YOUNGSTOWN Water revenue research dries up
The city now will study unmetered water that's used to put out fires, clean streets and flush sewers.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- Good news: The city keeps good track of its water accounts.
Bad news: That means there is little uncollected revenue to bolster city coffers.
A company called Utility Revenue Management Co. of Houston found that out the hard way. The city and the company have agreed to end their contract two years early.
The company's job was to find revenue that isn't flowing into the water department. In exchange, the company splits the money it finds with a city for three years. Cities typically don't have the equipment or auditing expertise to track down unrealized revenue.
Not worth it: A year of audits and checking leaks, however, didn't turn up enough problems to make the contract worth Utility Revenue's time.
Instead, the city has agreed to pay the company $15,000 -- the amount Utility Revenue would have made over the next two years, minus an 8 percent discount to the city.
The city keeps its share of found money, about $17,000. That revenue will continue streaming in each year now that the accounts are up to date.
"We thought they'd find more," said John Casciano, the water department's office manager and auditor. "We're glad we did it. You want to know."
The city doesn't bill for about 22 percent of the water that passes through its system. The industry average is between 10 percent and 20 percent, though some cities lose 40 percent or even 50 percent. The state performance audit released in 2000 recommended that the city cut its loss percentage by finding leaks or unbilled accounts.
The city already knew about the situation and contracted with Utility Revenue just before the audit was released.
Checking begins: The company sent two workers to Youngstown in January 2000 and set up an office. They checked more than 300 meters, including all major users; checked accounts where water, but not sewer, were paid; checked fire lines for unauthorized water use; and compared other account information.
After a year, Utility Revenue found about 15 accounts that weren't being billed, worth about $30,000 a year.
That pales compared with what the company usually finds. A typical city of Youngstown's size can generate 200 or 300 missing accounts worth hundreds of thousands of dollars, the company said.
Utility Revenue spends a few hundred thousand dollars up front looking for money that cities aren't getting. In Pittsburgh, the company found an entire downtown office building that wasn't paying for its water. The company has turned up more than $13 million working for cities such as Atlanta, Phoenix and Nashville.
Utility Revenue told the city this is the first time it left a project early and didn't make money.
Cooperation within the department and reliable equipment are among the reasons Youngstown has far fewer problems than other systems. Meters are 8 to 12 years old and the billing system is 8 years old.
"We believe [this] has accounted for the very few problems found within the overall distribution and billing system," the company's final report said.
Utility Revenue recommended a study of all city water that doesn't pass through meters to determine where unaccounted water is going.
For example, water used to put out fires isn't metered. Neither is water used to flush fire hydrants; clean streets, sewers and waterlines; or to hose down emergency demolition sites.
Low cost: Such a study can be done in-house for little cost and should go a long way toward finding where 22 percent of the water is going and reducing the number, Casciano said.
"We're real comfortable with these recommendations," he said. "We think we can drive it down some more."
The city then can decide if it wants to spend money on testing for leaks. However, that's unlikely to be worth the money. The city probably is losing less than it would cost to do the testing.
An in-ground ultrasound system would costs hundreds of thousands of dollars, which wouldn't be worth the cost, said Eugene Leson Jr., the water department's chief engineer.