved in providing service. But all the case law says that those rates must be "fair and equitable." How can an automatic DOUBLE rate be "fair and equitable" when the City can not show through a cost study why it is charging TWICE as much to the outside customer?

It is my hope that everyone on the current council will review the situation and recognize that you don't just pull a number out of the air when it is time to set outside sewer rates. The Mayor and Council requested a cost study to set inside rates. If outside rates are to be different, then a cost study needs to be performed to set a fair and equitable outside rate. Why? Because the city is required to be fair to all customers. Because the city is required to show a relation between rates and costs. The requirements of the law supersede any local policy.

[I first presented this info to former City Mayor Gary Johnson in 2005. Nothing was done. I also discussed this in front of the entire council years ago after completion of the Russellville sewer grant by the county. Nothing was done. I discussed the double rates again in front of the entire council in early 2009 and gave the CTAS/MTAS packet to Mayor Barile. Nothing was done. Months later, Mayor Barile said the packet was still "on her desk." I gave the packet to the city attorney. Nothing was done.]

Now is the time to do something. A policy to automatically charge one class of customers DOUBLE rates--without a cost basis--is, in my opinion, unfair and arbitrary rate-setting. The law clearly states that rates must be related to the costs of providing service. The City has not shown that the costs of providing service to outside customers is double that of providing service to inside customers. The City does not need to draw a line in the sand and say "sue me" over the double rate policy, resulting in additional costs to taxpayers and/or ratepayers for legal fees. It would be refreshing to see the City voluntarily do what's fair and legal in setting newer rates simply because it is the right step to take.


Eddie Fuller was awarded an architectural services contract for renovations of the new public works facility at the former Roy Widener Truck Lines location on Liberty Hill Road. The architectural fee is 8%.

The council approved executing and paying half of a $55,000 contract with Buxton for a retail sales study to see what companies would be a good fit for Morristown. Only four properties will be evaluated with the four landowners paying the other 1/2 of the $55,000 cost. As the discussion began, City Administrator Jim Crumley said five landowners wanted to share in the study and have their land evaluated, but when Paul Lebel (who worked out the contract) spoke, he said four landowners had signed on.

[Later in the meeting, Dwight Frazier spoke and said that he had been contacted by phone by Lebel and asked to participate but that he had been told a different and higher cost figure. Frazier also said that he wasn't given enough information in the brief phone call with which to make a decision. Frazier said this should have been advertised so that other commercial landowners could have had the opportunity to participate. Council seemed somewhat surprised by Frazier's remarks about the process. Some councilmembers asked whether others could still be added as contract participants. Crumley said he thought there was a portion of the contract that would allow for additional participants. I haven't seen the contract and I don't know if Council was given a copy before the meeting. Unless the evaluation process is very easy, it would seem surprising to find that Buxton could come in and evaluate 20 properties for the same cost that they could evaluate 4-5. The real problem presented to council is the failure of the process to open up the opportunity to all landowners who might have wanted to participate in the city's cost-sharing contract.]

The current city auditor Tom Jones (Craine, Thompson, and Jones) was present but apparently no one on council had yet received a copy of his recently completed FY 2008 audit. Discussion and/or review of the audit was postponed. And, yes, the audit that Jones is belatedly presenting to the Mayor and Council is for the year that ended JUNE 30, 2008! See my previous posts on the city audit situation here (toward the end of the post) and here.

Finally, City Attorney Dick Jessee presented his opinion on Jim Crumley's proposed moratorium on commercial garbage service to new businesses. Jessee stated that you can have different classes of customers as long as there is a rational basis for the classifications. He added that you must treat the members of each class fairly. Bottom line: you can't keep giving commercial garbage service to existing businesses and refuse to give commercial garbage service to similarly-situated new businesses. Scroll toward the end of my previous post on the meeting where this legal issue was first raised.

No comments: