Council absorbs initial shock re: electric rates

An adage among do-it-yourselfers says that every home remodeling project is more involved?and ultimately more expensive?than you think it will be at the start.

The Hillsboro City Council is finding that adage to be true about its desire to ?remodel? its rate structure for local utilities.

Having frequently identified the need to review its rates for electricity, water, sewer and solid waste, the council got a first glimpse of ?reality? in regard to electrical rates during its Dec. 18 meeting.

DeAnn C. Dotson, representing Sawvel and Associates Inc., a consulting and engineering firm from Louisburg, presented a 25-page preliminary report that analyzed projected energy costs as well as the city?s current structure and goals for its electrical system.

Her analysis concluded that if the city were to meet a goal of maintaining a $1 million balance in its Electric Fund as a safeguard for department operations, while also covering projected increases in energy demands and costs, the city would need to increase its rates by 3.4 percent for 2008 and by another 3.4 percent for 2009.

Dotson also strong recommended that the city add a ?power-cost adjustment? dimension to its billing policy that would allow the city to adjust its charges to customers for unexpected fluctuations in electrical costs during the year.

Her analysis indicated the balance of the city?s Electric Fund had dwindled over the past 12 months by more than $118,000 because of the city?s below-cost rates for local customers.

The suggested increase would mean the average household would see its annual electric bill increase by $67.41 in 2008 and by an additional $69.70 in 2009.

To complicate the matter, Dotson said her research indicates that Hillsboro?s current electrical rates are already ?pretty high? compared to rates in similar-sized communities.

But Mayor Delores Dalke noted that the issue facing the council is more complicated and far-reaching than simply raising customer rates to meet increases in energy costs.

She said a previous city council decided some time ago that $200,000 of the revenue generated by electrical rates should be used to subsidize the city?s general fund and capital-improvements budget.

A previous council also initiated a $5 electricity surcharge a few years ago to cover an operating shortfall that developed when the Kansas Legisla?ture arbitrarily reduced demand-transfer payments to cities as a way to ease a projected deficit in the state budget.

The only alternative at the time, Dalke said, would have been to raise the local mill levy on personal property to cover the shortfall in funding.

Dalke thanked Dotson for her initial analysis, calling the report ?the first sensible thing I?ve ever seen us do when it comes to utility rates.?

But Dalke added that before the council considers the report?s suggested rate adjustments, it will need to review those previous decisions regarding how electrical revenue will be used.

Dotson, in closing, emphasized that her report is only a draft, and that the rate changes it suggests would be subject to change based on the council?s review of its current funding policies.

Council members agreed that a work session to discuss the issue would be necessary, but no date was designated.

As if the report on electrical rates wasn?t sobering enough, City Administrator Larry Paine reminded the council that similar reviews are needed for the city?s other three utilities, too, and that additional rate adjustments may be required in those areas as well.

Other business

In other business, the council:

n approved a compensation plan developed by Paine that establishes a salary scale and step-grades for all city employees. As part of the plan, city workers will receive a cost of living increase of 2.5 percent in 2008. The plan also allows for the awarding of merit increases.

?This is what we?ve needed for years,? Dalke said prior to the vote.

n approved an ordinance identifying amendments to the city?s 2007 budget affecting seven line items that the original budget had not adequately projected. The changes will not affect the city?s total budget, Paine said, nor the local mill levy needed to fund it.

n approved cereal malt beverage license renewals for Duck?wall-Alco, Vogt?s HomeTown Market, Cooperative Grain & Supply (Ampride), Casey?s General Store and the Hillsboro Municipal Golf Asso?ciation.

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