01/26/06 — Engineer -- Sewer budget not in bad shape

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Engineer -- Sewer budget not in bad shape

By Bonnie Edwards
Published in News on January 26, 2006 1:49 PM

SEVEN SPRINGS -- The engineer who designed and oversees the town of Seven Springs' sewer system said the system's financial situation is not as bad as it might appear.

Town board members got bad news last month when they learned the system was losing money.

But Tyndall Lewis with McDavid Associates told the board Monday night that although the finances are currently in bad shape, he believes they will improve when the Georgia-Pacific plant near Dudley is connected to the system this summer.

"My expectation is if Georgia-Pacific used what is anticipated, the system will become self-supporting. I do not foresee having to raise rates. Georgia-Pacific coming on line is in the works at this point. Your bank account will stop going into the hole," Lewis said.

An audit report the board received last month showed that the system was losing money because depreciation of equipment and sewer lines had not been taken into account. But Lewis told the board that depreciation is almost never a factor in the operation of small municipal sewer systems. It simply isn't practical, he said.

"Hopefully, with Georgia-Pacific, we will be able to sock some money away," Lewis said. "But don't ever think you're going to be able to cover depreciation."

No small town that builds a sewer system tries to cover depreciation, Lewis said.

"It does not happen. In reality, if you salted that money away and the system aged out, you'd have money to buy a new system. But it is absolutely impossible to cover depreciation and have a reasonable rate. It is not in the cards, never has been in the cards from day one. It is an accounting concept that is commendable."

Even larger municipalities don't concern themselves with depreciation in their sewer system budgets, he said.

"You've got to have affordable rates when you're requiring people to have a utility," Lewis said. "You cannot cover depreciation with your rates."

Seven Spring's sewer system was built with help from state and federal grant money, Lewis reminded the board. When the system becomes antiquated, the town will likely have to seek more grant help to rebuild.

The system has used up most of the $80,000 that had been set aside for operations for the first couple of years, Lewis said. Plans had called for Georgia-Pacific to hook onto the system, with 75 percent of the company's payments going to pay the county for the sewer system's operation and 25 percent staying in the account to help balance the budget.

Until Georgia-Pacific comes on line, Lewis said, "We're going to eat away at what we started with."

Lewis, who reviews the system's situation monthly, said the operators found out infiltration was coming into the lines from some of the schools.

"We will adjust the billing, and that will lessen the drain that's being put on your cash situation," he told board members.

Despite the current money problems the town's sewer system has proven a blessing for residents, Lewis said. Before the system was built two years ago, most of the individual septic tanks and lines in town were failing, he noted.

"We are in a pickle," Lewis said. "But we're fortunate to be in this mess."