Cotulla hires Capex for utility rate study

By Marc Robertson - Editor | March 23, 2023

GARBAGE COLLECTION SERVICE CONTINUES OPERATING AT A LOSS

Examining a track record of their utility departments’ revenues and expenditures over an extended period, Cotulla city councilors have agreed to hire a consultant for a review of rates in the solid waste fund, which may result in a price hike for local customers.

Capex Consulting will perform the study for a $25,000 fee and provide a long-term financial plan, according to the council vote Thursday evening, March 9. The motion to hire the firm was made by Councilor Eloy Zertuche, seconded by Councilor Manuel Rodriguez and supported by Councilors Tanis Lopez and Gilbert Ayala. Councilor Alejandro Garcia was absent from the meeting.

The move came after a city finance presentation by Ernesto Garcia that showed Cotulla’s solid waste fund – the department responsible for residential and commercial trash removal – had lost money over the past month.

Former finance director Jorge Flores said this week that the solid waste fund may be as much as a million dollars in the red and has been subsidized by the city’s general fund for several years.

The city’s new finance director, however, pointed to the purchase of a new garbage truck earlier this year as critical to the current fund balance, since the vehicle cost $215,000. The February report for the solid waste fund showed it sitting at $118,000 in the red for the year to date, Garcia said.

By this month, that individual deficit had been reduced to $87,000, Garcia said on Monday.

“I believe the city is curious about the price of garbage services,” the finance director said. “I see us operating in the red, but the recent expense to that department is clear. They bought a new garbage truck.”

Garcia’s predecessor said he believes the long-term deficit and the history of revenue shortfalls is due in large part to a more significant issue.

“Rates to individual customers are low and have been low for many years,” Flores said on Tuesday. “That is what needs to be addressed.”

In their discussions last week, councilors learned from City Administrator Larry Dovalina that Cotulla presently has “the lowest or second lowest” solid waste utility rates among South Texas cities.

“The solid waste fund is the utility most in need of a rate change to reach a break-even balance,” Dovalina said.

Rates for garbage collection in Cotulla begin at $15.80 per month for twice-weekly residential customers, $24.49 for those outside city limits. Commercial customers pay $24.79 inside city limits and $38.42 outside. Businesses requiring Dumpsters both inside and outside city limits pay $114.90 per month for once-a-week collection of a four-yard container, $180.07 for an eight-yard container.

City Attorney Steve Pena told councilors an adjustment recommended by a consulting firm may be necessary in order for overall efficient municipal operations.

“This is critical,” the attorney said. “A city should have enterprise funds. In other words, each department pays its own way. Over time, rates have to be adjusted. Our citizens are getting a very efficient service, so you have to do it slowly, incrementally, and provide a consistent level of service without affecting customers harshly.”

Dovalina indicated that a department’s failure to operate independently flies in the face of a directive that all of Cotulla’s utilities be able to stand on their own, a policy he prompted more than five years ago.

Garcia said this week that the expense of operating a garbage collection service is often under-appreciated by the general public.

“Fuel costs have gone up, manpower is more expensive, and the fees we pay for dumping the solid waste at another location are also rising,” the finance director said. “These expenses have to be factored into a department’s operating budget, and we have been bearing those rising costs without raising rates.”

“Utilities are considered to be proprietary funds,” the city administrator told councilors last week. “Each has a balance. If they use funds from the General Fund, it diminishes your ability to handle emergency expenditures. You need to operate more efficiently.”

“Nobody wants to pay more for anything; I get that,” Atty. Pena said at the Thursday meeting, “but it’s just the way the world works.”

“The council has been astute in setting rates,” Dovalina said. “You have been diligently providing services at the least cost to customers. When you compare rates, the other cities are much higher. You have been frugal. This is how you least impact the people living here.”

The city attorney added that he and the city administration acknowledge the difficulty that some families may experience in meeting the demands of higher utility rates, although he did not specify whether garbage collection could be the only service whose rates may increase. Families on a fixed income – notably retirees and the economically disadvantaged – will look to social security benefits adjustments for inflation in order to meet their bill payments, he said.

“This is something you are always going to have to do,” Pena said before the council voted to contract Capex.

Councilors are expecting to hear from the utility consultant on what steps are recommended to help city departments operate independently and whether a rate hike is to be brought to the table.

Posted in News