Villa Rica officials have chartered a course toward "financial health by 2020" with a new budget that aims at solving many complex problems in a short amount of time.
The budget for 2018 is for only nine months, reflecting the city's shift to a new fiscal year that runs from Oct. 1 to Sept. 30. Within that time frame, however, city officials will attempt to address many long-standing problems, including water/sewer enterprise funds that now drain the cash the city uses to provide all its other services.
The final version of the budget is set to be presented to City Council Friday. There will be a public hearing on the plan on Nov. 30, and the council has scheduled a Dec. 5 vote to adopt the budget.
One way the budget addresses the water/sewer fund issue is by raising rates for water and sewer service. The budget proposes raising the average water customer's rate by 7 percent, while boosting revenue for sewer service by 35 percent. The average water customer who now pays $62.51 per month for combined water and sewer service will see their bill increase by $9.41 per month, or $71.68 total.
The jump in sewer service fees reflects the city's aggressive attempt to reach financial solvency in three years. The biggest drag on city finances -- and the water-sewer fund specifically -- is the $34 million revenue bond payment on the city's wastewater treatment plant, for which the city now shells out $1.7 million a year.
But in 2020, the year the city has set its sights upon, that bond payment soars to $2 million, based on the agreement with the bond holders. Unless that problem is tackled now, city officials say Villa Rica will not be able to manage its debt without significant cuts to other city services, including police protection.
That's because the water/sewer system cannot now pay for itself, and thus requires regular transfers of cash from the city's general fund. This, city officials say, risks the city's overall financial health, even as the town surges in growth.
For several weeks, the city's staff and council have met to discuss the budget and hammer out a plan they feel will best address these issues. The final version of the budget is scheduled to be submitted to the council on Friday. The last opportunity the public will have to comment on the plan will be during a Nov. 30 council work session. The council plans to adopt the final budget on Dec. 5.
Overall, the preliminary budget, which lasts only until the start of the new fiscal year next Oct. 1, anticipates $19.6 million in revenues to cover $20.4 million in expenses. The revenue side includes $997,000 drawn from the general fund balance to make up for a one-time event -- the fact that property taxes, the largest part of the city's revenue, will not be collected until after the short-term budget runs its course.
This draw-down of general fund balance will create what city officials say will be a temporary deficit that they expect to recover within a single budget cycle, through the normal collection of property tax revenues.
The reason the fiscal year was changed from October-September from the current January-December period is to better anticipate and plan for those revenues.
Revenues from property taxes not received until December and sometimes January. With the old fiscal year, the city had to estimate what it could spend based on what it expected to receive.
With the new fiscal year, however, more revenue will come in during the first two quarters, allowing city staff to more accurately project revenues and expenses for the remaining two quarters.
The new calendar also allows the city to set the millage rate at the same time its staff is preparing the budget, so that the property tax revenue calculations will be more accurate. Tax revenue is expected to increase as the city continues to grow, so the city wants these changes to better align and manage its incomes and expenses.
In a presentation made to the public during the Nov. 7 council meeting, the city's chief financial officer, Sarah Hefty, explained how the city plans to find its way to financial health in time for the 2020 increase in the city's bond payment.
The city's policy is to maintain fund balances that represents 40 percent of its budgeted expenses. That's equivalent to a family maintaining a bank balance that's higher than their monthly expenses.
But a city's finances are more complicated than a family bank account, and includes many sources of incomes that flow into separate funds. The general fund pays for basic government services -- administration of departments, police, city employee paychecks, etc. There are other funds that are supposed to be self-sustaining, generating fees that offset the expenses for running them. The city's water and sewer services are supposed to do just that -- but they don't.
While the general fund is healthy, the water-sewer funds are leaking, thus city officials have in the past diverted cash from the general fund and SPLOST revenues to keep them afloat, and to make the sewer system's bond payment. All that means that there is less money in the general fund to provide vital government services to a growing city.
The new budget aims to end this subsidy, and to maintain the same tax rate of 6.36 mills, which is the lowest in 10 years.
One of the main ways of doing this involves adjusting the rates for water, sewer and sanitation services for all citizens, and restricting the discount all senior citizens had received on those rates to those with low incomes.
An average customer uses 4,500 gallons of water per month. Base on that usage, someone who pays for both water and sewer service pays $62.51 each month. The proposed increase in fees for both those services increases that monthly bill to $71.68, which is comparable to what residents pay in other Georgia cities of comparable size, and considerably less than what Atlanta residents pay ($107.37.)
Currently, seniors aged 65 or older are entitled to a discount on those services. But the city proposes now to limit those discounts to households with $24,000 income or less. Senior customers use less water than other customers, or 3,500 per month. Therefore, the average non-discounted senior will see their bills go up by $20 per month, while average discounted seniors will see a $6 per month increase.
Sanitation and solid waste are additional "enterprise funds" that are losing money, but at a less serious rate than the water-sewer fund. The new budget also calls for increased fees for both those services; to $12.50 from the current $12 fee for sanitation, and to $7.50 from the current $5 fee for solid waste pickup. As with the water-sewer fund, senior discounts for sanitation will be limited to low-income households.