The Sealy City Council will spend $47,000 to evaluate its utility rates.
The council heard during an April 10 meeting from Robert Belt, an independent auditor with the accounting firm Belt Harris Pechacek, who reported the city took in a net loss of $301,000 in its general fund in 2017, pointing out major reductions in the city’s gas and solid waste funds.
The gas fund was reduced by $66,000 and solid waste was reduced by $112,000.
City Manager Lloyd Merrell proposed last week a budget amendment that would pay for a utility rate study. The study would cost about $47,000 with most of the dollars – about $40,000 – being pulled from a street paving fund. The remainder would be covered by the city’s water and gas funds.
Although met with some skepticism, the council unanimously approved the study. It will take a more detailed approach to restructuring rates, officials said.
“It’s going to be a fair and objective rate and I wasn’t here in the past but I’m under the assumption the city of Sealy has never had a rate study like this because if they had, they would have an industrial rate which we don’t,” Merrell said. “In the past they would just kick the rate up 10 or 20 percent and it doesn’t address the problem of how to structure a rate to benefit everybody and that’s what we’re doing now.”
The study will be conducted by Austin-based NewGen Strategies and Solutions, which will review 38 items regarding the city’s finances. This includes examining Sealy’s reserve account balances and contracts pertaining to providing or receiving water, wastewater or gas services.
“We need to have that rate study done to make sure we’re charging enough money to operate our city departments and provide for a certain level of repair and maintenance,” Merrell said. “What will happen is they will come in and look at the financial statements for operating expenses and current rate structures and they will suggest a rate we should adopt and we can structure it in any way the council wants.”
Merrell confirmed for the council that he has previously overseen a rate change. He emphasized the importance of the study as the audit made clear the city wasn’t operating well for the long-term future.
“We’re losing money on gas and sanitation and we’re not paying what it costs for us to provide that service and there’s just so long you can do that,” Merrell said. “You have to at least break even and when you don’t, you’re taking that money from somewhere else. If we’re buying gas and selling it at a lower price than we’re buying it at, show me a business that can do that in the long term.”
Councilman John Hinze raised concerns of continuing to raise the cost of services.
“We’re substantially going up on our rates every year and for someone on a fixed income that’s extremely difficult,” Hinze said. “It’s hard to have people come in and say, ‘Do you want me to pay my water bill or have my medicine this month?’”
Merrell said he understood those concerns and the study can likely find a way to take the burden off those who would suffer from a rate increase.
“We’re not trying to make a big profit off this or anything so we can structure the rate to give people with disabilities or senior citizens a discount understanding that we have to make that up elsewhere,” Merrell said.
Hinze also expressed concern of taking away funds for street repair but Merrell said the study is crucial to find a competitive industrial rate but implement it in the right way.
“We can’t let our infrastructure like our water lines decay so we have to make the investment to keep the utility systems sound and have the rates to do that and keep a good fund balance,” Merrell said. “I looked around at what was available and we had $140,000 in the street repair and we would be lucky to do one street with that.”