While the Gardner City Council grapples with the decision of who can best manage all three of the city’s utilities – water, waste water and electric – the Electric Utility Board continued with business as usual as members voted to approve three new policies at its Aug. 4 meeting.
However the possibility of losing control of the financially sound utility weighed heavily on the minds of board members.
City council members are considering whether or not to lease the management of the city-owned utilities to a publicly owned management company by forming a public-private partnership.
Members of the Electric Utility Board expressed concern during their meeting.
Some of the group believes electric is being lumped in with water and wastewater to “sweeten the pot” for any company interested in managing the utilities.
Board members Randy Tedford and Eric Schultz both commented that most of the information they found on public-private partnerships centered on water and wastewater, not electric.
Chairman Lance Boyd said that he attended Monday evening’s council meeting and it left him feeling uneasy about the proposal.
“I feel our success is what’s causing the problem now. They’re concerned about water and wastewater and as healthy as we are (financially) I feel our success is working against us,” he said. “I get concerned. I told Brian Broxterman, this is a very important decision the council has to make – probably as important as the intermodal.”
Added board member Eric Schultz, “We wouldn’t be on the table if they thought they could get someone to come in and take water and wastewater.”
Board members said that they believe water and wastewater, while currently in the red, are on their way to becoming solvent. Some speculated that creating a Board of Public Utilities, similar to the EUB would be beneficial in shoring up the two entities while keeping control in the hands of local citizens. Boyd said that the city has successfully managed the services for nearly a century.
The group worried about giving up control to a company who is not based in the area. Bill Krawczyk, Gardner Energy Electric Utility director, told EUB members he concerned about negative effects on response time to outages and rate increases that might face citizens should the council decide to move forward with the plan to form a public-private partnership.
“The council discussed forming a public-private partnership option to provide some (short-term) financial relief for city’s utilities as a whole, knowing (electric) is in good financial shape but water and wastewater are not,” Krawczyk said.
He said he believes that the city will receive an upfront payment from a management company that would provide an influx of cash to the city in the short-term, but that he believes that the private company would retain all of the revenues generated by the utilities – in the long run costing the city income. He also said private management companies can have periodic rate increases built into contracts, obligating the utility to raise rates on customers at intervals. Gardner Energy hasn’t had a rate increase since the Electric Utility Board took over nearly three years ago.
Brandon McCollum, Gardner Energy’s distribution supervisor, said he believes the city of Gardner is in a similar situation that De Soto found itself in several years ago – where the city was short on cash and decided to sell their electric to a private company.
“It’s an easy access to cash, De Soto sold their electric off and got $2 million in cash. It’s all spent now,” he explained. “…If you take the money out of your utility you’re robbing the utility to pay for other things. You’ve got to look down the road.”
While no decision has been made on the future of utilities in Gardner, the council is considering forming a citizens committee to investigate the feasibility of both options. In the meantime the council passed a vote on issuing an RFI – request for information – before proceeding.
In other business, the EUB:
• adopted Gardner Energy’s Operating Reserves Fund policy. The fund will maintain $2.758 million in cash reserves to address major expenses related to natural disasters. Should disaster strike, the utility could respond without raising rates.
• adopted Gardner Energy’s Capital Replacement Reserves Fund policy. The fund will maintain $3 million to address unscheduled major asset failure and replacement. Should major equipment fail, the utility would respond without raising rates.
• adopted Gardner Energy’s Line Clearance Policy. The policy will provide staff with a schedule and guidelines for tree trimming and removal. They also plan to work with community development to establish easements where trees should not be planted. Finally, GE formed a list of recommended trees for planting in Northeast Kansas – the list is simply a recommendation, not a mandate for citizens.
• reviewed Gardner Energy’s year to date budget through June 2011.
Electric board members express concern about future of utility