FIRST-YEAR REPORT ON MUNICIPAL WATER SERVICE SHOWS IT IN BLACK

City water department revenue and expenditure figures from its first fiscal year of operation show an efficient and profitable utility.

A report compiled by Mid-Missouri Engineers Inc., the company hired by the city of Cape Girardeau to run its water utility, show the operation is safely in the black.

Water revenues from July 1992 through June 1993 were $3.52 million while expenses, depreciation, and interest and financing charges totalled $3.29 million, leaving a net income of $231,000.

Tom Jones of MMEI said water department revenue was more and expenses less than in the previous two years of operation.

The bottom line -- revenue over expenditures -- was almost $227,000 better than was budgeted last year, Jones said. He attributed the tighter operation to efficiency and a vigorous leak-detection and repair program.

MMEI's Tom Taggart said that water production during the year was reduced 6.9 percent although revenues increased.

"We're basically looking at an 8 percent increase in revenue that can be attributed directly to greater efficiency in operations," Taggart said.

Two years ago, Cape Girardeau voters approved a bond issue to finance the purchase of the city's water system from Union Electric Company. In June 1992, negotiations were completed and the city took over the utility.

The transaction wasn't without critics, though, as some citizens expressed skepticism that the city would be able to operate the utility as efficiently as a private company. A 3 percent hike in water fees didn't ease the critics' apprehension.

But in a report to the city council, Public Works Director Doug Leslie said the first year of operation has gone better than even proponents of the water system buyout anticipated.

"As with any major acquisition and enterprise activity that has to support itself, there was some question as to whether this was a viable pursuit for the city," Leslie said. "We're pleased to report that in the first full fiscal year of operation, the utility has been successful from both a financial and operational perspective."

Leslie said the water system's net operating income exceeded expectations by 32 percent.

Total revenues budgeted for fiscal year 1992-93 were slightly more than $3.3 million. But actual revenues topped $3.52 million. Expenditures also came in about $30,000 below what was budgeted.

Several cost-saving measures were implemented to increase efficiency, Taggart said.

About $70,000 in savings came from reduced costs for water treatment chemicals.

Because MMEI operates several other water systems, the company is able to purchase bulk quantities of chemicals at bargain prices.

Those costs savings, though, were offset by increased electrical costs due, in part, to Union Electric "metering" services that previously weren't charged - adding $150,000-$200,000 to the anticipated water plant operating costs.

But Taggart said that by cutting energy consumption at the city's two water plants and by installing new, high-efficiency equipment some of the increases were deferred.

He said water pumps operated less during high-rate, peak hours and more during off-peak hours.

Taggart said some of the more important measures taken this year to improve efficiency include replacement of faulty water meters and an aggressive leak-detection and repair program.

Revenues were increased by more than $70,000 simply by getting more accurate metering of water consumption, he said.

"Water meters are mechanical devises and they wear out over time," he added. "It's like an automobile. After it has 100,000 miles on it, the car becomes worn out and doesn't operate as efficiently.

"It's same thing with a water meter."

Leak detection and repair also helped improve efficiency, Taggart said.

"When the water's already been treated and pumped and we've spent the electricity, we want that to be delivered to the customer so we can get paid for it," he said. "If that's running out on the ground, then we really pay twice for the water."

MMEI repaired 320 leaks last year, compared to about 290 the year before, Taggart said.

Although the utility enjoyed a positive fund balance, Jones explained that some excess revenues should remain in reserve to accommodate growth in the system and capital projects.

He said the city will fund depreciation in the amount of $270,000 annually. By doing this, the city will be able to finance $150,000 annually from the depreciation account to replace the city's old one- and four-inch, galvanized water lines that are too small and beginning to corrode.

"This will increase fire fighting capability, reduce water loss and provide better service to customers," Jones said.

He added that, within five years, the depreciation fund should maintain a $300,000 reserve to cover catastrophic emergency repairs.