Iola will raise its water rates, while reducing electric rates so that customers don’t pay more for their monthly utilities.
A divided council Monday directed City Administrator Carl Slaugh to develop a rate plan so the water fund could make up a nearly $300,000 annual deficit.
Doing so would require water rates go up about 18 percent, according to figures provided by the council’s water utility committee.
Council members discussed whether an 18-percent hike was too steep for ratepayers in one swipe, considering instead a 9-percent hike over each of the next two years.
That’s when talk about a simultaneous decrease in electric rates was voiced by council members Kendall Callahan and Ken Rowe.
Rowe provided a copy of the city’s combined utilities fund budget that noted that Iola has about $4.45 million in unencumbered funds, including $3.3 million in electric reserves.
When customers receive their utility bills, most are not concerned with how much is spent for electricity, water or natural gas separately, Rowe said.
“Most people are concerned with what the bottom line is,” Rowe said. “In the combined utilities funds, we do not have a revenue problem. We do have a lack of sufficient revenue in the water fund, but that’s not the public’s fault that we got ourselves into this.
“We’ve got a very good picture in all the funds except the water,” he continued. “I don’t care if we have to increase the water fund by 25 percent, as long as we make adjustments elsewhere to keep the public’s utility bill about the same.”
A 25-percent rate hike in water rates would equate to a 3-percent cut in electric rates, Rowe said, in order to make up the difference.
“In today’s times, I don’t think we need to be getting into the pockets of our citizens more than we already are doing, especially when we are making money in our utilities,” Rowe said, adding that increasing water rates, and utility rates in general, disproportionately punishes the city’s poorer citizens.
Rowe’s proposal received four votes — his, Callahan’s, Jim Kilby’s and Scott Stewart’s — while Joel Wicoff, Beverly Franklin, Steve French and Don Becker voted in opposition.
“I hate to reduce the electric fund,” Franklin said. “No more than we want to raise the water fund, it seems to me that it’s not enough to hurt anybody to get the fund solvent over two years.”
Raising the water rates 9 percent would mean an increase of about $2.70 for the average residential bill and $7.57 for commercial businesses.
“My caution on this issue is that with all the discussion about the budget, we’ve got to be careful not to cut our income,” Wicoff said. “Our electric fund is a good source of income for the city, so we’ve got to be careful with that.”
Wicoff noted the city still has yet to decide whether to accept a proposal from the Kansas Power Pool to lock in the city to a 20-year pact to purchase wholesale electricity from the consortium over the next 20 years.
“We probably need to get that taken care of first before we decide to adjust that fund,” Wicoff said. “If we are sure that it works, I don’t have a problem. But at this point, I’m not sure that we’re clear on that. I don’t want to weaken our electric fund.”
Rowe responded that the city’s overall revenue would not drop, only that more of the income would be going to the water fund, and less for electricity.
“We really need to look at reducing our spending in some way, shape or form,” Rowe said. “If we don’t reduce our spending, we’re gonna be in bad financial shape in not too long a period of time. You can’t always just increase the burden on the public in order to fund every dog park and walking trail that you want to build.”
Wicoff, meanwhile, noted that the 18-percent rate hike necessary to replenish the water fund is roughly equal to the rate of inflation since the water rates last were adjusted.
“We’ve got to keep up with inflation to keep our equipment up,” Wicoff responded. “Our electric fund is going to be going down. And we’re going to have less money for generators.”
French, meanwhile, noted it took several months of scrutinizing the water rates to come up with what he considered a fair proposal to get the water fund solvent.
“We’ve known for months that the water rate issue was the topic,” French said. “I personally would have appreciated sticking to the water rate issue, and if we needed to look at the electric rates and making adjustments, that we have another special committee formed to look at it and discuss it. I hope we’re not prematurely shooting ourselves in the foot by making a cut to the electric fund without doing an actual study of what all it’s funding and can those obligations be switched to another account.
“I have no problem looking at electric and possibly cutting it,” French continued. “I would love that idea. But I would like to see a study put into it first.”
The 4-4 deadlock sent the matter to Mayor Bill Shirley, who opted for Rowe’s proposal with his tie-breaking vote.
IN A RELATED matter, the council authorized a letter be sent to the Kansas Power Pool that said the city still is not interested in locking itself into the KPP consortium for the next 20 years.
Power pool officials said a long-term commitment from the city is necessary in order for it to purchase a share of the electricity provided by the Dogwood Power Plant near Kansas City, Mo.
Iola would be interested in paying for its share of the Dogwood plant “under a project based transaction” instead of bonding itself to KPP.
The city also is looking to once again receive financial considerations from the power pool for Iola’s ability to generate electricity when demand warrants. Such a practice allowed the city to receive discounted electricity from Westar when it was the sole supplier of electricity to the city.
