HomeMy Public PortalAboutMemo relating to Sanitary Res 7-1981 / Common Council Ord 49-1981RICHMOND SANITARY DISTRICT
INTERNAL MEMORANDUM
To: Mayor Clifford Dickman
City Council Members
City Department Heads
From: Susan Wier, Office Manager
Richmond Sanitary District
Re: Status Report on User Charge System
Date: January 21, 1983
Page 1 of 10
This memorandum encompasses those areas of the User Charge System that I
felt you might be most interested in. I have tried to summarize some of the
background information, available factual data, and possible considerations
for the future. I hope you find the following information beneficial.
Total Cash Collections:
Cash collected from July 1 through December 31 totalled $1,022,493.46-
(see Attachment A). Of the $1,022,493.46 collected, 61% was allocated to the
Operation and Maintenance Fund, 34.7% to the Debt Service Fund and 4.3% to the
Replacement Fund. These allocation percentages were calculated by the
accounting firm of Brady -Ware, Inc., to comply with Ordinance requirements for
allocating receipts into the previously mentioned funds. Brady -Ware, Inc.,
based their allocations upon estimates of the amount and classification of
Page 2
January 21, 1983
collections taken from H.J. Umbaugh's Report. It was understood that once the
District had accumulated sufficient billing history from the Richmond [dater
Works Corporation M A[ C), the allocation percentages would be re-examined and
Possibly revised. In allocating each day's deposit, however, I cannot begin
to explain how time consuming this procedure is and the "checks and rechecks"
that must be done. Our accountant's have suggested taking each day's deposit
and receipting it into the Operation and Maintenance Fund. Then on a monthly
basis, a predetermined amount would be transferred to the Debt Service Fund
and the Replacement Fund according to projected expenditures. This, however,
would mean an amendment to the Ordinance. The matter has not been pursued as
yet but it is a request that will come before Council yet this year.
According to H.J. Umbaugh's Report, the total projected annual revenue
would be $2,898,328. If you review what has been collected to date, the
District is at least $250,000 short of the amount projected for a five month
period (see Attachment B). The first month's collections were not considered
in this averaging. If you go one step further, the District will be
approximately $600,000 short of the annual projection (see Attachment C). As
a result, it may be necessary to request a rate increase in order to meet
operation and maintenance requirements.
Wastewater Budget:
The unaudited 1982 wastewater expenditures totalled $1,506,024.49. This
was the first year the wastewater and solid waste expenditures were maintained
in separate budgets and the first time a real effort was made to allocate
Page 3
January 21, 1983
administrative costs. Naturally, there are a few areas in which refinement
needs to be made and procedures established. In addition, the State Board of
Accounts informed us that our accounting system must be changed to an accrual
based system. With this in mind, Brady -Ware, Inc. was hired to perform a
number of accounting functions for the District which included developing an
accrual based system and reviewing internal controls. For the most part, the
new accounting system has been placed into operation with asset numbers still
to be finalized. As to internal controls, the major suggestion concerned the
approval process for purchases. A new system of purchasing has been developed
and will be implemented February 1, 1983. This should give us better control
over what expenditures are made.
It has been very difficult to budget for the District the last two years
due to the implementation of the User Charge System (i.e., uncertainty of
revenues to be collected) and the plant construction. One problem with the
plant construction involves the addition of new equipment thereby increasing
or at least altering costs in supplies, utilities, etc. Another costly item
is personnel. The initial plan proposed hiring additional personnel several
months prior to plant start-up. However, with the financial picture uncertain
at this time, the District does not intend to hire any additional employees
until it becomes absolutely necessary. The 1983 wastewater operating budget,
as approved by the State Board of Tax Commissioners in December of 1982, will
be $1,818,750 or $422,071 more than projected revenue allocated to the
Operation and Maintenance Fund (see Attachment D).
Page 4
January 21, 1983
Number of billings:
Total bills generated by month and by category are as follows:
*Projected
Totals July Aug. Sept. Oct. Nov.
Dec.
Residential 11,779 11,753 11,646 11,647 11,649 11,603 11,586
Commercial 2,533 2,388 2,359 2,339 2,313 2,302 2,289
Industrial 60 53 61
62 66 66 66
Governmental 39 30 30 29
70 ?_6 26
Institutional 154 155 155
154 154 154
TOTAL 14,445 14,387 14,251 14,233 14,211 14,151 14,121
I think the above table is self-explanatory and shows that the H.J.
Umbaugh projections were very much on target (see Attachment E).
Collection Breakdown:
Table 1 shows how much revenue was collected through the mail, over the
counter at the District's Administration Office and by outside collection
agencies. Table 2 shows how many stubs (return portion of bill) were
collected through the mail, over the counter and by outside collection
agencies.
TABLE 1 - REVENUE
Mail
Counter
Agency
August
164,776.75
6,339.71
32,651.19
September
144,611.87
5,993.99
27,921.07
October
150,939.09
6,323.54
27,253.47
November
157,001.54
8,676.39
29,124.63
December
158,265.57
---
8,560.63
25,576.84
$775,594.82
$35,894.26
$142,527.20
(81%)
(4%)
(15%)
Page 5
January 21, 1983
TABLE 2 - STUBS
Counter
A enc
August
9,054
620
3,510
September
8,357
590
3,124
October
8,229
656
3,149
November
8,601
759
3,335
December
8,017
791
2,912
42,258
3,416
16,030
(68%)
(6%)
(26%)
Penalty Charges:
During the first six (6) months, we manually applied the ten percent
(10%) penalty charge to accounts thirty (30) days past due. Actually, this
system worked well the first six (6) months but we all knew that it would
t
become unmanageable further down the road. As a result of several meetings
between District representatives and Richmond Water Works Company (RWWC), we
felt that a workable solution for applying the penalty had been agreed upon.
Effective with January billings, the RWWC began computing the ten percent
(10%) penalty on the net charge and printing a gross amount on the bill. Due
to the RWWC 25-30 day billing cycle, there may be instances where the next
bill is generated before the first bill actually becomes due (i.e., 30 days
after bill date). If this occurs and the customer has not yet paid, the ten
percent (10%) penalty will show up in the previous balance. In instances
where the customer pays his bill before the due date but after the next bill
has been generated, a credit adjustment will be made to the account. The
entire penalty assessment procedure is a difficult one to administer for two
reasons: 1) State statute prohibits us from collecting the ten percent (10%)
Page b
January 21, 1983
penalty until thirty (30) days after the hill date; and 2) the RWWC 25-30 day
billing cycle.
Delinquent Accounts:
In November, the District sent approximately five hundred and fifty (550)
letters to customers with accounts ninety (90) days past due. Out of the five
hundred and fifty (550) letters mailed, two hundred and twenty (220) responded
favorably by paying all or a portion of their past due bills; one hundred and
ten (110) letters were returned for various reasons; and two hundred and
twenty (220) did not respond in any way. The User Charge Department is
currently preparing a list of customers whose accounts are past due to submit
to the Auditor's Office. They, in turn, will check their records against the
service address to determine the owner of record. We will then take this
information to the Treasurer's Office to verify mailing addresses. Once this
information is gathered, the next step will be to inform the owner of record
that if payment is not received, their account will be turned over to the City
Attorney for legal action or to the County Auditor for collection through
taxes.
Industrial Billing:
The District manually prepares twenty-nine (29) industrial bills per
month in addition to those automatically billed by the RWWC. The reason for
manually billing these accounts is due to specialized industrial processes
which do not allow for true meter readings (i.e., water meter readings do not
Page 7
January 21, 1983
correspond with actual sewage discharge). Revenue from industrial billings
for the period July through December totalled $132,442 or an average of
$22,073 per month.
Of all the industries billed, twenty-one (21) have an approved Industrial
Discharge. Permit on file at the District and are subject to surcharge.
Surcharge is billed when an industry exceeds biochemical oxygen demand (BOD)
and suspended solids (SS) limitations as set out in the Ordinance. This
surcharge is billed on a quarterly basis. As a result, we have had only two
surcharge billings since implementation of the User Charge (i.e., August
billing for June and July surcharges; November billing for August, September
and October surcharges). Of those industries subject to surcharge, only eight
(8) have actually been billed resulting in revenue of $14,408.59; five (5)
have not been billed due to lack of laboratory test data; and nine (9) did not
exceed the limitations. Surcharge will be billed retroactively for those five
(5) industries as soon as laboratory test data becomes available.
Well Customers:
The District hills approximately two hundred and fourteen (214) well
customers each month at a flat rate of $9.10. We only have one customer who
has gone to the expense of installing a discharge meter for which specific
guidelines have been established for reporting and billing. If a meter
reading is not called in, the account is automatically billed the flat rate of
$9.10.
Page 8
January 21, 1983
Sewer Connection Letters:
In .July, one hundred and nine (109) notices to connect were sent to
property owners believed to be on septic systems. The notices informed them
of their obligation to connect to the sanitary sewer providing one was
available within three hundred (300) feet of their property line. Of the one
hundred and nine (109) notices sent, sixty-two (62) have been cleared. Of the
forty-seven (47) remaining, they will either be required to connect, cleared
because a sewer is not available or exempted because of unusual circumstances.
Exemptions are only granted by the Board. In the Spring of 1983, all of those
required to connect will be sent final notices before submittal to the City
Actorney.
ti
Authorized Collection Agencies:
By design the District started out with as few outside collection points
as possible. As a result, we began with First and Second National Banks and
their respective branches. In response to public comments, we added the
following outside collection points as of January 1, 1983, and we hope the
customer is better served by these additions. It should be noted that the
District does not require a collection fee from these agencies and therefore,
any amount charged for collection services is beyond the District's control:
1) Kroger Sav-On
3701 National Road East
2) Cox's Market
4200 South A Street
2021 Chester Boulevard
1301 South E Street
501 West National Road
Page 9
January 21, 1983
3) Long's Market
16 Southwest 5th Street
1801 West National Road
4) Phillips Drugs
631 Promenade
5) Natco Credit Union
582 South Round Barn Road
(members only)
A future consideration may be the installation of a drop deposit box.
Neither the location nor the actual cost of the installation has been
investigated and probably will not be until we get feedback on the addition of
the five (5) outside collection agencies. Another question asked is why the
District does not have a downtown office location. I strongly feel. at this
point that a downtown office is out or the question. With a close eye on
expenditures, additional monies for office rent, utilities, supplies, etc.
could not be justified not to mention the restrictions that would be placed on
office personnel as to job duties.
Annual Notification:
In conjunction with the February billings, annual notification will be
made to all customers of the amounts billed (not paid) to a specific service
address. Said amounts relate to those billed in 1982 only and are broken dorm
between user charge and debt service.
Page 10
January 21, 1983
I have been extremely happy at how the entire User Charge System has
progressed. In addition, the RM,TC has commented more than once that they have
been "pleasantly surprised" at the lack of problems encountered. The only two
recurring questions seem to be: 1) why do we have estimated bills; and 2) why
don't we have a downtown office location. In response to Question 1, Orville
Allen has recently presented data to his corporate office requesting monthly
readings rattier than quarterly readings. His request was denied. As a
result, estimated billings will be with us until such time as the District can
produce its own billings. As for Question 2, it has been explained earlier
that it is not economically feasible at this time. The District is attempting
to accommodate its customers by offering a greater number of outside
collection points. If this proves insufficient, a closer look will be taken
at the possible installation of a drop deposit box.
As for the internal controls review performed by Brady -Ware, Inc., their
findings were favorable in that collections were being processed as they
should be. One weakness found, however, concerned a lack of relating
information generated by the RWWC back to collection information produced by
the District. Brady -Ware, Inc, has not yet formalized their findings on
internal controls but copies of their formal letter will be available to
Council members upon request.
As with any new procedure, it takes time to work out all the details
but I am proud of the staff and how well they have adjusted to an entirely new
concept at the District. If you should have any questions, please feel free
to ask.
SW/clh
ATTACHMENT A
USER CHARGE REVENUE SUMMARY
DECEMBER, 1982
month
Opening
Balance as
of 12/l/82
$ 203,782.97
No. of
Amount
Credit
Bills
Billed
Adjustments
Residential
11,586
105,239.56
(4,409.41
100,830.15
Commercial
2,289
57,304.07
2 ( ,619.94)
54,684.13
Industrial
66
44,964.65
(2,645.54
42,319.11
Governmental
26
2,834.78
( 79.06)
2,755.72
.-Institutional
154
5,585.78
( 123.66)
5,462.12
TOTAL
14,121
215,928.84
(9,877.61)
$206,051.23
Misc. Debits
162.44
Cash Collections as of 12/30/82
192,403.04
Misc. Credits
1.55
Closing Balance as of 12/30/82
$217,592.05
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Revenue Collected This Month:
Mail $ 158,265.57 82.26%
Counter $ 8,560.63 4.45%
Agency $ 25,576.84 13.29%
Stubs Collected This Month:
Mail- 8017 68.40%
Counter 791 6.75%
Agency 2912 24.85%
*Total Revenue Collected To Date: $1,022,493.46
ATTACHMENT 13
Total Projected Annual Revenue divided by twelve months equals Projected
Monthly Revenue.
2,898,328 : 12 = 241,527
Projected Monthly Revenue multipled by five months equals Total Projected
Revenue through December 31, 1982.
241,527 x 5 = 1,207,636
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Revenue Collected _less July Revenue equals Total Actual Revenue through
December 31, 1982.
1,022,493 - 68,477 = 954,016
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Total Projected Revenue (based on H.J. Umbaugh projection) less Total Actual
Revenue (based on actual collection history) equals Amount Short for the five
month period.
1,207,636 - 954,016 = 253,620
ATTACHMENT C
Total Revenue (based on actual collection history) divided by five months
equals Average Monthly Revenue.
954,016 55 = 190,803
Average Monthly Revenue multiplied by twelve months equals Projected Yearly
Revenue.
190,803 x 12 = 2,289,638
Total Revenue (based on H.J. Umbaugh projection) less Projected Yearly Revenue
equals Amount Short for the year.
2,898,328 - 2,289,638 = 608,690
I
ATTAc8MFNT D
Projected Yearly Revenue allocated to three (3) funds as follows:
Operation & Maintenance Fund
2,289,638 x .61 = 1,396,679
Debt Service Fund
2,289,638 x .347 = 794,504
Replacement Fund
2,289,638 x .043 = 98,454
Approved 1983 Wastewater Budget less Projected Yearly Revenue allocated to
Operation and Maintenance Fund:
1,818,750 - 1,396,679 = 422,071,
A1-rAC1-1M1'.N'1' I.]
RICTIMOND (INDIANA) SANITARY DISTRICT
PROJECTED BILLED SE:•7RGE FLOW AND SEWAGE USERS*
Customer classification
Residential
Commercial
Industrial - per Water Co.
- less adjustment**
- adjusted industrial
Governmental/Institutional
Totals
6
W
4
f
H
W
F
u
0
h
<
d
Z
u
m
f
Projected
Sewage
Customers
11,779
2, 533
60
60
73
14,445
Projected
Billed Sewage
Flow
(1,000 gals.)
7161 550
645,071
7771055
(265, 049)
512,006
145,944
2,019,571
t
* Based on test year water billings adjusted for results of industrial
Z survey.
** This adjustment reflects the results of a survey of major industrial
users to project both amounts of metered water not entering the
sanitary sewer system and sources of water other than the Richmond
Water Works Corporation.
(Subject to the ccanents in the accompanying letter dated
June 19, 1981 of H. J. Umbaugh & Associates, page 1)
-11-