Quarterly Report: 2014, October - December (Q2), Kake

Community:
Kake 
Staff:
Lynn Kenealy  
DCRA Regional Office:
Juneau 
Gov't Type:
First Class City 
Borough:
 
Agreement?
Yes 
Agreement Date:
7/10/2012 
Entity:
City of Kake 
Population:
598 (2012 DCCED certified estimate) 
Assessment Status:
Assessment Completed 
Assessment Date:
7/17/2013 
Exp Date:
7/10/2014 
Last Updated:
1/6/2014 
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 septic pumping garbage pick-up and landfill services.  
RUBA Status & Activities This Qtr:
RUBA staff was scheduled to travel to Kake this quarter, but was unable to make the trip due to staff illness. Nonetheless, remote assistance was provided throughout the quarter in various fields of utility management. RUBA staff provided the city with information related to elections of Kake’s city council, the policy-making body for the community’s utilities, specifically concerning, election procedures, the canvassing of returns, election certification, and candidate eligibility. Further, RUBA staff assisted the city in researching the legal relationship between the city and the school, the city’s responsibilities and authorities related to building condemnation, Affordable Care Act exemptions, the process for adopting resolutions, and requirements for majority council votes. RUBA staff also advised the city on its water service charges, statutes of limitations for pursuing debts owed to the city, utility billing for city staff, and Permanent Fund Dividend (PFD) garnishment for delinquent utility accounts. This quarter the utility received from the State of Alaska garnished PFDs from delinquent customers totaling more than $42,000. Forty percent of the garnishments were made with the signed consent of the customers and sixty percent were made without prior consent through the Alaska Court System. The amount collected will go against the outstanding bills for each customer who had their PFD garnished. 
RUBA Activities for the Coming Qtr:
RUBA staff will visit the city in the coming quarter to provide elected officials training to the city council and provide one-to-one training for the city's new bookkeeper and city clerk. Additionally, RUBA staff will assist with the process of garnishing next year’s PFDs from delinquent customers by drafting customer agreements for payment plans for utility customers who do not wish for their PFDs to be garnished, but are instead willing to go into a payment plan to repay past-due accounts. RUBA staff will also assist city staff in drafting customer agreements for homes with multiple adult residents, as the city wishes to recognize all adults in each household on the utility bill in order to increase the ability to pursue delinquent customers and, therefore, to ensure more financially-sustainable sanitation services in the community. City staff have also requested a new water utility rate study be conducted for FY13 in order to see that the city's current rate increase schedule is on target with the actual increasing costs of the service it provides.
Scores:
 
Essential Indicators:
24 of 26
Sustainable Indicators:
19 of 27
Total Score:
43 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 fiscal year, and 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. This is currently being undertaken by city staff and will be introduced at the next council meeting as a proposed amendment to the FY14 budget. The budget separates water and wastewater finances into a utility enterprise fund, which also includes garbage. The FY14 budget anticipates collecting 181 percent more water/wastewater customer fees in FY14 than in FY13. Normal procedures indicate that the city’s bookkeeper provides 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, and then provide 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, water treatment plant, city buildings, etc. 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 early 2013 concluded that the water utility costs $75.88 per customer. The city distributes this cost at a higher rate to commercial customers than to residential or elder customers. Subsequent to the rate study, the city council adopted a scenario to increase the water utility rate 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 will sufficiently cover the cost of the water utility at its current cost. Until such a time as customer payments fully cover the full cost of the sanitation services it offers, 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 FY 14 budget and mentioned in the Finances section of this report would mainly be owed to the relinquishment of PFDs for delinquent customers and the eventual enforcement of the utility's collection policy, including shutting off delinquent water customers until payment is received or a payment plan is in place. Indeed, utility staff have identified the location of all customer shut-off valves throughout the community and anticipate installing 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; however, until the formally adopted collections policy is fully enforced, the essential indicator in this section related to actively following an adopted collection policy has been marked ‘No’. Nonetheless, the city 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 a deferred payment plan agreed upon by the date specified on the door notice, water is to be shut off. At this time, shut off valves are only available on some properties. Therefore, this process is not always being carried out. However, utility staff has identified properties which do currently have shut-off valves; as water distribution lines are upgraded shut off valves will be installed on those that don’t. All delinquent customers were given the option of signing over their PFD assignments. Those who did not sign over their PFD assignments are also having their PFD assignments relinquished without consent through the Alaska Court System in order to pay past due utility accounts. Additionally, the city is currently on a plan to increase water utility rates 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 collection rate study was undertaken in September 2013 and indicated that the 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 the QuickBooks program, and payroll records are maintained by the bookkeeper. A chart of accounts also allows for appropriate allocations 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 requires 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.
Yes 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 utilizes the QuickBooks accounting system to track payroll tax liabilities, both state and federal, and utilizes online reporting systems. The city has no current tax liabilities or liens. The State of Alaska Department of Labor verified employment tax compliance on November 22, 2013. The IRS confirmed, through Taxpayer Advocates, that the city is compliant on federal tax requirements as of December 18, 2013.

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 valid until June 30, 2014. Proof of coverage is posed in all main places of city employment. In April 2013, the city adopted an employee handbook, 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 and 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 in updating the city's utility ordinances and in increasing utility rates in order to cover the cost of providing sanitation services in Kake. 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 administrator attended the SDS conference in 2013 and works with RUBA staff regularly. The utility's bookkeeper has been in the position for several years and has attended the 32-hour RUBA Personnel, Financial, Elected Officials, and Utility Clerk management trainings, as well as a RUBA-sponsored QuickBooks class. The bookkeeper has also completed the 18-hour UAS Bookkeeping for Small Businesses and Non-Profits course. The utility's primary water operator has attended several trainings including HAZWOPER training and certification in 2005, the ANTHC Water Treatment Seminar in 2007, the 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 including 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 on a whole 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 currently on the Significant Non-Compliance (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 very aware of what parts the utility currently 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.