Outside Expertise

Extension helps Mississippi town balance its budget

Local governments and water associations often face the balancing act of meeting the infrastructure needs of the residents they serve and keeping costs for those services affordable.

Tunica’s board of aldermen and Mayor Chuck Cariker knew last year that enterprise fund revenues were becoming insufficient to support the water and sewer services in the northwest Mississippi town. Cariker credits MSU Extension’s Center for Government and Community Development with helping the city streamline its budgeting process to generate the revenue required to provide the services its citizens need.

In the past year, the Center for Government and Community Development has helped more than a dozen municipalities and rural water associations to balance their budgets. The center compares similarly sized systems to provide local leaders with information they can use to maximize their resources.

Assistant Extension Professor Jason Barrett found that, based on the city’s rate structure, Tunica’s enterprise fund was operating at a $424,000 deficit each year. He and Extension Associate Hamp Beatty compared the city’s rates to similar systems in five other Mississippi cities.

Barrett and Beatty showed city leaders that Tunica charged significantly less than their peers per 5,000 gallons of water and for sewer and sanitation usage per customer. Instead of raising rates, aldermen lowered the number of gallons covered by the minimum base fee from 6,000 gallons per month to 4,000. The adjustment had no effect on the 45 percent of consumers who were using only up to 4,000 gallons each month, Cariker says, and the city was able to make up its revenue shortfall.

“If we do a rate study in-house, it becomes political. And without an expert, you get asked why the current rates need to be adjusted and whose idea it was to consider doing that,” Cariker says. “The Center for Government and Community Development studies those situations for municipalities around the state. Our citizens looked to them as experts because they were an independent group with experience in evaluating water and sewer rate structures.”

The city’s board of aldermen was able to use Extension’s study to make an informed decision instead of “picking something out of the blue,” he adds.

“We could explain and provide proof to residents that this was looked at by more than just us,” Cariker says. “Jason and Hamp are the people to go to for any municipality in Mississippi wanting to have experts evaluate their enterprise funds.”

Barrett regularly makes presentations at Mississippi Municipal League and Mississippi Association of Supervisors conventions to show the services that the Center for Government and Community Development provides. City and county leaders interested in a study contact him for further information. Studies are free of charge to the municipality.

Barrett says the leadership that Tunica officials showed in consulting a third party before the city reached a crisis was a positive sign.

“What they did is what you like to see in Mississippi communities, because they had the foresight to know they were not generating the money they needed in their enterprise funds and that they needed to seek assistance as soon as they could. Being able to lean on the MSU Extension Service faculty and staff provides a great resource for them,” Barrett says. “We provided a third-party objective opinion with factual input from the Extension Service. We looked at their consumption and budget to show them how their deficits could be made up. They had a need; we had the expertise; and we were able to connect the two.”

Barrett says one of the most important steps involved in each study is meeting with officials in person and seeing how a city’s infrastructure and services operate.

“Listening to what the officials have on their minds and observing how their systems work are two of the most important parts of each process,” Barrett says. “From there, it’s just a matter of gathering data and putting several programs together that will help them from a revenue standpoint. After gathering and organizing the data from that city’s peers, I like to go back for an actual board meeting, present it, and be available to the citizens to answer their questions.”

Officials from municipalities and rural water associations in Hattiesburg, Hernando, Coldwater, Brandon, and Okalona have recently sought the center’s expertise. As a former elected official, Beatty can relate to leaders who look to third parties to evaluate deficiencies and to show what improvements can be made.

“Municipal enterprise funds are supposed to be able to stand on their own financially and generate enough revenue to cover expenses each year with enough left over to account for depreciation and upgrades,” Beatty says. “Municipalities cannot rely on property and sales tax revenues in their general funds, which are designed to fund police, fire, and maintenance departments.”

Projecting a surplus in enterprise fund budgets is not the best policy, because achieving a profit is not the objective of a municipality. But, Beatty adds, cities and towns have to budget for maintenance.

“System and equipment upgrades are needed to keep water and sewer systems functioning, so some reserves have to be available when the inevitable happens and the time comes to make those improvements,” he says.

The goal of each study is not to tell a board what to do about their enterprise rates, but simply to give officials the information they need to make the best decision for the people they represent.

“We try to refrain from telling somebody what they need to do. I’m just giving them food for thought,” Barrett says. “I’m giving them A, and I’m giving them B. They should be able to calculate C on their own. Each municipality and association has its own unique situation. Tunica was simply trying to make up for a budget shortfall. Officials in another city may have to plan for future upgrades to their wastewater system. They know what it’s going to cost and they have to do it. They just have to figure out how to structure their rates to pay for the upgrades.”