Fort Supply facing ‘tough decisions’ [The Woodward News, Okla.]

June 10--WOODWARD, Okla. -- FORT SUPPLY -- Town officials in Fort Supply are facing some "tough decisions" as they work toward a balanced budget for Fiscal Year 2012-2013.

The town's accountant Meredith Meacham Wilson, with R. S. Meacham CPAs and Advisors, presented the town board with a proposed budget during a special meeting Thursday evening.

In creating the proposed budget, Wilson first analyzed the city's current financial status. She said there were a couple of items of good news there.

First, Fort Supply received over $5,000 in sales tax collections in June, which were used to help pay down some of the city's bills, she said. Second, the town will have some carryover of around $10,000, which can be used to help balance next year's budget.

However, the carryover is not enough to avoid making some "drastic" changes in the way the city operates.

In drafting an almost $442,000 proposed budget for the town, Wilson said she made it balance by taking 2 main steps: 1) increasing utility rates, and 2) cutting expenses.

The accountant said she was proposing a "10 percent rate increase on all utilities," which she showed would add almost $95,000 in additional revenue.

But even with the rate increase, Wilson said the town would need to make "significant operating expense cuts." Especially when considering how total projected expenses for the current year are approximately 40 percent above revenues, according to estimates listed in Wilson's draft budget.

In her proposed budget for FY 2013, she cut all capital projects and recommended a tighter belt on spending for things like material and supplies.

Her biggest cuts came in personnel expenses, where she said "there's no overtime for any employees, no retirement benefits, ... and no health insurance benefits."

"So when I say significant, I mean significant," she said.

These cuts in employee benefits would save the town over $55,000, Wilson said.

CITIZENS NOT HAPPY, BUT RATE INCREASE LIKELY

A number of citizens spoke out against the proposed utility increases.

Many felt there were other options the town should consider before just automatically increasing rates.

Some suggested determining whether the city is collecting all the utility payments it is owed. They discussed having collection agencies help collect past due utility payments. In addition, one man suggested the city check to make sure it wasn't paying for water lost through leaks.

However, one woman said she felt like the city should look into outsourcing its electrical service in order to keep rates low for the citizens.

Wilson was adamantly against getting an outside electrical company to provide service to the town. She said she wasn't sure that rates would actually be much cheaper for citizens and it would remove the only real profit center for the town.

"You never sell your golden goose, and electricity is Fort Supply's golden goose," she said.

In fact, she said that it is the estimated $80,000 in profits from electricity sales (when factoring in a 10 percent rate increase) that makes her proposed budget balance for next year. Because she used $63,500 of those predicted profits in a transfer to the city's general fund to help cover expenses there.

Wilson also provided the board with some charts, comparing the town's current utility rates to around 40 other communities throughout the state. Based on calculations provided to her by Municipal Electric Systems of Oklahoma (MESO), she said Fort Supply has some of the cheapest utility rates, among "the lower 20 percent," in the state.

"That's good because it means we have room to raise rates without being out of line (with what other communities are charging)," she said.

Wilson explained that while a 10 percent increase may sound like a lot, there have been certain utility increases charged to the town that have not been passed on to Fort Supply residents.

For example, the City of Woodward, from which Fort Supply gets its water, has passed annual rate increases, which Wilson said haven't been reflected in the rates Fort Supply has been charging its citizens. Just this past Monday, Woodward city commissioners approved an almost 3 percent water rate increase for FY 2013. But the Fort Supply board didn't take any action Thursday to adjust its rates accordingly.

As it is Fort Supply's income from current water rates is not sufficient to cover expenses in the town's water department. "You're projected to lose $20,000 in water next year," Wilson said.

Wilson said the rate increase is needed to bring in valuable revenue to help the town out of its current financial hole.

"I don't see any way to have a balanced budget without a rate increase or requiring more cuts," she said, noting bigger cuts could mean cutting employees.

TOWN TRUSTEES DON'T WANT TO SACRIFICE EMPLOYEES OR BENEFITS

But losing employees didn't seem like an option for the town trustees.

"Personally I'd like to pay more for utilities than not have anybody to run the city," interim trustee Clay Hickman said.

In addition, Hickman and fellow interim trustee Donna McCaslin voiced disapproval of even cutting any employee benefits.

"I'm not comfortable with taking health insurance and retirement benefits away from our employees," McCaslin said. "We've worked hard to get those benefits for our employees, I don't want to see us lose them now."

Hickman said cutting benefits would almost be the same as cutting employees.

"If you start cutting benefits, what's to keep them from looking for work (elsewhere)," he said.

Wilson said there were alternatives to cutting the benefits completely.

For instance, she said the state offers a program known as Insure Oklahoma, whereby the town could potentially get reimbursed for health insurance costs for its employees as long as the town uses a qualified insurer.

However, the town's current health insurance provider isn't qualified under Insure Oklahoma, Wilson said, which is why she excluded health insurance from her proposed budget. But if the town were able to find a qualified insurer, she said she would have no qualms about putting health insurance back on the table as long as the city can be reimbursed for the costs.

As for retirement benefits, Wilson said the town is currently paying in at a 14 percent level, which she implied was a generous contribution.

So while the trustees might be hesitant to completely cut out retirement payments, she strongly encouraged them to consider reducing the town's contribution level.

But for every percentage the town does pay into retirement, Wilson said the money will have to come from somewhere.

"Where do you see us making that money up?" she asked the board, looking for suggestions in how they would like to see the budget amended. "Just tell me what you'd like to see in a 2nd draft and I will try my best to include it while still creating a budget that is balanced."

ANNEXING PRISON COULD HELP

One avenue for increasing town revenues was discussed Thursday as the town trustees decided to move forward on possibly annexing William S. Key Correctional Center into city limits.

This would increase sales tax collections for the town as the minimum security prison includes an onsite commissary.

Attorney Bart Bouse, who serves as the town's lawyer, said he has heard figures that the commissary sells between $800,000 to $1 million in merchandise each year.

Based on the Fort Supply's 3 percent local sales tax rate, this could mean an additional $24,000 to $30,000 a year in sales tax revenue for the town.

However, the decision to annex doesn't come without concerns, because once the prison becomes a part of the community, the community is required by statute to make a plan to extend services to the annexed land.

But Bouse said he doesn't think Fort Supply will really have to do much since the prison is already so established as it is.

For example, the services the town is required to extend to the annexed land include police and fire protection. However, since the prison is a law enforcement entity, the attorney said, "I think they'll say to you, 'we don't really want you out here.'" As for fire protection, Bouse said the Fort Supply Fire Department likely already provides those services just because of the prison's proximity to the community.

Other services that could be extended include utilities. However, Bouse said it is unlikely that the prison will want to change utility providers, especially if switching to Fort Supply's service would mean an increase in rates.

But even if the prison did want the city to extend utility lines out, the attorney said the town would have 120 months, or 10 years, to actually extend those lines. So there wouldn't be any immediate expense required. In addition, Bouse said if the city couldn't afford to extend those services, the prison could always be de-annexed after that 10 years. And the city "won't have to reimburse tax revenue from that time," he said.

Some of the trustees were also concerned about whether Fort Supply would be responsible for maintaining roadways within the prison. Bouse said he doesn't think streets would be an issue, because he believes the way the prison property is set up, the roadways on prison grounds are essentially "considered private drives."

Although the trustees said they still had questions over whether there might be any liabilities with annexing the prison, Bouse said, "it's my recommendation that you move forward on the annexation. You have to set it (a vote on the annexation) off a month anyway, that will give us time to find answers for any other questions you may have."

The board decided to go along with their attorney's recommendation and proceed with the annexation process. Bouse said there are statutory requirements that affected property owners and the public have to be notified at least 14 days in advance of the public hearing when the annexation will be voted on. But he thinks that the vote could be made as soon as next month at the Fort Supply board's regular meeting.

If and when it is approved, he said the annexation would be immediate.

"IT IS DOABLE"

In addition to possibly voting on the prison annexation at their next regular meeting, the Fort Supply trustees will also likely be considering the second draft of their proposed budget for FY 2013.

But even with revisions, the budget will likely include things that the public and/or trustees may not entirely like.

"I don't envy you, you have some tough decisions ahead," Wilson told the Fort Supply trustees.

Bouse said although "Wilson is telling them things they don't want to hear," she is also saying there is a light at the end of the tunnel.

"The good news is that it's not unfixable," he said.

When asked by Interim Mayor Mike Lowden whether the community could consider its current financial issues "as just a temporary setback," Wilson chose to answer with an example from her own experience.

"In 2008, I walked into the town of Snyder and they had over $350,000 in unpaid taxes," she said.

To help Snyder out of it's hole, Wilson said she created a budget in which "they cut benefits, cut employees and enacted a 28 percent utility rate increase."

But with careful planning since then, the accountant said the city of Snyder has been able to reinstate employee benefits and "this year gave a 4 percent raise to all employees."

"So it is doable," Wilson said about having a town recover from financial hardships. "But it takes time. With Snyder it was a 4- almost 5-year process, and it took tough decisions."

It also took continued annual rate increases, although at a smaller, much more manageable level to keep the town going. For instance, this year Snyder passed a 2.2 percent rate increase to all citizens, she said.

Wilson also told the Fort Supply trustees that "I don't think I have one town (of those she contracts with for accounting services) that doesn't increase rates every year based on CPI (Consumer Price Index)."

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