City Manager

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.

Sincerely,
George Campbell