A sewer authority cannot survive simply on the revenue it expects in the course of a year, according to Timothy R. Yingling, executive director of the Greater Pottsville Area Sewer Authority.
To cover long-term debts, plan for upgrades to the sewer plant and have a reserve for emergency repairs, the authority has to have invested funds, or a fund balance, of roughly $3 million, Yingling said Thursday.
"We don't have $3 million just sitting around. This is our net assets at the beginning or the end of the year. And part of it is for debt service, part of it is emergency funds for unexpected projects like repairs and part of it is for future projects," Yingling said.
There are an estimated $250,000 in equipment replacement projects planned for this year, he said.
"We have to have the fund balance when we plan for these projects, otherwise, we might have to raise the rates every time we did a project because we wouldn't have planned for it," Yingling said.
On Jan. 29, the authority approved its 2014 budget. This week, Yingling offered some insights into its structure, and shared the results of the authority's 2012 audit, which was recently completed by Jones & Co., Pottsville.
The Greater Pottsville Area Sewer Authority has a total of 8,069 customers and serves a total of 10,068 units owned by those customers, Yingling said.
As of Dec. 31, 2012, the authority's total net assets were $34,623,538, according to the 2012 audit by Jones & Co.
The 2014 budget, which the sewer authority board approved Jan. 29, expects a total income of $9,322,504. There's $5,982,041 in expenditures budgeted for the authority's day-to-day operations. Revenues include $5,863,081 from billing, $101,297 in pretreatment program fees, $5,781 in interest income and $15,014 in miscellaneous income, according to the budget.
The expected fund balance of $3,340,463 will cover upcoming projects, loan payments and the unexpected. It's funds the authority built up over time through investments in local banks, Yingling said.
"We're planning about $250,000 in improvement projects this year. That will include replacing the rollers on our belt filter press. It helps us to process sludge down at the plant. That will cost in the neighborhood of $200,000. The others are smaller projects which include pump replacements," Yingling said.
The underground tunnels which carry sewage and stormwater beneath Pottsville showed their age in 2013.
On June 10, faulty stone sewer works owned by the authority near the 500 block of North Centre Street broke during a storm, spilling rainwater and sewage onto the street. The repairs by Dallago's Backhoe Service, Minersville, cost $39,917.52.
On July 3, a section of the sewer works repaired in 2011 on East Market Street gave way. The repairs by Mazzuca Enterprises Inc., Pottsville, cost $106,380.07.
The funding for those repairs came from the fund balance, Yingling said.
On Thursday, Yingling provided a list of all banks used by the authority and the balances on those accounts since Dec. 31:
The authority has two accounts at Riverview Bank, Pottsville:
- Checking account. "This is an operating account. Funds are transferred from the revenue fund at the First National Bank of Minersville into this account on a weekly basis to cover expenses," Yingling said. Balance, $122.045.49.
- Collections account. "This is a revenue account. Funds are deposited into this account from customers paying their sewer bill at the bank. Funds are held in reserve to cover costs of regulatory compliance, emergency repairs and capital improvement projects," Yingling said. Balance, $1,068,720.23.
The authority has two accounts at Susquehanna Bank, Pottsville:
- PENNVEST account. "This is a debt service account. Funds are transferred from the First National Bank of Minersville into this account on a monthly basis to cover the Authority PENNVEST Loans, $190,375.66 per month. The balance serves as a security reserve for repayment," Yingling said. Balance, $685,857.52.
The authority's debt includes five PA Infrastructure Investment Authority PENNVEST loans it was awarded since 2000, according to the 2012 audit by Jones & Co.
- Collections account. "This is a revenue account. Funds are deposited into this account daily from customers paying their sewer bills by mail and at the authority's office. Funds are transferred on a weekly basis to the Revenue Fund at the First National Bank of Minersville," Yingling said. $58,502.28.
The authority has four accounts at First National Bank of Minersville:
- Revenue fund. "This is a revenue account. Funds are transferred from the Collections Account at Susquehanna Bank into this account on a weekly basis. Funds are held in reserve to cover costs of regulatory compliance, emergency repairs and capital improvement projects," Yingling said. Balance, $1,362,341.36.
- Debt service reserve fund. "There's some money that we can't touch. It's set in accounts which say if you were to default on your loan this money has to be available to repay the loan. This is one of those accounts. Funds are deposited into this account to secure the repayment of the authority's bond issue," Yingling said. Balance, $322,834.89.
- Surplus & improvement fund. "This is a reserve account. Funds are deposited into this account for future costs of acquisition or costs of construction," Yingling said. Balance, $289,670.54.
- Debt service fund. "This is a debt service account. Funds are transferred into this account from the revenue fund on a biannual basis for repayment of the authority's bond issue. The authority's bond issue was retired in March 2013," Yingling said. Balance, zero.
In Jones & Co.'s audit, it included a "financial analysis of the authority as a whole."
"Most of the authority's net assets are invested in capital assets - buildings, land and equipment - in the amount of $28,011,860. The unrestricted assets are the bond issue funds used for plant construction activities in the amount of $1,248,415. The restricted assets include the debt service fund and the bond redemption and improvement fund totalling $611,778," according to the audit.
"For the year (2012), the authority's excess of revenues over expenses totalled $354,580 compared to the reported $640,716 for 2011," according to the audit.