Quarterly Report: 2014, January - March (Q3), Kake

Community:
Kake 
Staff:
Lynn Kenealy  
DCRA Regional Office:
Juneau regional office 
Gov't Type:
First Class City 
Borough:
 
Agreement?
Yes 
Agreement Date:
7/10/2012 
Entity:
City of Kake 
Population:
598 2013 Department of Labor Estimate 
Assessment Status:
Assessment Completed 
Assessment Date:
7/17/2013 
Exp Date:
7/10/2014 
Last Updated:
4/17/2014 
Community Sanitation Overview:
Kake is located on the northwest coast of Kupreanof Island. It is a primarily Tlingit native community with an economy based largely around fishing, logging, and subsistence. Kake’s residents rely on surface water piped eight and a half miles from Alpine Lake to the water treatment plant, and then to 173 service connections. In the case of an emergency, a secondary water source, Gunnuk Creek, is also available. There are several lift stations throughout the community. Wastewater is piped from homes, collected, and then undergoes a rudimentary treatment process before being discharged offshore. The City of Kake operates and manages all of these sanitation services and facilities, which include a Class 2 water treatment and distribution system and a Class 1 wastewater collection and treatment system. The city also provides wastewater tank pumping, garbage pick-up, and landfill services. 
RUBA Status & Activities This Qtr:
RUBA staff traveled to Kake this quarter to conduct a water utility rate study in order to ensure the city's current increasing rate structure is on-target with any changing cost of the utility. The study showed that utility costs have not changed substantially since a similar study last year. During the visit RUBA staff also met with utility staff to discuss improvements to management indicators, and to provide training to the newly-hired city clerk. RUBA staff also provided a two-hour training on utility management and effective meetings to the city council, school board, and other interested community members. Twelve elected officials and utility staff members attended the training. RUBA staff also met with the city administrator during the visit to draft water utility customer contracts and relevant addendums, particularly those related to paying back delinquent accounts. RUBA staff also researched matters of commercial kitchen wastewater requirements and assisted the city in drafting necessary revisions to utility ordinances in relation to commercial customers. Additionally this quarter, RUBA staff provided remote assistance and training to the newly-hired city clerk, and answered questions pertaining to mayoral voting powers, utility mailing costs, credit card costs, employee utility account delinquencies, setback requirements and other platting issues, debt forgiveness, Permanent Fund Dividend reassignments, codification, meeting procedures, local option laws, borough incorporation, the city’s non-profit status, and taxation. RUBA staff provided information to the city to help it return to compliance with federal tax deposit requirements, as well. Further, RUBA staff attended the Sanitation Deficiency System meeting this quarter, in which Kake's ongoing distribution lines upgrades were discussed. Providers discussed coordinating services in order to ensure upgrades are made in line with a Department of Transportation road improvement project and other system improvements. 
RUBA Activities for the Coming Qtr:
RUBA staff will be visiting the community in April 2014 to continue training the city clerk on utility management practices, training a newly-hired bookkeeper on utility finance, and continue working with the city administrator on necessary improvements to the city's utility ordinance. Remote assistance will also continue to be provided as needed.
Scores:
 
Essential Indicators:
23 of 26
Sustainable Indicators:
19 of 27
Total Score:
42 of 53

Finances

Essential Indicators
Answer Question
Yes All revenues and expenses for the utility are listed in the utility budget.
Yes The utility has adopted a balanced realistic budget.
No Monthly financial reports are prepared and submitted to the policy making board.
Yes The utility is current in paying all water/wastewater electric bills.
Yes The utility has on hand a year's adequate fuel supply or it has a financial plan to purchase an adequate supply.
Yes The utility is receiving revenues (user fees or other sources) sufficient to cover operating expenses.
Sustainable Indicators
Answer Question
Yes The utility is receiving revenues (user fees or other sources sufficient to cover operating expenses and Repair & Replacement (R) costs.
No YTD revenues are at a level equal to or above those budgeted.
No YTD expenditures are at a level equal to or below those budgeted.
Yes A monthly manager's report is prepared.
Yes Budget amendments are completed and adopted as necessary.
Finances Comments
The city council, which is the decision-making body for Kake’s sanitation utilities, follows the State’s fiscal year. The city adopted its FY14 annual budget timely in May 2013. Budget estimates were based on the FY13 budgeted and actual values, and the FY14 budget proposal included details such as dollar and percent change between years. The budget was balanced and realistic, though the finance committee has requested the budget be broken down into more specific categories; these revisions will be introduced at the next council meeting as a proposed amendment to the FY14 budget. The existing budget ordinance separates water and wastewater finances into a utility enterprise fund, which also appropriates funds for garbage services. The FY14 budget anticipates collecting 181 percent more water/wastewater customer fees in FY14 than in FY13. This increase would come from the garnishment of several delinquent customers’ Permanent Fund Dividends (PFDs). The utility has collected over $40,000 through PFD garnishments; however, full comparisons of revenues and expenditures to budget are not possible at this time due to accounting staff turn-over. Normal procedure is for the city’s bookkeeper to provide a profit and loss report comparing budgeted and actual amounts to the council finance committee, which meets before all full council meetings to review finances. The bookkeeper then provides a full report at the regular council meeting. The bookkeeper and city administrator, who serves as the utility manager, both attend the finance committee meeting and provide verbal reports, as well as written reports when requested. However, this practice has not taken place since July, as the bookkeeping data entry has fallen behind due to the loss of the city's bookkeeper. An interim bookkeeper is in the process of bringing the books up-to-date. Kake's electricity is provided by the Inside Passage Electric Cooperative (IPEC). IPEC bills the city monthly with a break-down of services provided to different buildings and areas, such as wastewater lift stations, the water treatment plant, and city buildings. The bookkeeper logs each itemized bill into the QuickBooks accounts payable system, then creates the check payment for the full amount, which is then signed by the city administrator and submitted for payment. Evidence of billing and payment have been provided to RUBA staff. The city budgets for and purchases its fuel from Kake Tribal Corporation as needed. Kake Tribal Corporation receives fuel by barge once per month, which is sufficient to provide all necessary fuel to the community. A water utility rate study conducted by RUBA staff in February 2014 concluded that the water utility costs the city $85.85 per customer per month. The city distributes this cost at a higher rate to commercial customers than to residential or elder customers. One year ago, the council adopted a plan to increase utility charges gradually over the next four years, at a rate of 25 percent per year for residential customers and 35 percent per year for commercial customers. Therefore on July 1, 2013, the residential rate for sanitation services increased from $36 per month to $45 per month and the commercial rate increased from $40 per month to $54 per month. By the fourth year of this plan, the residential rate will be $87.89 per month and the commercial rate will be $132.86 per month. Assuming a near-100 percent collection rate, this financial plan will allow for all costs associated with the water utility to be met. Until such time, however, the city utilizes funds from the Community Revenue Sharing and Payment in Lieu of Taxes programs as subsidies.

Accounting Systems

Essential Indicators
Answer Question
No The utility has adopted a collection policy and actively follows it.
Yes The utility bills customers on a regular basis.
Yes An accounts receivable system is in place which tracks customers and reports past due accounts and amounts.
Yes An accounts payable system is in place.
Yes The payroll system correctly calculates payroll and keeps records.
Yes A cash receipt system is in place that records incoming money and how it was spent.
Yes The utility has a cash disbursement system that records how money was spent.
Sustainable Indicators
Answer Question
Yes A chart of accounts is used that identifies categories in a reasonable, usable manner.
Yes Monthly bank reconciliations have been completed for all utility accounts.
Yes The utility has a purchasing system that requires approval prior to purchase, and the approval process compares proposed purchases to budgeted amounts.
Accounting Systems Comments
The improved utility bill collection rate anticipated in the FY14 budget, and mentioned in the Finances section of this report, can be mainly attributed to the delinquent customers’ relinquishment of PFDs and the eventual enforcement of the utility's collection policy. That policy requires delinquent customers’ water service be shut off until payment is received or a payment plan is in place. Utility staff have already identified the location of all existing customer shut-off valves and anticipate installing additional valves at properties which do not already have them. This was the first step toward the full enforcement of the city’s shut-off policy. Shut-offs are scheduled to be commenced this quarter. Until the adopted collections policy is indeed fully enforced, however, the relevant indicator in this section has been marked ‘No’. Nonetheless, the bookkeeper does bill customers on the first of every month, with a due-date of the last day of every month. Statements and invoices include details of all utilities and services rendered, as well as clear due-dates for all bills. Accounts are considered delinquent if they have not been paid by the tenth day of the following month. At that time, the water operator places an overdue notice on the delinquent customer's door and spray-paints a circle around the location of the customer's shut off valve. If payment is not made or no deferred payment plan agreed upon by the date specified on the door notice, water is to be shut off. As mentioned previously, shut off valves are only available on some properties at this time, and therefore this process cannot be carried out in all cases. All delinquent customers were given the option of signing over their PFDs. Those who did not sign over voluntarily are having their PFDs relinquished without consent through the Alaska Court System. Additionally, the city is working to increase monthly service charges gradually over the next four years, as described previously in this report. Customers who have remained current on utility bill payments will also have a two-year delay in the increase of their utility bill. A study completed in September 2013 indicated that the utility bill collection rate remains at approximately 52 percent. A further collection rate study will be undertaken subsequent to PFD relinquishments. Accounts receivable, accounts payable, and payroll are tracked using QuickBooks, and payroll records are maintained by the bookkeeper. A chart of accounts allows for the appropriate allocation of revenues and expenditures using QuickBooks. Accounts are separated into all appropriate types. An accounts payable aging summary provided to RUBA staff evidences consistent and complete payment of all incoming bills, and an accounts receivable aging summary evidences tracking of all utility and other service customers and current and past-due accounts. Bank accounts are reconciled monthly, with a reconciliation details report completed and saved in QuickBooks. The city accepts credit and debit cards for utility service payments. If cash is received, the bookkeeper writes a receipt for the customer, logs the transaction in QuickBooks, then locks the cash in a drawer. Cash disbursement is carried out in a similar manner. All purchases are requested through a purchase order form and require approval by the city administrator. Purchase order forms include a reference number to be included on all invoices, which are then processed and reconciled by the bookkeeper. Purchases are logged in a purchase order book and on QuickBooks. Any purchase over $1,000 requires approval from the mayor.

Tax Problems

Essential Indicators
Answer Question
Yes The utility has a system to accurately calculate, track, and report payroll tax liabilities.
Yes The utility is current on filing tax reports.
No The utility is current on making tax deposits.
N/A If there are any past due tax liabilities or recorded tax liens, a lien release has been issued or a repayment agreement has been signed and repayments are current.
Tax Problems Comments
The city uses the QuickBooks accounting system to track payroll state and federal tax liabilities, and utilizes online reporting systems. The State of Alaska Department of Labor and Workforce Development (DOLWD) verified employment tax compliance on March 4, 2014. The IRS’s taxpayer advocacy service confirmed that the city is compliant on federal tax reporting, but is delinquent on payments as of March 17, 2014.

Personnel System

Essential Indicators
Answer Question
Yes The utility has a posted workers compensation insurance policy in effect.
Sustainable Indicators
Answer Question
Yes The utility has adopted and uses a Personnel Policy, which has been reviewed by an attorney, AML or Commerce for topics and language.
Yes The utility has adequate written job descriptions for all positions.
Yes The utility has adopted and follows a written personnel evaluation process that ties the job description to the evaluation.
Yes The utility has an adequate written hiring process.
Yes The utility has personnel folders on every employee that contain at least: I-9, Job Application and Letter of Acceptance.
Yes The utility has a probationary period for new hires that includes orientation, job training/oversight, and evaluations.
Yes The utility provides training opportunities to staff as needed and available.
Personnel System Comments
RUBA staff has verified that the city has a workers’ compensation insurance policy through the Alaska Municipal League Joint Insurance Association (AMLJIA) is valid until July 1, 2014. Proof of coverage is posted in all main places of city employment. In April 2013, the city adopted an employee handbook, which was drafted with city staff by AMLJIA and reviewed by RUBA staff prior to adoption by the city council. The handbook includes a cover page which employees sign to acknowledgement their receipt. The handbook provides for a personnel evaluation process that includes formal performance evaluations at the end of employee's introductory period (probationary period), then annually thereafter. A specific performance review form is used and includes an evaluation of all job factors, performance appraisal factors, and a review summary listing areas of strength and areas for improvement. Training and appropriate certification of staff is encouraged and is discussed further in the ‘Organizational Management’ section of this report. Most city staff are experienced and highly proficient at their jobs. However, there is limited cross-training between city staff. The city adopted updated and adequate written job descriptions in August 2013 for all positions of the city. The city administrator maintains a file with I-9 forms and job applications, though no job applications are available for employees who have been with the city for several years. All new employees are submitting job applications, which are maintained in files hereafter. Letters of acceptance had also not been previously used, but have recently been instituted by the city administrator. The letters include information about a new employee’s start month and year, their current position, and their rate of pay. Letters have been completed for all current employees and will be completed in the future for all incoming employees.

Organizational Management

Essential Indicators
Answer Question
Yes The entity that owns the utility is known; the entity that will operate the utility is set.
Yes The policy making body is active in policy making of the utility.
Yes The policy making body enforces utility policy.
Yes The utility has an adequately trained manager.
Yes The utility has an adequately trained bookkeeper.
Yes The utility has an adequately trained operator or operators.
Yes The utility has adopted the necessary ordinances (or rules and regulations) necessary to give it the authority to operate.
Sustainable Indicators
Answer Question
No The utility has adopted an organizational chart that reflects the current structure.
Yes The policy making body meets as required.
Yes The utility complies with the open meeting act for all meetings.
Organizational Management Comments
The City of Kake owns and operates the community's water and wastewater systems with the necessary authority to operate provided in Title 60 of the Kake Municipal Code. The city council is the decision-making body for the utility and holds regular meetings monthly. The council also convenes special meetings as needed. The finance committee meets monthly to review utility finances. Designated harbor and utilities committees meet approximately monthly as well. All meetings are noticed in compliance with the Alaska Open Meetings Act. The council has been particularly active over the past year updating the city's utility ordinances and increasing utility rates in order to cover the cost of providing sanitation services. One city council member has attended the 32-hour RUBA Planning Management for Rural Utilities training and the Personnel Management for Rural Utilities training. The utility's manager is the city administrator, who has worked for the city since October 2012. The utility's clerk began working in this position in October, 2013. The city is currently without a permanent bookkeeper, but is employing a highly experienced interim bookkeeper. The administrator attended the Sanitation Deficiency System conference in 2013 and works with RUBA staff regularly. The utility's primary water operator has attended several trainings including HAZWOPER training and certification in 2005, the Alaska Native Tribal Health Consortium (ANTHC) Water Treatment Seminar in 2007, the SouthEast Alaska Regional Health Consortium (SEARHC) Introduction to Small Water Systems Workshop in 2008, and NTL's Water Treatment Systems class in 2011. Water operator certification is discussed further under ‘Operation of Utility’ section of this report. The utility does not have a current organizational chart, though a proposed organizational chart has been drafted and will be introduced to the city council shortly for consideration and possible adoption by resolution.

Operation of Utility

Essential Indicators
Answer Question
Yes The utility operator(s) are actively working towards necessary certification.
Yes The utility has a preventative maintenance plan developed for the existing sanitation facilities.
Sustainable Indicators
Answer Question
No The manager receives a monthly O&M report from the utility operator and routinely "spot checks" the facilities to see that the maintenance items are being completed.
No The utility has a safety manual and holds safety meetings.
Yes Utility facilities have not suffered any major problems/outages due to management issues that are unresolved.
Yes The utility is operating at the level of service that was proposed.
Yes The operator provides status reports to the manager on a routine basis.
Yes The utility has completed and distributed its "Consumer Confidence Report".
No The utility is not on the "Significant Non-Complier" (SNC) list.
No The utility maintains an inventory control list.
No The utility maintains a critical spare parts list.
Operation of Utility Comments
Kake’s primary water operator has been working in this position since 2006 and has Class 1 Water Distribution and Water Treatment certifications. The primary water operator is currently working on passing the Class 2 Water Treatment exam. The utility also has a back-up operator who has not yet been certified but is receiving relevant training. The primary water operator has developed and follows a very specific preventative maintenance schedule that includes system checks, calibration, cleaning, backwashing, and other steps. The schedule is posted in the water treatment plant and can be followed by any back-up or substitute water operator if needed. The primary water operator provides regular verbal reports to the manager at least weekly and often daily. The manager is active in assisting in water operations when needed, and passes on information about water operations to the city council when appropriate. The manager is not currently conducting spot checks of the water utility, but reports an intention to do so soon. The utility is not currently conducting safety meetings either, though attending the AMLJIA telephonic safety meetings has been discussed. The city is working with AMLJIA's loss control program and has instituted several of its recommendations. The water utility has not suffered any major problems or outages due to unresolved management issues. There have been issues with the wastewater collection system, which is currently being cleared and worked on with the assistance of the Remote Maintenance Worker (RMW) program and ANTHC engineers. The primary water operator discussed concerns that a back-up electric system is needed in the case of electric outages. The distribution system is gravity-fed, though the treatment system does require electricity. A back-up generator may be an option. The utility is operating at the proposed level of service. The 2013 Consumer Confidence Report (CCR) was completed and distributed to the community in July 2013. The city is on the January 2014 Significant Non-Complier (SNC) List due to high levels of disinfectant bi-products. ANTHC and the RMW are attempting to find optimal chlorine levels and system changes intended to help address the issues have been completed. Further testing is required to ensure these changes are sufficient and to remove the community from the SNC list. The utility does not have an inventory control list or critical spare parts list. RUBA staff will assist in developing these lists, which utility staff will then maintain. The primary water operator is well aware of what parts the utility has and needs, and works closely with management to ensure all necessary parts are budgeted for and obtained. However, in the event of an emergency, or were the primary water operator to become unavailable, critical spare parts and inventory control lists would assist back-up operators in maintaining the system.