It’s not every day that you can get a group of people from diverse backgrounds to agree to volunteer and make tough but fair decisions that will benefit their neighbors. When USDA Rural Development (RD) referred Communities Unlimited (CU) to offer technical assistance to the Phillips County Sewer Board, the task of developing a new board of directors for their wastewater system was a bit of an unknown.

Phillips County is a Mississippi River Delta community that proudly encompasses the cities of Helena-West Helena, Lakeview, Elaine, Lexa, and Marvell. The Phillips County Sewer Board, a county subsidiary nonprofit, had been inactive for quite a few years, with only the office clerk and the wastewater operator facilitating the board’s operational and administrative needs. With the clerk soon to retire, the county judge, Clark Hall,found himself tasked with finding and appointing a new board of directors. He contacted CU for assistance.

Check the Bylaws
Before one can fathom managing a board of directors, some thought has to go into developing the board. You’ll need to answer such questions as:

  • How many directors are necessary?
  • What should the board look like?
  • Where can the directors live?
  • How are the members selected?
  • Is it voluntary?
  • Are they elected or appointed?
  • Are the board members volunteers, or can and will they be compensated?

If there has been no active board management, beginning to answer these questions may be intimidating. But, before the room starts spinning, consider what most, if not all, nonprofits have in common: bylaws. Though it might seem outdated, checking the existing bylaws will give you an excellent foundation on which to build. Under the direction of the bylaws, you can determine the number of directors that defines a quorum. With that one key definition, you can begin posting notices within the area for possible candidates.

Recruit Volunteers
Finding volunteers to manage the wastewater needs of nearly 800 customers within the Barton-Lexa Water Association, the City of Lakeview, and the City of Helena-West Helena proved to be challenging. As the facilitator, we worked closely with Judge Hall. Judge Hall reviewed and selected potential candidates to revive this previously dormant utility board.

By October 2020, Judge Hall selected Evelyn Schmidt, Cleveland Jackson, and Jerry Martin to serve as the directors of the Philips County Sewer Board. Each candidate’s background is uniquely different, but they share a common interest in the success of the board. Their first board meeting took place in the Phillips County Library. During this meeting, they learned that the clerk and wastewater operator would be retiring within the month. Although things seemed uncertain, the new board took this news in stride and asked us to facilitate their future meetings. We knew that this board, like others, needed to establish roles and responsibilities, and take inventory of its assets.

The position of board president was accepted by Evelyn Schmidt, secretary/treasurer by Cleveland Jackson, and director #1 by Jerry Martin. Review the Current Situation It was confirmed that the board owns some 27 lift stations across the service area that pump wastewater to the cities of Helena-West Helena and Lakeview to be treated. We confirmed with the Arkansas Department of Energy and Environment that there was no further need to employ a wastewater operator, because the system does not treat wastewater.

When reviewing the expenses of an entity to look for ways to reduce budget expenditures, payroll is usually the number-one area that can significantly display a hefty reduction. In comparison, other line items, such as utilities like electricity, are pretty consistent unless some significant, energy-efficient upgrades are made. As a part of managing their assets, the board realized they needed to get the financial records from the now-retired clerk, and they decided to hire a new bookkeeper. In the following months, the board of directors worked through CU’s technical, managerial, and financial assistance assessment. They were able to plan, recognize, and address important business matters while understanding their new environment within wastewater operations.

Discuss Issues and Solutions
By mid-November 2020, the board began noticing a significant inconsistency in the billing invoices from one of the systems that treats Phillips County’s wastewater. Anyone with firsthand knowledge of the billing process had retired, leaving the board with unanswered questions.

At the December meeting, President Schmidt stated, “Something has to be done. This board can’t continue to operate in chaos. We have inherited some issues that will hinder our effectiveness if not addressed.” The other directors agreed. We suggested that the board request a meeting with the Mayor of Helena-West Helena to discuss wastewater treatment and the billing challenges. A motion was made and passed unanimously to meet with the Mayor in January. We also encouraged the board to let CU review all debt and income as well as current sewer rates to gain a true perspective of the sewer board’s operating ratio—and to determine the need, if any, to restructure some of the board’s RD debt with a loan from CU. Determining the operating ratio would allow CU and the board to fully note the sewer board’s profitability.

To calculate the operating ratio, one divides operating revenues by operating expenses. An operating ratio of less than 1.0 indicates fiscal distress. After the CU review, the board’s operating ratio was found to be 1.0. While this isn’t a terrible position, any increase in yearly expenses would put the board in financial distress if the sewer rates were not updated/increased. Early in 2021, Board President Evelyn Schmidt, CU staff, the board’s new bookkeeper, and the Mayor of Helena- West Helena met at City Hall to discuss the billing discrepancy and solutions. The mayor actively listened and noted the board’s concern; he was fully aware of the issue. He assured the group that he and his staff would work diligently to correct the error if one was determined.

Expect the Unexpected
Like most things in life, something unexpected almost always rolls down the pipeline. In this case, during February 2021, the Phillips County Sewer Board faced a nearly two-week-long winter storm with temperatures dipping below zero degrees Fahrenheit, with the lowest being 18 degrees below zero. Due to the extreme temperatures, the pump station equipment sustained damages totaling almost $25,000. Initially, the board was relieved to know that the insurance plan would cover damages. But, much to their surprise, the insurance plan had been canceled. Unfortunately, it was set to renew when the previous clerk retired. In that transition, nobody made the payment and the policy lapsed. The cost of making the repairs would have created a significant hardship for the board; fortunately, CU was able to assist them with a small utility loan.

Adjust as Needed
In preparing the CU loan application and reviewing the income revenues and expenditures of the sewer board, it became clear that the sewer rates needed to increase from $18 to $23 for the first 2,500 gallons, and $2.20 for every 1,000 gallons in usage after that. With that increase, the Phillips County Sewer Board would quickly achieve a more stable 1.05 operating ratio. Once the directors saw the results of the loan application review, they were eager to move forward in the best interest of the board and its customer base. Shortly after that, a motion was passed to raise the rates.

After a few months, the Phillips County Sewer Board was approved for a $255,000 CU loan that allowed for the reimbursement of pump station repairs and the restructuring of existing debt. During this time, the board also heard from the USDA area office about a scheduled compliance review, as required of all USDA loan borrowers per RD regulations. They successfully provided USDA with all the necessary documents, thus keeping the board compliant with RD guidelines and prepared in the event of a disaster. Keep Going Despite the hurdles, the newly appointed directors of the Phillips County Sewer Board made it through their first year, aided by CU’s technical assistance for the water system. The system has successfully adjusted and implemented its new sewer rates. They also pinpointed the billing issue with the wastewater processing system and have a pending resolution to solve the problem.

In the future, the board of directors hopes to construct a maintenance building to house equipment and supplies and to host its monthly meetings.

Brad Jarrett

Brad Jarrett

Communities Unlimited
Arkansas State Coordinator