Council eyes possible electric rate increase

Year-end transfers, a normally routine exercise done every December by city planners to ensure Iola’s funds are in balance, has once again put the city’s utility reserves under the microscope.
City Administrator Carl Slaugh said the city should once again consider raising Iola’s electric rates to boost its reserve fund. That’s because 2014 was a particularly costly year, Slaugh noted, with the city transferring more than $3.4 million from its utility funds to either Iola’s general fund or its parks and recreation funds.
“Our utilities are what most people would consider a ‘cash cow,’” Slaugh said.
Those funds are equivalent to a property tax levy of 115.043 mills, Slaugh said. In other words, the owner of a $100,000 home would spend an additional $1,322.99 in property taxes to support the city, if it could not use utility transfers.
That said, the city still is able to maintain competitive rates while supplementing its budget through utility transfers, Slaugh offered.
As it stands, Iola’s natural gas fund are flush, about $1.3 million, or roughly 25 percent of the city’s annual budget to run its Gas Department. The electric fund balance has more money, about $1.8 million, but it is only equivalent to about 14 percent of the city’s budget.
“The electric fund is lower than desired,” Slaugh said, because of extra money spent over the past two years to meet EPA regulations, economic development projects and cost overruns for ambulance service.
Slaugh said he was preparing a proposal asking the city to implement a 3 percent hike in its electric utility rates to offset lost reserve funds. Doing so would bring in an estimated $381,000 in 2015.
But he also wants to wait.
“We need to do a better job of providing specifics of how our rates compare,” Slaugh said.
Scott Shreve, Iola’s energy consultant, will be on hand in January to provide some perspective on the city’s utility reserve funds.
As an aside, Slaugh noted the city has realized plenty in savings now that it no longer is a member of the Kansas Power Pool, and instead purchases electricity from Westar’
“If you look at what we spend today versus what we would have spent had we stayed with KPP, that’s a difference of about $2 million,” Slaugh said.
Lower electricity costs meant Russell Stover Candies spent about $322,000 this year, compared to $460,000 in 2013. Gates Corporation, over the same period, saw its electric bill drop from $483,000 to $344,000. Both used the same amount of electricity, Slaugh said. With a 3-percent hike, those costs would go up about $24,000 for each business, Slaugh said.
“My only concern, water and sewer rates have already gone up,” Councilman Gene Myrick said. “I just got a comment from a citizen who said everybody’s making money because we keep raising rates. Some of these people on fixed incomes are saying ‘enough is enough. We have to make do with what we have, the city should do the same.’”
“That’s true, it’s difficult to raise rates,” Slaugh responded. “What happens if you don’t raise rates is what happened to us three years ago, where we had three years of no rate increases, and we lost $1 million in revenue. That money has to be made up somewhere, or you stop maintaining your systems. If we want to continue with maintenance projects, if we want to continue providing incentives to companies through economic development projects, the money has to come from somewhere.”
Councilwoman Beverly Franklin agreed.
“We need to get those reserves built back up,” she said.
“When you talk about the kilowatt rate increase, it might be helpful to show what we as residents see each month in terms of dollars,” Councilman Steve French said.
He suggested bringing in samples of minimal, median and maximum electric usage for residential consumers.

NO CITIZENS attended Monday’s budget hearing to discuss the year-end transfers.
Council members approved, 6-0, a $40,000 transfer from the gas fund, an additional $200,000 from the electric fund, and $120,000 from its wastewater fund.