Possible Flaws in Polk City's Master Utility Plan

The latest Ledger article states, "Polk City Wants Master Plan To Map Its Struggling Utilities' Future."

In case you were unable to attend the Special City Council Meeting this past Monday, November 15th, 2010, there were proposals discussed to get a set of utility studies done on the existing city utility systems.  At a cost of $43,000, the council approved to hire experts at GAI Consultants of Orlando to do the set of 5 studies.  The 5 studies to be done are:

1. Wastewater Operational Optimization Study
2. Water Operational Optimization Study
3. Water and Wastewater Revenue Sufficiency Study
4. Water and Wastewater Financial Optimization Study
5. Water and Wastewater Rate Study

These studies are done sequentially and somewhat simultaneously to arrive at the complete picture of what GAI would recommend to do to get the most out of the utility system, as well as arrive at appropriate costs and rates.  The results of these studies will provide information to calculate a fair market value of the current system as well as a 5 year pro forma.  By definition, pro forma accounting is a statement of the company's financial activities while excluding "unusual and nonrecurring transactions" when stating how much money the company actually made.  The recommendations GAI will be providing as a result of this study will in essence be a plan the city can follow to get the utility system running the most efficiently and cost effectively as possible, while also giving the city an opinion if the system can realistically be supported by the municipality considering factors such as tax base, debt ratios, and credit worthiness.  GAI has employees who specialize in such areas as grant writing, so after the study is done, if the city qualifies, then GAI can be contracted to assist in this function as well. This study typically takes 90 days to complete and GAI's Vice President Gerald Hartman sounds like he unquestionably has the experience to do the study.  He was recommended by Mr. Tom Cloud, since they have worked together on numerous cases in the past.

At face value, this sounds wonderful.  But Councilman Kimsey had a very valid point when he questioned the timing of getting this study done now, when there is a possibility that the County may be taking back the Mt. Olive Utility System within the next year by voiding the contract signed with the city back in 2008.  If this happens then the "plan" that GAI will be suggesting will be worthless.

From our perspective there are additional issues that have not been brought up before voting on going forward with this study.  Public questions were not permitted at this past Monday's meeting.  The first is regarding the numerous meter reading errors occurring system wide, as stated by Utility Expert Mr. Sanderson from FGUA.  If the misreading is challenged by the customer, are they simply being resolved by issuing a monetary credit to the account?  Are the meter readings for usage in the system being adjusted to reflect numbers closer to the actual usage, instead of the extremely inflated usage numbers that are originally being billed?  If not, how is this study going to even be close to accurate?  This is not taking into consideration how many other misreadings are happening which are not being challenged or corrected.

This reminds me of a common phase used in computer lingo, "Garbage in; Garbage out."  If inaccurate numbers are being used in the calculations of this $43,000 study, the answers resulting from these calculations which will be used to base all of GAI's recommendations on will also be inaccurate.  In the example we sited in this previous blog post Proof of Utility Meter Software Problems and Gross Incompetence a customer was charged for approximately 15 times more than his actual usage.  Mr. Hartman, from GAI, spoke quite a bit about when customers' actual usage exceeds what is typically expected when they put in a meter, which is what the impact fees are based upon.  He stated that if customers excessively use the resources, it will raise the cost for everyone on the system.  How can he accurately get these calculations when the meters are consistently providing inaccurate inflated data?  Does that mean that the software glitches causing these misreadings will ultimately end up with the false appearance of justifying further rate increases, when actual usage is far less, in reality justifying a dramatic rate decrease?  Is the study going to show that in just this ONE example 44,000 gallons of water and sewer usage went unpaid?  How will this effect the balance sheets when all of these monetary corrections have been made without the usage corrections and the total amount of gallons used shows God knows how many millions of gallons unpaid for?  The math will be so messed up there will be no way to even be close to reality.  How can this study move forward knowing that these errors exist?

Understandably, the City Attorney, Mr. Tom Cloud would be greatly assisted by having data that a study like this can provide.  The county is challenging the city's ability to financially support such a utility system as well as questioning the fairness of current utility rates.  This study will shed light on both these issues assisting Mr. Cloud to have "facts" to base his arguments on.  If this entire study is done using inaccurate data to begin with, the tax payers are spending $43,000 for a study that will result in additional inaccurate data on which these arguments will be based.  This study may also be used as a delay tactic in the new phase of discussions with the County to resolve these issues, since this study is expected to take 90 days or more to complete.

In addition, some of our sources have indicated that County Officials have already notified State Agencies of the City's delinquencies on it's payments to the County.  If our sources are correct, it is likely that the guidelines in this state statute 218.503 Determination of financial emergency will be followed.  Is this one of the reasons why City Attorney, Mr. Cloud stressed such a need for a study right now and not waiting a few months, as suggested by Councilman Kimsey?  Instead of the city officials using the "shoot from the hip" strategies for decisions, are actual facts and plans to justify these decisions now being requested by the Governor's Office?

Another point that was brought up during this meeting is that no other similar study has ever been done on Polk City's utility system in the last 15-20 years.  Council Person Adorno challenged this statement by saying that a utility system study had been done at a cost of several million dollars during the previous administration in the planning stages of the large sewer and water treatment plant that was scraped.  Ms. Block later then acknowledged that a previous study had been done, but stated it was not a priority to find it in the files.