City of Bemidji studies options to avoid deficit in 2011 sewer fund
The city of Bemidji is considering several options to avoid generating a sewer fund deficit in 2011 and beyond.
Revenues in the other utility funds, sewer and water, are expected to decrease in the future and smaller cash reserves will be available, but the decline will not lead to levels below industry standards, according to a November report from Public Financial Management, Inc.
The Bemidji City Council already has taken some action to try to address its depleting sewer fund, including the adoption of new sewer and water access charges.
Incoming sewer and water customers will now pay approximately $2,700 to connect to the systems. However, those who have deferred sewer and water connection will have until Jan. 1, 2010, to connect to the systems without charge.
SAC/WAC fees are expected to generate between $180,000 and $216,000 annually, according to PFM. The sewer fund is slated to have $2.6 million in deficits in 2011 and $3.3 million in deficits in 2012.
"Even with SAC/WAC, you haven't resolved this problem," City Manager John Chattin told the City Council during its Monday work session.
PFM had once said a 7 percent annual increase on residents' utility bills would address the problem, but councilors were against that high of an annual increase.
"Everyone on the council balked," Mayor Richard Lehmann said.
Instead, the council previously voted in favor of a 3 percent increase last year and another 3 percent increase to be implemented in January 2008.
Why a shortfall?
The council discussed some options for addressing the sewer shortfall, but Lehmann first wanted an explanation as to why the city's cost of doing business is higher than in other cities.
Staff explained that the city's "state-of-the-art" Wastewater Treatment Plant contributes to higher costs.
Also contributing to the problem, explained City Engineer Craig Gray, is the age of the city's infrastructure. Unlike developing cities such as Maple Grove, Minn., 90 percent of Bemidji's infrastructure was built in the 1940s, '50s or '60s - and now is approaching the end of its 50-year-life.
"Everything in Bemidji is in that 50- to 60-year range," Gray said. "It's all due now. We're in that phase."
The age of infrastructure accounts for the need to repair water towers and also water mains when a road is reconstructed, Gray said.
"All those things have a 50-year life," he said.
A reorganized staff?
A reorganization of the city's staff was discussed as one option toward decreasing operations.
A revised organizational chart presented by Chattin included the elimination of the public works director position, which is now held by Andy Mack, who is expected to retire in 2009.
City Engineer Craig Gray would instead supervise the public works department, including its functions of streets, water/sewer and the Wastewater Treatment Plant.
Other potential changes include the hiring of non-union supervisors to oversee union employees instead of having union supervisors overseeing union employees, as they do now.
"We need to get away from that," Chattin said.
The organizational chart was not discussed in advance of an anticipated vote - Chattin said none of the suggestions were proposed to be implemented immediately, but initiated over time through anticipated retirements, not through the termination of employees.
"This isn't something we're bringing to you and saying we want to do this next week," Chattin said.
If the proposed organizational chart is ever adopted, at least one support position for Gray would be added for assistance.
Included for discussion was the potential of separating the superintendent of parks and recreation position from the public works department.
This change would not likely save money and will probably cost more in the long-run, Chattin explained.
The parks and recreation superintendent, a position that is now vacant due to the retirement of Dan Haluptzok, is currently overseen by the public works director. But, under the proposed chart, Chattin himself would oversee the position, which would become a department head and likely require a four-year degree.
The council's only official action during the meeting was a unanimous vote in favor of seeking proposals regarding the Wastewater treatment Plant.
The city plans to send out requests for proposals to private firms that may have an interest in operating the facility instead of having a city-run facility.
Chattin said Tuesday that that is will accomplish two things: First, the council will be able to compare costs of having a private firm operate the plant versus current city expenditures of doing so; and second, the council will have proposals in hand if it does decide it is interested in retaining a private firm to operate the facility.
"It kills two birds with one stone," Chattin said.
Just having a consulting firm assess the current operations at the wastewater treatment plan could cost tens of thousands of dollars, Chattin said.