Looking at Rates and Perceptions
by GalionLive • January 27, 2012 • News & Views • 2 Comments
The second part of Thursday’s City Council Finance Committee meeting started with a simple question, and ended with a set of motions fixing the next step in the City’s consideration of electric rate increases. In the middle was a good amount of dialogue, including a few rather stark differences of opinion.
The initial question was raised by one of those gathered to listen to the Finance Committee meeting:
In the 2011 Revenue Requirements (the amount needed to be obtained to operate the electrical utility) shared by Sawvel and Associates, some $296,668 was added to total expenditures with a caption of “Uncollected Billing Revenue and Other.” If this is correct, the questioner posed, why should paying electric customers be paying for those who do not pay their bill, and does this not therefore represent a form of hidden tax?
City Manager Gene Toy responded that while this amount does include uncollected bills, it also includes various City operations that use electrical service, from the water plant to street lights. Councilwoman Roberta Wade, Finance Committee Chair, immediately agreed with the audience member, and went one step further to suggest that each part of City government should be responsible for paying their own utility costs. At present this cost is passed on to electric customers only, which she suggested means that the City has “found a way to tax the people through electric rates.” Requiring each department to account for their own power usage, she added, would encourage conservation of resources — lights would be turned off more often, etc.. It would also eliminate the electric consumer’s current subsidy of governmental operations.
Council President and Committee Member Gail Baldinger quickly responded by questioning the impact this segregation of uses would have on water and sewer rates. The electric rate might go down, for instance, but the water and sewer bills would rise to compensate for their new departmental charges. The net result, he suggested, would likely be a “wash.” Wade responded by noting that there are currently “healthy fund balances” in each department coffer and suggested that Council should at least examine the impact the move would have on each rate.
Wade then referenced a recent comparison of utility rates she had completed with the City of Shelby. Taking her last month’s bills, she discovered that she would have paid 28% less for water last month in Shelby, as well as 72% less for sewer and 12% less for electricity.
At this point, Baldinger signaled his agreement that a study should be made to determine the impact of billing departments directly for utilities, although he again emphasized that the net result would likely be the same for utility customers, with amounts going down in one area, but up in another.
The difficulty of actually measuring department utility usage was discussed as well. While some departments have metered usage, other usage — such as the lights in Heise Park, for instance, are not. The question was raised whether or not segregated costs would then be passed on to City facility users — the Little League organization charged for ballfield diamond lights, for instance.
The conversation then turned more conceptual. Another audience member noted that the problem in part was one of perception, sharing that in his opinion there was a general belief in the community that Council is not doing enough to keep costs down. Still another in the audience agreed, sharing that the common perception is that there no action by Council. “It’s 2012, its time for a change,” she suggested, encouraging Council to be proactive, not reactive.
When Electric Department head Jeff Price was then asked whether his department was becoming a “training ground” for line workers, he noted that that was likely the case; Shelby, for instance, pays their workers $7.00 more per hour than Galion. Wade immediately reemphasized the fact that despite this, Shelby’s rates were actually lower than ours — suggesting that that City is somehow holding the line on costs in an effective way, although Price reminded her that Shelby had just sold their city-owned utility and their rates were therefore poised to increase.
“If we can’t get a handle on the utility rates, and restore confidence, we will have an exodus,” Wade continued. “We have to make tough decisions on these utilities.”
The next few minutes were spent looking at whether high utility rates — or possibly the perception of high rates — was actually the cause of people or businesses leaving the community. Price asserted his belief that “people are not moving because of utility rates,” suggesting instead that they are leaving “because they find out that we don’t want this town to grow.” At this point, Councilmember Walter Keib asked Galion Chamber of Commerce head Joe Kleinknecht, who was present, whether or not any businesses had moved to Galion in the last two or three years. Kleinknecht assured Keib that there has been, and City Manager Toy added that E-Crane had just moved from Bucyrus to Galion, that Covert had just completed a major expansion, that HTI on South Street has added to their Galion operation at the expense of other locations, and that Avita Health System made the decision to make the Galion Community Hospital there primary facility — all knowing in advance what local utility rates were.
At this point, one audience member shared that she knew of a family who had just moved to Galion from Marion to escape higher utility rates in that city. Baldinger and Keib shared that they had received no calls or complaints from citizens about rates. Yet another individual asserted that he knew of 11 people who had moved because of utilities, although Price openly doubted that was true, saying that a large number of factors go into decisions on moving to or from Galion.
Keib mentioned at this point that the proposed rate changes did call for complete removal of the 4% stabilization adder, which would provide some immediate relief for electric customers.
Two motions were made, seconded, and passed unimously by the Committee. The first was to recommend to Council to completely remove the 4% adder — although the Sawvel representative suggested not moving ahead on that recommendation until a decision on the electric rate decision was made. The second motion was to have Sawvel conduct a study of departmental electric usage, and the impact it would have on the various utility rates to charge the cost for that usage to the particular department.
Before the meeting ended, Balidinger took the opportunity to refute a major allegation made during the meeting about Council’s alleged “inaction.” Originally, he emphasized, the proposed utility rate increases were set at 20% annually for the next five years. This Council and City Manager, he concluded, had worked tirelessly to reduce those numbers, and as a result the proposed increases are only a small fraction of those original proposals.
As it stands, the study will now be conducted before the Committee makes its final recommendation to Council.
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