Thank you for attending the 2025 OML session
"Is Your Utility System Profitable?"
Do you remember the objective of the session? It was to go home and implement the ideas needed to make your utility systems profitable. This page contains material referred to during the session.
Your Role as a Director
As an elected official you serve as a Director on a Board of Directors. You have different titles, such as "Trustee", or City Counselman but you serve in the role of a director. As a Director you have 3 duties in the discharge of your role:
Care
A director's duty of care is a fiduciary duty to act with the diligence, prudence, and reasonable care that a prudent person would use in similar circumstances when making business decisions on behalf of the organization. This includes staying informed about the organization's affairs, thoroughly investigating options, seeking expert advice when necessary, and ensuring all actions are taken in good faith for the organization's best interests
Obedience
The duty of obedience requires adherence to the organization's governing documents, such as organic documents, bylaws and ordinances or resolutions. This duty ask you to ensure the organization operates in accordance with its mission and applicable laws and regulations. Directors must act in good faith to ensure the organization stays true to its purpose and uses resources exclusively to advance its mission. You should stay informed about changes in relevant statutes and policies.
Loyalty
The duty of loyalty requires a board director to prioritize the organization's and stakeholders' interests above their own personal interests, avoiding self-dealing, conflicts of interest, and any actions that could personally benefit the director at the organization's expense. This means directors must disclose conflicts, recuse themselves from related decisions, and not take organizational opportunities or assets for personal gain. A breach of this duty can lead to personal liability and other legal consequences.
The duties of care, obedience and loyalty are owed to the organization – always and only. Decisions must further the mission of the organization and strengthen its ability to carry out that mission. These duties are clouded when you wear two hats. Single hat wearers seem to operate fiscally stronger and better maintained systems.
Obstacles to Implementation
- Over staffed general fund
- general rule of thumb you should employ no more than about 1% of your population – every extra body carries a minimum $45,000 price tag
- Lack of economic development
- are you actively engaged in economic development
- Ignorance of governing board members
- use the bank lobby rule – slow, deliberate measures
- Staff resistance
- Fear of job loss
- Lack of knowledge/experience
- Creation of "extra" work
Antidote to Obstacles from the Governing Body
- Ordinances and Resolutions
- Set in place boundary lines and witnesses to future governing board, staff and field hands about the rules and expectations of the organization
- Initial creation of ordinances and resolutions should include steps and timeframes for achieving goals – bank lobby rule
- Rent expertise to overcome the obstacle of lack of knowledge/creation of "extra" work
The Profit and Loss Formula
Although gathering all the inputs into the cost may not be, the profit and loss formula, or P&L, is simple. Consider this: What did it cost to get a bucket of water out of the ground, or out of the lake, or both, and delivered into my bathtub? What did you charge the customer for that bucket of water? The difference is profit (retained earnings) or loss.