Town plans to increase utility rate

Greybull residents could see some increases in their town utility bills early next year after an audit revealed that the rates it’s currently charging are not keeping up with inflation and maintaining adequate reserves.

James Seckman of Seckman and Thomas, CPA, otherwise gave the town high marks across the board, telling council members Monday night that he issued a “clean or unqualified opinion” of its financial statement and found no material weaknesses in internal controls.

The audit, which was for the fiscal year that ended June 30, 2023, also included an evaluation of the reasonableness of the town’s cash reserves, focusing on the general fund and the town’s three enterprise funds: water, wastewater/sewer and sanitation.

Seckman said the town’s general fund reserves and water reserves are in good shape, but that it’s wastewater reserves and, to a lesser extent, sanitation reserves are not.

The town’s general fund reserve balance stood at $786,000, which is about 7.5 months of its annual operating expenses of $1.2 million.  That’s within the recommended range of six to 12 months, he said.

“Your general fund is healthy,” he told the council.

Where some rate adjustments may be needed is to the enterprise funds. By law, rates must sustain operations.  The water fund is doing just that, ending the year with $1.7 million in reserves.  With annual operating expenses of about $1 million, reserves represent about 20.5 months of spending, which is within the auditor’s recommended range of 12 to 36 months.

The sanitation/sewer fund is the concern, Seckman said.  The town ended the fiscal year with $243,320 in reserves. Annual operating expenses are $418,828, however, which means the sewer fund reserves would fund only about 6.5 months of operations.  Auditors typically want to see  12 to 36 months of spending in reserves, said Seckman. 

The sanitation fund is in slightly better shape, with $379,339 in reserves and annual operating expenses of $405,317.  Towns should have enough money in reserves to cover the cost of replacing a garbage truck and containers, he said.

Seckman’s evaluation of the town’s utility rates also included information about depreciation and cash flow.  The water rates are covering 64% of depreciation and producing a positive cash flow of $111,470.  For that reason, he found current rates to be adequate. The wastewater rate is too low, he said, as it’s covering just 48% of depreciation and generating a negative cash flow of $4,111. Seckman said the sanitation rate is also too low, covering just 25% of depreciation, but that it’s a “toss-up” whether the town needs an increase because reserves are adequate at this time.

Later in the meeting, Administrator/Finance Director Carrie Hunt recommended putting in motion plans for an 18% increase in the sewer rate, with first reading to occur in November, the second in December and the third in January, which means the new rate could take effect as soon as February 2024.

The council will also contemplate an increase of about 3% in the sanitation rate, which has remained flat since 2016, although that one may not kick in until the new fiscal year, which begins July 1, 2024.

Combined, an 18% sewer rate increase and a 3% sanitation rate increase would add up to about $6 per month for the average utility customer.