By Ron Rocky Coloma
The Guam Waterworks Authority's revenue increase in fiscal 2023 was offset by an expenditure increase triggered by salary raises and the rising cost of utilities.
The financial strain comes despite strategic rate hikes and substantial federal grants to shore up the utility’s finances.
According to the Office of the Public Auditor's audit, GWA's operating revenues rose by 6.5 percent, reaching $107.8 million, p from $101.1 million in fiscal 2022.
The increase was driven by higher water and wastewater revenues, which grew by $2 million and $2.8 million respectively, and a $1.6 million reduction in bad debt expenses, OPA said.
A Public Utilities Commission-approved rate increase of 5.5 percent effective Oct. 1, 2022, also contributed significantly to the revenue boost, despite a 4.1 percent decline in overall demand.
Auditors, however, noted that the revenue growth was overshadowed by a 10.1 percent increase in operating and maintenance expenses, which surged to $105.9 million from $96.2 million the previous year.
The primary drivers of these rising costs were power and water purchases, and waste disposal fees, which together added $7.2 million to expenses.
Additional operational costs increased by $6.7 million, with power purchases significantly impacted by the Levelized Energy Adjustment Clause rates linked to oil prices.
The audit found that employee-related costs also rose, with salaries, wages, and benefits increasing by $2.3 million, including $900,000 in premium pay for employees involved in recovery efforts following Typhoon Mawar.
These recovery costs are not expected to be covered by insurance claims or FEMA funds until fiscal year 2024 or later. Despite these increases, a $4.2 million reduction in retiree healthcare costs provided some relief.
Despite these financial pressures, GWA reported an increase in net income of $12.3 million, largely due to $24.5 million in grants from the government of Guam and interest income.
However, the overall financial picture remains challenging. Total non-operating expenses experienced a net loss of $3.1 million, an improvement from the $23.3 million net loss in fiscal year 2022, driven by $14.5 million in grants and $10.1 million in interest income.
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GWA’s total liabilities decreased by $34 million, from $867.8 million in fiscal year 2022 to $833.8 million in fiscal year 2023.
OPA said this reduction was mainly due to decreases in other post-employment benefits liability by $29.1 million and revenue bonds payable by $12.3 million. However, the net pension liability increased by $13.4 million, reflecting ongoing pension obligations.
As of Sept. 30, 2023, GWA had outstanding revenue bonds payable of $640.1 million, down $12.3 million from the previous year. The total principal and interest remaining on these bonds is $1.1 billion, payable through 2050.
In fiscal year 2023, GWA paid $39 million in debt service on these bonds, with total pledged system revenues amounting to $103.2 million. Interest expense for the revenue bonds decreased by $497,000 compared to fiscal year 2022 due to higher principal repayments.
Federal assistance played a crucial role in supporting GWA’s operations. The U.S. Environmental Protection Agency provided $9.9 million for water and wastewater capital projects, and the American Rescue Plan contributed $12.4 million to mitigate rate increases. An additional $8.6 million was allocated for infrastructure upgrades in Adacao.
The U.S. Department of Defense also provided $173.2 million for system improvements related to the Marine relocation from Okinawa to Guam, with $8.1 million expended in fiscal year 2023.
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