The City of Albany is operating in the black and apparently doing a pretty good job in handling its finances. That is the overall picture given by auditor Sammy Lee when he reviewed his 2016-17 year audit report in depth with the council at a call meeting last Thursday.

However, despite the basic overall positive news, some areas of concern were addressed–and one category in which the City of Albany nor any other local government has any control, that being the state of Kentucky retirement debt, which Lee feels local governments may eventually be stuck with paying.

Lee said the audit information was based on all information available and they had been using the same system since the 1980s. “You (city) are on the right track with the new computer software system (in the water department),” Lee told the council. “I have issued a clean opinion on the numbers I have reviewed.”

The city has around $800,000 in net assets, compared to $140,000 in liabilities and is worth (everything owned by the city) is $23 million.

The water and sewer departments, however, is a bit of a concern, with around $30 million in assets but also several million in liabilities. Lee said that the water/sewer departments were basically “just breaking even” at this point, when it should be showing a profit.

The water department has $6 million in long-term debt but the city is making payments annually to pay that down. “The water department should be operated like a business, because it is a business,” said Lee.

Councilman Tony Delk questioned Lee on his opinion of why the water department wasn’t making money.

Lee said there were varying reasons, including the costs associated with treating water, stressing again that water bills are not being collected in a timely manner, or meters being cut off for non-payment, as well as a reduction in the amount of water sold last year.

An example the auditor gave, without naming a specific business or industry, said that five or six of the city’s largest water users used (purchased) a lot less water from the system, and in one month, the Cumberland County Water District purchased three million less gallons. Lee said there could be several reasons for those reductions.

It was noted however, that since the city recently increased water rates to offset the cost of treating and selling water, its monthly water department revenues have shown increases over the last couple of months. Lee also said that increase, as well as the new computer software system, would continue to move the city toward hopefully making money on water it sells.

Although Lee informed the city their audit was clean and they were operating as they should financially, including steps to improve water department revenues, his primary concern remains the state retirement pension debt that is now added in all city and county retirement line-items as “debt” owed.

For example, net pension (retirement) plan liability this audit year was some $569,000. And, although Lee said there was not currently any indication from the state it was actually going to make cities, counties and local governments pay that money, he expects it could likely happen in the years to come, forcing many cities to have to grovel to get by, including taking out loans and bonds just to pay off the state retirement debt.

“It (retirement plan) is my biggest worry,” said Lee. There is no current legislation to make us pay, but it is possible..the state does not have any money and the amount of debt per year (to local governments) will only increase.” He said Kentucky is currently $30 billion in debt in its retirement system.

“The pension program is the major issue, the state needs to restructure, but it can’t,” said Lee, adding again the city needed to be more aggressive in cutting off delinquent water customers, but concluded, with the rate increase and new computer system, “you are on the right track.”