by Cliff Dobler

Originally submitted to the IVGID Board of Trustees on June 26, 2017

Re: Utility Fund – Accumulated resources for the Effluent Pipeline and misrepresentation of the Utility Fund Restricted Net Position.

It is with true dismay that the Staff of IVGID  has been reporting  in the audited financial statements and other memorandums that the accumulated money collected through increases in Sewer rates specifically for the Effluent Pipeline are UNRESTRICTED funds . This money is RESTRICTED.

History of committing and restricting funds

The Effluent Pipeline  is a phased project which started several years ago.  Phase1 completed in 2012 was funded  75% by the Army Corp of Engineers and 25% by IVGID.

In 2013,  IVGID increased sewer rates to accumulate money to replace the remaining  6 miles of the Pipeline from a pump station south of Sand Harbor to the top of Spooner e south along Highway 28.

In the October 15, 2013 introduction letter of transmittal to Citizens and the Board of Directors in the Comprehensive Annual Report for fiscal year 6-30-2013, under the heading Utility Rates to Support Infrastructure the following statement was made:­­­­­­ “The District has identified  approximately 6 miles of effluent pipeline for replacement over a series of years. This replacement will be paid for by  rate increases rather than debt. Sewer rates have been getting increased to accumulate more resources for this  project”

In subsequent years on November 5, 2014 for fiscal year 2014, December 8, 2015 for fiscal year 2015 and November 30, 2016 for fiscal year 2016 the same statement was made. In 2015  the following was added “The project is expected  to cost at least $15,000,000.”

In recent Board meetings particularly regarding the Utility Rate Study, Mr. Pomoroy  from the Utility operations stated the pipeline project may cost $23,000,000.

 

Current Idea on moving forward with construction of the pipeline

According to Brad Johnson of IVGID there are 13 “spots” which will require some form of repair or replacement which should hold the pipline together.  The hope is there may be funding from the Army Corp of  Engineers and some cost sharing with the Bike Path when it proceeds along the same path. Nothing is even close on these cost sharing ideas.

The actual beginning of pipeline construction  could be within the next five years.

In the meantime, the draft 5 year capital budget plan from 2018 to 2022 will set aside an additional $9,000,000 in Sewer Fees .  Some  amount  will be spent during the same period and is unknown .

 

 

Accumulated Resources

Based on information in the Comprehensive Annual Budgets IVGID began accumulating resources since  2011 and budgeted $11,150,000 for project #2524551010 Effluent Pipeline Phase 2.  Through June 30, 2016 accumulated amounts budgeted but not spent was $7,942,937. It is therefore assumed that approximately $3,200,000 has been spent on design and engineering . During 2015 and 2016 $1,351,122 was spent. A public records request has been made to obtain the exact amount spent.

We do not know the expenditures or the unused portion of the $2,000,000  budgeted in fiscal year 2017 which is now ending. The  capital improvement project report will not be available until August 2017. Based on Mr. Eicks  representations in the 2017 budget presented in May 2016 the accumulated funds for the pipeline was expected to be $10,000,000 .

Mysteriously the report for projects budgeted and carried over into fiscal year 2018 as part of  the May 24, 2017 board packet  does not include the Effluent Pipeline. No reason was provided. However, within the same report, there is $3,576,000 of unspent previously budgeted funds for10 Utility Fund projects.  (Page 88 &89 of the May 24, 2017 board packet).

So a decision was made unilaterally by IVGID staff that budgeted unspent funds for ten capital projects would be carried over into 2018 and the Effluent pipeline project would no longer be carried over.  This is a $10,000,000 ERROR.

 

The ramifications of not reporting Restricted funds

Mr. Pinkerton and Mr. Eick  have reported that the Utility Fund has large unrestricted reserves (accounting term is unrestricted net position) . As recent as the June 12, 2017 board meeting  asking the Board to approve an unbudgeted item know as the  WRRF Low Pressure Air System for  $235,072 the memorandum in support stated.

“The total estimated project budget to complete the proposed work is $235,072, and if approved, will come from the Utility Sewer Fund reserves where there is an adequate available projected unrestricted fund balance of $13,895,876. ($12,026,276 from the June 30, 2016 audit plus $1,869,600 from the recently adopted budget projected results for June 30, 2017.)”

It would be impossible to report that the Utility Fund will have $13,895,876 in unrestricted funds at June 30, 2017 when approximately $10,000,000 has been set aside for the Effluent Pipeline, another $3,576,000 set aside for 10 projects and another $2,500,000 has been determined must  be set aside for emergency projects.  There may only be a measly $300,000 of unrestricted funds.

The Board of Trustees by approving projects and related budgets have placed constraints upon the use of  monthly Sewer Fees. The unused portion of funds set aside for approved projects should be reported as RESTRICTED funds.

The  is a true distortion of the Utility Funds financial position and the Board of Trustees should take immediate action to correct.

BOTTOM LINE – THE UTILITY FUND DOES NOT HAVE ANY MEANINGFUL UNRESTRICTED FUNDS.

 

Attachments

1) Excerpts from the Comprehensive Financial Report for year ended June 30, 2013, Letter of Transmittal to Citizens and Board of Trustees dated October 15, 2013

2) Excerpts from the Comprehensive Financial Report for year ended June 30, 2014, Letter of Transmittal to Citizens and Board of Trustees dated November 5, 2014

3) Excerpts from the Comprehensive Financial Report for year ended June 30, 2015, Letter of Transmittal to Citizens and Board of Trustees dated December 8, 2015

4) Excerpts from the Comprehensive Financial Report for year ended June 30, 2016, Letter of Transmittal to Citizens and Board of Trustees dated November 30, 2016

5) Page 88-89 of the Board Packet dated May 24, 2017