Archive

A Funny Thing Happened on the Way to the Debt Statement!

This week, Trenton’s City Council is scheduled – at what will be the final session of this Council and the Eric Jackson Administration – to deliberate the Second Reading of a number of Bond Ordinances which, if all are passed, will increase the long-term debt obligations of the Trenton Water Works by $18.7 Million Dollars, and that of the City of Trenton by $7.3 Million Dollars. These Ordinances were easily passed First Reading on June 5; there’s no reason to believe that this Council won’t give their final, lame-duck approvals on Thursday.

I was going to write a piece about the City’s debt burden, and how these proposed measures will only further stretch the City’s fragile finances even further. I will write that piece, but not right now.

Today I want to write about the Finances of the Trenton Water Works (TWW). Because today, we know a lot more about the financial operations of that utility than we knew yesterday. And that’s because what are essentially financial operating statements for TWW have been hiding in plain sight for years, located in a tabbed section of an Excel spreadsheet that’s filed by the City with the State at the end of every budget year. Since the City will be discussing the Trenton Water Works twice this week, tomorrow at an open public forum at City Hall and in a presentation at Thursday’s Council meeting, I thought this it would be timely to discuss these items today, in the hope that some of you readers might be able to ask a pointed question or two at these sessions.

Do I have your attention now? OK, then!

Each year, every municipality in the State of New Jersey files a number of forms with the Office of Local Government Services of the Department of Community Affairs (DCA). These forms provide the State with snapshot pictures of the financial status (I was going to use the word “health,” here, but hey! it’s Trenton we’re talking about, the Sick Man of Mercer County. “Status” it is) of each local community in the State. These forms are all available for public examination and review, here. One of these forms is called the Annual Debt Statement and Debt Limit Calculation. It’s an Excel spreadsheet that summarizes the debt load of the municipality by each Fiscal Year ending on June 30. It also provides a great detail in separate tabs. The DCA website contains the Trenton forms for the recent Fiscal Years of 2013, 2014, and 2015 (The links will take you directly to copies downloaded from the State website). The two most recent filings, for 2016 and 2017, aren’t on the State website. The City of Trenton released those (those have been uploaded as well) to me in response to an Open Public Records Act (OPRA) request.

These forms give us a pretty good look at the overall debt of the City, which was my original topic today. They also provide more information about the annual operations of the Trenton Water Works than the public has realized is publicly available for years.

The Debt Statement filed with DCA contains tabs where separate debt information for schools and municipal utilities, since those entities and authorities often issue and carry their own debt.

Here’s the 2017 page for the Trenton Water Works, found in the “utility I” tab.

debt5

See those numbers in the section called “Deductions Applicable to Bonds” etc. etc?

Item #1 – “Total Cash Receipts”?

Item #2 – “Operating and Maintenance Costs”?

Item #6 – “Total Debt Service”?

And… wait for it… Item #8 – “Excess in Revenues”

Ladies and Gentlemen, what you see before you is the closest thing to a separate Income Statement for the Trenton Water Works that we are likely to get for at least another long while. They are simplified, and don’t provide much detail. Put that aside for now. Here, stated very simply, are the numbers that TWW customers and Trenton resident have been looking for, for years! And here, they are, buried in an obscure spreadsheet on the NJ DCA website. Who knew?

Simply expressed, in the fiscal year ending June 2017, TWW brought in $54,068,735 of income, most if not all in customer billing. Operating expenses totaled $27,814,162, and debt payments $10,909,533.

The operating surplus – some might call it the “profit” for the Water Works – was $15,345,040. The operating margin (surplus as a percentage of total income) was 28.3%.

That, Ladies and Gentlemen, is amazing. Let me put that in a little perspective.

In 2016, the operating margin for Apple was 21%.

J.P. Morgan/Chase Bank’s margin was 23%.

Alphabet(that’s Google to you and me)’s margin? 22%.

Trenton Water Works beats those companies!!!

2017’s result was no fluke for the Water Works:

  • In 2013, TWW earned a surplus of $11,051,207 on revenues of $46,572,608, a margin of 23.7%.
  • In 2014, the surplus was $10,551,000 on revenues of 43,398,424. yielding a margin of 24.3%.
  • For 2015, TWW earned a surplus of $14,716,827 from revenues of $44,759,726. The margin that year was an incredible 32.9%.
  • Oddly, there are no numbers on the 2016 form. Given the other years looked at, I think it’s safe to say TWW probably had another good year.

Dear Readers, don’t let ANYONE tell you that Trenton’s Water Works isn’t profitable!

The numbers filed with the State for five years don’t lie. Or, I hope they don’t!

Seeing this kind of history proves without a doubt that the problem with the Trenton Water Works is not with its business model, but with its management.

The reason its operating margins have beaten Apple and Google for the last five years is mainly because the utility hasn’t spent what it should have to keep the place running well.

It didn’t hire the numbers of trained and experienced staff it needed to keep operations running smoothly and error-free.

It didn’t pay competitive salaries to those staff it did hire.

It didn’t spend the amount of money on repairs and capital equipment and pipe replacement that it should have.

THAT’s how you beat Apple’s margin! And also how you strangle a water system!

We know the City of Trenton has for years taken these amazing surpluses TWW has earned, and used them to cover the City’s horrid budget numbers. Some of that is fine and legitimate. The level at which Trenton skimped on spending money on the Water Works – at the considerable expense of its customers -  was entirely excessive and inappropriate.

The numbers are here, and the numbers are clear. Trenton Water Works makes plenty good money.

Now, it’s time to spend some of it!!!

Make sure the City hears this from their citizens and customers all over Mercer County. Tomorrow night, and Thursday night.

Comments are closed.