Brookhaven’s financial position remains strong, but an auditorTuesday suggested consideration of fee increases for some cityservices whose expenses are not being covered by current rates.

Auditor Pat Lowery presented an audit for the city’s 2004 fiscalyear that ended Sept. 30. He said he issued a clear opinion.

“Overall, the city’s finances are in good shape,” Lowerysaid.

With a $43,000 gain, Lowery said the city was in a virtual”break even” position in its more than $7 million general fund.

In discussing water and sewer and solid waste activities,though, Lowery voiced some concerns that fees charged are notgenerating enough revenue to cover expenses. Water and sewer andsolid waste operations are known as enterprise funds, meaning theyshould be self-supporting.

According to the report, solid waste fund operating expensesexceeded revenue by $281,775. Nonoperating revenue from propertytaxes and other sources was not enough to make up the difference,leaving the fund with a $19,067 net loss.

In the water and sewer fund, revenue surpassed operatingexpenses by $287,431. But nonoperating expenses, such as debtservice on previous capital improvement bond issues, amounted to$240,694, leaving only $46,737 in net income.

Lowery said audit guidelines recommend entities being able toreserve 5 percent of revenue for future improvements, something thecity is unable to do in its current position. He pointed out a$249,115 net decrease in cash flow in the water and sewer fund.

The auditor said the city board may want to look at rateincreases to address the situation. Citing conversations with cityofficials, Lowery said a rate analysis is being planned.

“Steps are already being taken to give you information you needto make a decision there,” Lowery told board members.

In a related matter later in the meeting, the board approved anew city policy for aldermen to review water and sewer and solidwaste rates in August during annual budget preparations.

Mayor Bob Massengill said the city should have had a policy toaddress the requirement but had not. He said financial consultantand former Vicksburg Mayor Demery Grubbs would discuss rates andfees with board members during an upcoming work session for the newyear budget.

In other budget matters, the board approved a budget revisionfor the current year.

City Clerk Mike Jinks said the city’s general fund was adjustedto reflect an expected $73,000 more in revenue over expenses. TheWater and Sewer Fund revision reflects a $207,000 gain while theSolid Waste Fund revision shows a negative $18,580, which will becovered with a carryover fund balance.

“This does not throw us out of a balanced budget,” Jinks said.”It’s just realigning where the funds are.”