Past City Manager Updates
Examination of the Water Utility Fund Complete
June 22, 2017
To the Citizens of Kennedale,
In early February of this year, I began my employment with the City of Kennedale. At that time, the primary issue being addressed by the City concerned the implementation, a year earlier, of increased water and sewer rates meant to address Utility Fund revenue shortfalls. Residents questioned the validity of the increase because of the magnitude of the rates themselves as well as the shift toward generating more revenue through base rates than from volume charges. If nothing else, the “shock” of double-digit increases caused many residents concern and frustration.
In order to properly address the rates and other utility matters going forward, the City Council and I sought to identify the accurate and complete reasons behind the depletion of working capital held in the Utility Fund, which ultimately led to the rate increases. To that end, in late March, Government Resource Associates (GRA) was engaged to conduct a third-party review of the Fund.
When managing a vital service like a water and sewer utility, it is of utmost importance to ensure that there is sufficient working capital – or reserves – to carry the fund through periods of decreased revenues due to weather fluctuations or for other unanticipated circumstances.
As City Manager, I tasked GRA with reviewing the City’s adopted financial policies, annual budgets, and other financial data to determine the reason for the drawdown of the Utility Fund’s working capital to an unacceptable (and, in fact, negative) level.
On Saturday, June 10, the City Council met in special session to receive the report, presented by Becky Brooks of GRA. The presentation was comprehensive and identified factors that likely contributed to an overstatement of the working capital balance of the Utility Fund, specifically:
- one budgetary calculation error resulting in a fund overstatement by as much as $1.6 million; and
- the inclusion of restricted-use monies that, arguably, could have been accounted for elsewhere, in a more conservative manner.
It should be noted that, while the inclusion of these monies in the wrong place was a budgetary and/or strategic error, it does not signify nor is there any evidence that the error was deliberate or that funds were misappropriated in any way. It did, however, present a Utility Fund budget overview to the City Council that was more robust than was actually the case. The report also clearly indicates that, had rates been increased incrementally over the past several years instead of all at once, they would likely be the same or greater today than the rates currently in place.
Following the June 10 presentation, the City Council met in a follow-up work session on June 19 to further consider the report and more specifically discuss financial policies and practices that, over time, could serve to enhance and restore the working capital to an acceptable level, while maintaining both the efficient operations of the departments providing service to the community and continue to protect the financial integrity of the Utility.
Going forward, staff will explore and present for consideration by Council several policy objectives and operational alternatives aimed at both restoring the working capital balance and achieving meaningful reductions in the water and sewer rates. As we pursue and assess options, I will continue my commitment to keeping residents informed of the progress made.
March 13, 2017
To the Citizens of Kennedale,
Please allow me to introduce myself. My name is George Campbell. I have recently been afforded the opportunity to provide service, in an interim capacity, as the City Manager of Kennedale following the resignation of long-time City Manager Bob Hart.
As a manager in local government for many years, I was attracted to Kennedale because of your community’s very evident commitment to neighborhoods, economic health, parks and open space, sustainability and progressive leadership. My personal knowledge of Kennedale and the dynamic nature of the city itself was reason enough to accept the opportunity and challenge of managing the City organization during a transition period.
What I have found is a city that is poised for progress and grounded in community. Clearly there is much to be proud of and there are challenges that face the Kennedale community as is the case for any dynamic city. Being new to the City organization I want to provide my initial perspective and observations knowing that the city’s leadership has made a clear commitment to an expanded dialogue with you, our citizens.
Let me first congratulate you on the strong financial foundation of the City as evidenced by two recent and significant occurrences.
Certified Annual Financial Report (CAFR)
An audit by Pattillo, Brown and Hill provided the City of Kennedale with an unmodified opinion – the highest opinion that can be rendered. This comprehensive audit process reviews financial statements for accuracy, evaluates financial processes for compliance with generally accepted government accounting principles, and provides assistance to a system of checks and balances to ensure that your tax dollars are spent appropriately.
Bond Rating Upgrade
S&P (Standard & Poor’s) Global Ratings raised the city’s long-term bond rating from A+ to AA-. This upgrade reflects the City’s improved financial performance and flexibility. Several factors were considered including quality of management, standard financial policies, the capital improvement plan and strong budgetary flexibility and liquidity.
Clearly, two different assessments by highly professional and independent organizations have resulted in high marks for your city’s financial integrity.
While we have much to celebrate, there is also work to do. The recent increase in water and wastewater rates and the reasons they were adopted generated many excellent and legitimate questions. For that reason, I have authorized a comprehensive analysis by Government Resource Associates (GRA), industry experts, to evaluate our Utility Fund and the need for these additional revenues. GRA’s analysis will provide us with an objective assessment of our utility rate structures and suggest options for future policy considerations. The City will share the results of this work with you as quickly as possible.
My short tenure here has confirmed that Kennedale is a very involved and connected community. It is clear Kennedale residents stay informed and engaged. As a City, we need to do our part to nurture this connectivity. As a first step, I invite you to participate in a short survey in order that we may better understand your communication preferences and interests. Please take a few moments to complete this survey (no longer active). Your responses will inform and guide our future efforts.
Thank you for letting me share with you my initial observations of the City government and this great community. I’m excited by the opportunity to build on the existing strong foundation and continue to make Kennedale a wonderful place to live.
George Campbell, Interim City Manager