HSUD financials revealed

In a persistent probing of the financial status of the Holly Springs Utility Department, the board of aldermen queried HSUD accountants on the debts accumulated by a series of five storms that has rocked the utility since April of 2022.

The inquiry was led primarily and unrelentingly by Ward 4 alderman Patricia Merriweather and Ward 2 alderman Andre Jones who asked HSUD accountants how deep in the financial hole the utility is presently.

“Miss Mason, how did we get in this deficit?” asked Merriweather, taking the lead. “I hear stories but I want to see numbers, specifics, in terms of money we paid out to whom for the last year.”

Mayor Sharon Gipson said the details are in the claims docket every week.

“No check is cut, no transfer is made without it being there,” she said.

“The reason we have these board meetings is to get clarity,” Merriweather said. “It may be clear to you, Madam Mayor, but it is not clear to us.”

The alderman asked payroll and personnel at HSUD for information, “because we are in a deficit,” she said.

“I think we need to look at the budget in terms of the budget for 2024,” Merriweather said. “I think we need to look at (budget) cuts

being made instead of using CDs (Certificates of Deposit) which to me is our emergency fund.”

The CDs are holding $1.3 million, Merriweather said.

Gipson said the CDs mature in November, but aldermen Jones and Shipp suggested the utility get a line of credit “as is done when people have these types of disasters.”

She said HSUD accounting manager Annie Mason was asked to go back and see what bills are outstanding, what she projects, and whether she would recommend a line of credit.

Gipson said sometimes people use “exciting language,” but the situation “is way too serious for us to not politicize the situation and make it look like something it is not.”

Mason then was asked to list some of the expenses, which included:

• a TVA bill for wholesale power for $2,086,374 is coming due October 5.

• a bill for $325,000 to Northcentral Electric Cooperative for mutual aid that has not been paid.

• the total outstanding debt at HSUD of $5,876,564 which includes debt to the general city fund, sanitation and insurance.

• a projected HSUD collect of $3,200,000 in September, Mason said, “which is down basically due to all the trouble we’ve had with the GE meters. So next month we’ll recoup some of that.”

Mason said that figure is down as compared to last year because of trouble the utility has had with GE AMI meters.

“So next month we’ll recoup some of that,” Mason said. “That’s the first option.”

• a good line of credit of $1.5 million if HSUD chooses a second option, which is to defer HSUD Tax Equivalency payments to the general city, Mason said. This would be Option 2.

“So, we were a million down in August because of billing issues,” she said. “We collected a little over $1 million less than we did last year in August.”

Gipson said the billing was down in August because billing statements could not be processed because they could not be imported into the system.

“My question is, how do we get out of this hole?” Merriweather asked. “If we are doing a line of credit to pay our bills to get us out of this hole, how are we going to sustain ourselves?”

Senior accountant Shawanna Harris fielded questions regarding how the utility will manage the workload.

“There’s a lot of factors that play into that,” Harris said, including having customer service representatives, telephone operators and billing clerks share duties when there is a shortage of personnel.

“So, we’ve been using allhands- on-deck to help with the various departments,” she said. “So they are being cross trained, even in the cash office. So they are not just sitting ducks - they’re being utilized.”

Merriweather said cross training could make it difficult to track accountability of the workers.

“That’s not what I said,” Harris said. “They were hired for the call center, but of course the call center hasn’t happened, so we’ve been utilizing these people.”

Gipson corrected Harris saying the call center has always been there.

“It’s the ladies who answer the telephone. We have hired additional people,” Gipson said

Harris explained the cut-off policy.

Customer’s service was not being disconnected for lack of payment during the COVID pandemic, she said.

But that is a two-edged sword, because people who don’t pay their bills won’t pay until service is cut off, Harris said.

“We are millions of dollars in past-due bills,” she said.

Gipson said when GE started having trouble with the automated meter reading system, those issues prevented turning off of customers who hadn’t paid.

Merriweather said the utility needs to cut back, “because we are going to end up in the red tape, here. We’re needing to cut $2.7 million. I still don’t understand why we have this surprise effect - that the utility department is either going to have to get a line of credit or use the CDs to pay our arrearages. I’m asking how we are going to sustain ourselves, even after that?”

Gipson said Mason has shown the budget is healthy and with the expectations with what’s coming in, “at some point I think our residents will see who has lied and who has not.”

“We’ve been having storms since we got in office,” the mayor said. “Perhaps the Lord was trying to tell us something.”

Jones took the lead.

Jones said it has come to the board’s attention that the Tax Equivalency Payments from HSUD have not been paid to the general city fund.

The tax equivalency TVA allows HSUD to pay to the city as a supplement annually is capped at around $1.7 million.

He said he saw nowhere in the board minutes that the payments are being paid.

“And now it is a debt, because we can’t make a payment. That means it is a deficit,” Jones said. “So it’s definitely a deficit in regards to the $1.2 million and the $300,000 invoice that is outstanding with Northcentral.

“Are we being realistic in regards to the utility budget? If we are not doing anything different in terms of generating, how is it possible for us to sustain ourselves? What’s the plan for the $6 million deficit in regards to paying the city. That’s a major concern.

“If the budget were healthy as the mayor says, we wouldn’t have to dip into a line of credit. I did not know this tax equivalency to the city was not being made. How was that reported to TVA? Was that reported to TVA that we weren’t receiving it?”

Mason said the utility has been cutting the tax equivalency checks but holding them.

“When you get to the point that your cash flow is low, you go through and you pick out debt which must be paid,” Mason said. “You continue to hold (checks) and so the city was one person that we thought we could work with.”

Jones asked why that fact had not been brought to the attention of the board of aldermen. He said the board is the first group to be held liable for transactions.

“So that is why it is very important to supply us with the information we need,” he said. “It’s extremely hard to conduct business when you’re limited in terms of the information you are receiving. Are we behind on TVA?”

“Definitely not,” Mason said. “They would have been screaming a long time ago.”

Mason said TVA has said if the utility falls behind on other bills, the tax equivalency payment is one payment that can be held.

Gipson said the amount paid to contractors due to the storm this year is $1,478,514.

“That’s right, that’s the mutual aid agreement,” Mason said.

The total costs for storms, including that paid to contractors and that owed, comes to a total of $2,463,526, the mayor said.

Gipson said cutting checks and holding them until money comes in is a standard accounting practice.

Mason said HSUD could be able to catch up on paying the tax equivalencies to the city by winter when cash flow is expected to improve.

“That’s a false check, then,” said Ward 3 alderman Colter Teel.

“It’s not a false check,” Mason said. “We just hold the check.”

“It’s a standard practice and it’s even been done on the general city side,” Gipson said.

Jones asked when the utility started holding checks for the tax equivalency.

Mason said May or June.

Jones asked Mason when she reported the practice.

She said she didn’t remember when she told the mayor the utility may have to defer a payment.

Jones asked Gipson at what point in time did she know that the utility would defer payments to the general city.

Gipson sat silent.

Teel asked where the checks are now.

“I’ve still got the checks,” Mason said.

City clerk Jerrica Jones was asked when the practice of deferring payments to the general city began and how many were deferred.

Jones said the first deferral was in January. Then payments were deferred in February, March, April, June, July, August and now September.

“TVA knows the history, they really do,” Mason said.

Attorney John Keith Perry suggested the board go into executive session to continue the budget discussion.

The board then went into executive session to continue the budget discussions and take up additional items.