Mayor's request for line of credit denied
A request for a motion by Mayor Sharon Gipson to the Holly Springs Board of Aldermen to use a $1,407,707 certificate of deposit as collateral to obtain a line of credit to shore up the Holly Springs Utility Department financially, failed.
The maturity date on that CD was given as Nov. 20, 2024.
Listed in item 20 on the Nov. 21 agenda was a “renewed request for line of credit due to expenses from the multiple storms, or access to the account designated for emergencies labeled as the Electric System and Reliability Account Unity Bank Account/CD.”
An intense discussion by the mayor and board followed the request as listed.
“We talked about as far as payroll,” Gipson said. “The other CD we have is $3,296,763.” Gipson said an alderman had asked to see the financials before hiring additional workers she had asked for in previous meetings.
The mayor said back-toback storms since 2021 had run up expenses at the Holly Springs Utility Department.
She cited $2,086,220 and $834,557 as costs to recover the electric service from the first storm and other expenses such as inventory and Fuelman – a total of $2,976,233.
She also cited a $1,076,371 bill from the Tennessee Valley Authority for March and April storms.
Gipson said the city used a line of credit in 2016 from three different banks. Those lines of credit followed the cost to rebuild the power lines downed in the Dec. 23, 2015, tornado.
Gipson presented a stack of emails she said she had received from Emergency Management Coordinator Leland Reed every time there was a storm warning.
“We are improving every day,” the mayor said. “Also, we had an issue with GE (General Electric). They no longer work with the water and gas side. So, we are working to make sure the newer systems could be put in so that those could be read (automatically).
“We have to keep the revenue flowing, whether or not it is GE,” she said.
Gipson said she held requests to hire new workers listed on the Nov. 7 agenda in order to discuss the line of credit at the Nov. 21 meeting.
“The challenges we are having is not from mismanagement, but it is about the cost of storms,” the mayor said. “We do have CDs and talked about a line of credit. We need one or the other and that’s like, yesterday.”
Gipson said GE has pretty much corrected their end, but when they corrected their end they no longer work with the water and gas side of the utility department. She said the system GE had was outdated, so it would no longer pull that information (usage). Water and gas employees have been helping read meters, she said.
“One of the things that is correct that was stated tonight is that we have to keep the revenue flowing,” Gipson said.
When the city went to the automated meter reading system, the city had only two people reading meters. The utility is also short of staffing.
“So, I hope by Dec. 1 we will be back on track in getting bills (out),” Gipson said.
She said if the utility cannot get the meter reading, whether from GE or its own staff, it does affect the revenue.
Ward 1 alderman Bernita Fountain asked what is the problem that people are not receiving their bills on time.
“We’ve experienced this for some months now,” she said. “Wherever we go people are asking. Is it employment, is it the meters themselves? What actually is the problem with the delay (in billing on time)?”
The mayor said there was a shortage of staff and also GE had resolved what happened with their system, but then the system was not compatible with HSUD.
“So, that’s where we are with the new meters?” asked Alderman-At-Large Dexter Shipp.
“That new system and new meters is going to be quite costly,” Gipson said.
She said she hopes to have all the metering back on schedule by Dec. 1.
She said she hopes TVA will finance the meters.
Annie Mason, accounts manager at HSUD, was called up to explain some of the issues with billing and the financial needs.
She said TVA is in the middle of a joint cost study and wants to know how HSUD divides costs between the different departments (electric, gas, water).
Gipson digressed to discuss the need for more employees to help correct problems at HSUD and read meters and the problem with the metering system itself.
“So, is that saying that by the first of January, things will be back on schedule?” Fountain asked.
“So, where are we now on the new meters?” asked Ward 2 alderman Andre Jones.
The mayor said the city has to get through the financing at the utility first before it could take up financing for a new system and meters that will allow HSUD to make repairs and collect data.
After some diversion regarding reports HSUD is required to provide TVA, Ward 4 alderman Patricia Merriweather asked about TVA’s concern about tax-in-lieu of checks that were written but held and not issued to the city. Those monthly monies have not been paid to the city since January.
Mason said TVA wanted a true picture of cash and also wanted HSUD to void all checks it had cut, but not paid the city. HSUD has been holding these checks because of lack of funds to pay to the city. On the books it looks as if the city has been paid when in fact it has not.
“We need to make cuts where we can,” Merriweather said. “In terms of a line of credit, we need to look inside. We know more money should be coming in. We need to go back and look at the stability of the utility department because TVA and HSUD are not on the same page. I can’t follow what is being said. It’s a lot of money – maintenance, reliability and sustainability needs to be looked at again.”
“Clarity,” said Fountain.
Merriweather said that the financial reports do not see the current data. She said she still has questions about the reports to TVA and the financial status for the last year.
She said TVA said they do not see the financial stability of the utility department from the reporting data.
Mason said TVA wants a true picture of the cash. And in their opinion, in order for them to see a true picture of cash, TVA wants her to go back and void all the checks that the utility is holding (such as payment of in-lieu-of tax to the city).
“The tax levy checks,” Merriweather said.
“Right,” said Mason. “I’m holding them in hopes that we will eventually pay. I checked with the bank and they said as long as the checks don’t have on them, “void by a certain number of dates,” we don’t have to worry about the check not being good.”
Merriweather said the board needs to look inside to get a true picture of the financials before continuing on in the same vein.
“Because TVA and HSUD apparently are not on the same page,” Merriweather repeated.
She said the board needs clarity because there is a lot riding on sustainability or maintainability.
Jones expressed a general concern that the utility accounts do not look good in regards to cash flow.
“We’re asking for a line of credit, a fix, to pay off some old debts,” he said. “I don’t see an action plan for the next steps. We’re asking for a quick fix. Now TVA has imposed a 4.5 percent increase. We haven’t done anything to offset that cost. It looks like, as a city, we need to entertain a rate increase. This system has been in a deficit. It looks like this system has been neglected for years, but the question is, what are we doing to move things forward?”
Gipson said the line of credit is not a band-aid. The city has just paid off $5 million from the 2015 storm.
“It is something that is practical and good business sense,” the mayor said. “A line of credit is necessary.”
Merriweather said the city needs to look at employee attrition.
“Right now we are not aware of who is there. The turnover is just unbelievable,” she said.
She said the board needs clarity because there is a lot riding on sustainability or maintainability.
Jones expressed a general concern that the utility accounts do not look good in regards to cash flow.
“We’re asking for a line of credit, a fix, to pay off some old debts,” he said. “I don’t see an action plan for the next steps. We’re asking for a quick fix. Now TVA has imposed a 4.5 percent increase. We haven’t done anything to offset that cost. It looks like, as a city, we need to entertain a rate increase. This system has been in a deficit. It looks like this system has been neglected for years, but the question is, what are we doing to move things forward?”
Gipson said the line of credit is not a bandaid. The city has just paid off $5 million from the 2015 storm.
“It is something that is practical and good business sense,” the mayor said. “A line of credit is necessary.”
Merriweather said the city needs to look at employee attrition.
“Right now we are not aware of who is there. The turnover is just unbelievable,” she said.
She said the city spent $1 million in overtime.
Gipson said some employees were terminated and that some departments have never been fully staffed. Some people are leaving because “we work really hard.”
Gipson asked Mason what she recommends as a line of credit.
Mason said $2.4 million, but that does not mean it will all be used.
“When will you be able to pay the city’s part so their budget…?” Fountain asked.
Mason said HSUD is going to try to pay the city something each month until the cash flow increases and the problem with meters is resolved.
Mason said her first concerns are to pay TVA and with the metering system. Cash flow was flowing well until the HSUD started having problems with the metering, she said.
“Who is acting GM? Jones asked.
“I am,” Gipson said.
Jones said the board is looking at the deficit and when the city will recoup what it is owed by HSUD.
“We have to look at the future stability of the utility department,” he said. “There has not been enough discussion of the operation of the utility department. That needs to happen. What is the plan?”
Merriweather asked if the city has received tax-in-lieu of and city clerk Jerrica Jones said the city is operating on ad valorem taxes and sales tax receipts.
Gipson said, “without all the storms we would have had a surplus.”
She said the CDs are there for just such times as this. She said the utility is the biggest asset the city has and there is an attempt to steal this asset from the city.
Shipp asked why the money in the ARPA (American Rescue Plan Act) fund couldn’t be used to shore up the utility department.
Gipson said she is saving that for the Hiram Revels Library on the Sims School Campus.
Merriweather made a motion to hold the discussion of the CD at Unity Bank for $1,407,770 for later. Fountain seconded and the motion to hold passed 4-0 with Ward 3 alderman Colter Teel absent.