Signal Mountain’s water system has no debt, provides excellent customer service and is well thought of by residents of the town. Those are part of the findings in a new 18-page report prepared by the University of Tennessee’s Municipal Technical Advisory Service (MTAS).
However, the report also reveals.that years of penny pinching, combined with lax oversight and management, have left the system with problems ranging from minimal staffing and training to potential water quality issues, to lack of a comprehensive capital improvement plan for aging machinery and other equipment, to outdated meter reading practices,
Fixing those and other problems, the report says, will take determination, hard work -- and money.
The report concludes, “MTAS believes that Signal Mountain has a water system which is marginal in technical capacity and moderate in administrative and financial capacities .
. . It is not an impossible thing to maintain this system but it will take dedication by all involved to make changes in (technical, administrative and financial) areas.”
Improving management and operation of the system, MTAS says, “will require an increase in revenue . . . (A) rate increase is needed and should be studied further to determine the amount and a plan for implementation.”
An annual 2 to 3 percent water rate increase probably would cover inflation, the report says.
However, it recommends that officials also consider doing both a comprehensive rate study and a review of usage comparing residential to commercial and industrial customers.
Infrastructure and equipment problems account for a sizable portion of the improvements necessary for efficient operation of the system, the report says. For example:
· There is no connection to Walden’s Ridge Utility District for emergency backup should the town’s current single 12-inch water supply line and one pump station fail.
· Water system equipment is aged, lots of it so much so that it has been almost fully depreciated. One pump, for example, has been in use since about 1949.
· The estimated 67 miles of distribution lines in the water system consist of pipes ranging in size from 2 ¾-inch to 8-inch. Pressure within the system varies from 35 psi to 180 psi.
· A large percentage of the lines are made of PVC. Due to improper installation – bedding, fill material, exposure to sunlight – there are problems with the PVC pipes.
The report was prepared at the request of Signal’s town council, which has been debating whether to retain the system or sell it to one of two bidders: Tennessee American Water Company or Walden’s Ridge Utility District.
WRUD also has offered to take over operation of the system – which has more than 3,700 meters (3,326 residential, 272 yard and 157 commercial, the study notes) -- should town officials decide to hang onto the utility.
Currently the town buys water from Tennessee American, and the municipal water system then distributes it to customers in and near the town.
“The town . . . requested MTAS to study the viability of the water department, with an eye on identifying ways to strengthen its provisions to address all aspects of the department,” according to the report. “It was determined by MTAS staff that the study would be based on three areas identified in the Safe Drinking Water Act’s Capacity Development Plan: managerial, technical and financial.”
Toward that end, it notes, MTAS staff met with town employees, reviewed numerous documents and toured some of Signal’s water system facilities.
Their efforts revealed a system facing declining profit margins, the report says, and the possibility that a single major repair or replacement could cause the town to incur a net loss for the year.
“This is significant,” according to the report, “as the state of Tennessee requires referral to the Water and Wastewater Financing Board (WWFB) when . . . a system has a deficit in net position in any one year.”
Improving management and operation of the system, MTAS says, “will require an increase in revenue . . . (A) rate increase is needed and should be studied further to determine the amount and a plan for implementation.”
An annual 2 to 3 percent water rate increase probably would cover inflation, the report says. However, it recommends that officials also consider doing both a comprehensive rate study and a review of usage comparing residential to commercial and industrial customers..
“No significant audit findings were noted that specifically mentioned the water system in the nine years reviewed,” according to the MTAS report.
However, during five of those nine years the town budgeted more revenues than it collected and far more in expenses than were actually incurred, it says.
Despite the water system’s shortcomings, MTAS reports, “the system showed a net profit during each of the nine years between 2009 and 2017, according to the report, and revenues increased during those same years “21.42 percent overall, or an average of about 2.4 percent per year.”
However, the report notes, that growth in revenues was outpaced by an overall 29.9 percent increase in expenses, or about 2.9 percent per year.
“The town should consider boosting its revenue as costs are certain to rise given just the annual inflation rate,” the report recommends
“No significant audit findings were noted that specifically mentioned the water system in the nine years reviewed,” according to the MTAS report.
Analysis revealed that, during five of the nine reviewed years, the town budgeted more revenues than it collected and far more in expenses than were actually incurred, it says.
“It is noted that the town routinely budgets Treatment and Transmission - operating supplies and expenses for far more than it actually spends,” MTAS notes. “It is not known if this is done to simply hedge against an unforeseen major repair, or if items are actually budgeted in anticipation of being spent – but no action is taken to follow through with appropriations.”
MTAS says its study uncovered a number of “warning signs” of challenges on the horizon.
“Capital assets are 55 percent depreciated, meaning they are getting older, and a financially strong system relies on good, up-to-date equipment and water lines,” the report says. “A comprehensive capital improvement plan of five to ten years should be developed and systematically implemented as appropriations are made.”
The report says town officials have known about many of the problems facing the water system since at least 2011, when Arcadia Water Distribution System provided Signal with an evaluation listing issues that needed to be addressed.
Cited issues included, but were not limited to:
· a water line connection to Walden’s Ridge Utility District to handle emergencies
· chronic pipe breakages
· occluded and/or deteriorated cast iron pipe
· insufficient fire flow and/or pressure
· low output fire hydrant areas
· areas outside city limits needing more hydrants
During a July 26 meeting with Signal employees, the report notes, MTAS staffers learned that less than 20 percent of the needed improvements identified by Arcadia have been corrected.