01/12/06 — Seven Springs residents will see higher sewer bills

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Seven Springs residents will see higher sewer bills

By Bonnie Edwards
Published in News on January 12, 2006 1:49 PM

SEVEN SPRINGS -- Seven Springs officials are facing sever financial problems with its sewer system, town board members learned Wednesday night.

Bookkeeping errors have led the town's sewer fund deep into the red, auditor Connie Huffman said.

To compensate, the town might have to raise rates significantly, Ms. Huffman said, perhaps prohibitively.

Ms. Huffman said she discovered the sewer fund to be $14,000 short of projections halfway through the fiscal year.

On paper, Ms. Huffman said, sewer expenses are running about $4,000 ahead of revenues. With depreciation of the lines and lift stations figured in the shortfall more than triples, she said.

Ms. Huffman said the town's previous auditor showed the sewer system with a $27,000 profit, but that there was actually a $51,000 loss. That auditor also did not include depreciation of the system into the system's financial statement. Depreciation figured at $88,000 leaves the sewer system with a $139,000 loss during its first year of operation, she said.

The bad news will only get worse unless something changes, Mr. Huffman said.

"It will get more critical down the line as the system ages. It looks to me like you're paying more to have the sewer processed than what you're collecting," she said.

The town pays Wayne County more than $29,000 a year to process its sewage. Ms. Huffman said the problem could possibly be traced to faulty meters or stormwater getting into the system, forcing it to process more wastewater than it should.

"Your first year didn't look like a very good year," Ms. Huffman said, adding that "Your financial statements will get worse and worse, because depreciation is an expense. It will eat at your net assets until they're gone."

Ms. Huffman said she was shocked to learn that the town has only 74 sewer customers. She said she doesn't see how the so few customers will be able to pay for the town's $3 million sewer system. She told board members that it would take an average water bill of $128 a month just to pay for the depreciation of the system.

"I thought you had 200 or 300 people on the system. If you're paying more than you're collecting, you'll have to raise those rates," she said.

She recommended combining the system's accounting records with those kept by the Southeastern Wayne Sanitary District, which is administering sewer service for the town.

Glen Smith, the district's accountant, said he would provide the town clerk with monthly financial reports. Southeastern Wayne has contracted with Seven Springs to keep up with expenses and income, but the town is responsible for balancing the income and the expenses.

Smith said during the first year of operation the town's sewer fund "floated around on nobody's books. Your previous auditor did not include the sewer fund, because he did not want to do the work. He was simply lazy. I offered to send him the books, and he said, 'No. I don't want to deal with that.'"

Another financial problem discussed at Wednesday's meeting was the town's property tax collection rate.

The town is collecting only 86 percent of the taxes it is owed, Ms. Huffman said. Most small municipalities collect at least 95 percent of their taxes, she said. She said the town board might consider asking the county to help with collections.