Last night the Finance Advisory Board met to go over 1) the electrical conversion and the Assistant Utility Director, Clay Lindstrom's Plan 2) The Fire Assessment and 3) a way for the FAB to examine city matters of financial importance before they go to the Commission. I left near the end of the discussion on item #2.The Agenda items were re-adjusted because top departments were there. When I say "top," that's exactly what I mean. Becky Mattey, Utilities Director, is right under the city manager in salary, benefits and perks. Next there was Steve Carr, Finance Director, Clay Lindstrom, Assistant Utilities Director, Ed Fry, Manager of OMB and then Kathleen Margoles, Assistant City Manager. They were all there "just in case" and to be able to answer any of the FAB's questions.
Leeann Evans of the FAB wanted to discuss the possible sale of our Utility. One of the interesting questions asked by FAB member Bill Thrasher was, "What is the Utility worth?" No one could or would give even a guess--they had NO idea and if they did, they were staying mum. One engineer very familiar with the utility said, "Its worth around $25 - $30 million, with a lot of liability questions surrounding the power plant and its antiquated infrastructure. It has less than one-half of the meters and will eventually require a $25 million conversion, if for no other reason than to keep storeroom costs down."
Thrasher was all for spending this money if we keep our Utility. Mattey revealed that they are holding $5 million in inventory when in fact it should be at least half that amount. They will have a "garage sale" at some future date. When Pickett suggested that we were spending a lot of money, Mattey's reply was, "It's a big business. It's time to operate it as a business." It has been operating as a business, a very costly one to the rate payers. It should be operating as revenue neutral. All we know out here looking in is that the Utility is still the Black Hole. It just keeps spending and we just keep on paying. How many millions in inventory will they be selling off at pennies on the dollar?
And that's another thing. We were told that it is NOT a conversion. "It is a system upgrade. The problem is the system configuration, not the voltage," said Lindstrom. He further stated that he had designed bigger systems and this was "no big deal." Mattey agreed that our system had very little design to it and a plan was devised to ensure that reliability will be maintained so that we can move forward. It prompted the question from Pickett, "Any way to get rates down..are we stuck with a poorly designed system?"
What is the primary advantage of having your own municipal electric system? One expert in the Utility industry says: "It’s to be a not for profit entity. The owners, the citizens and ratepayers are to have the benefit of cheap reliable electric, not to have a cash cow to operate the rest of the city on. That is why they establish an enterprise fund to operate from so as to be independent of the burden of supporting the entire city budget.
A “normal” contribution for the utility is anywhere from 3 -6% of gross revenues to the general operating fund, I would suspect it’s (Lake Worth) closer to 20% if you looked at all the money taken for the utility. If you can’t operate the utility for the benefit of the customers as revenue neutral than there is NO reason to have it. You could attack business up the wazoo if you had the proper rate structure, but the greed of the leadership in conjunction with the incompetence has taken control away from the citizens. How about the concept of most households, live within your means, stop the spending."
We heard the Utility Director and Assistant say that all of this spending is in the ten year plan. Things could change but for now, we have $16,669,961.98 in restricted funds for the Utility upgrade. The Utility department predicts that we will need $22, 587,778 in today's dollars to complete the upgrade within the next 10 years. The FAB, Chair, John Pickett, asked for a complete run-down on costs to date. Where did the money go?
Last night was the first time we heard that it was Clay's plan. Actually Clay's plan back in April 2011 was presented by the Utility Director herself, Becky Mattey and people who heard the presentation insist that this Plan is a new plan, not the original.
Clay said that he devised this plan as if he were building a utility from scratch. Now, that is nice, if you don't already have a system and a plant in place. But since we have our own Utility, this seems rather extreme to say the least and definitely costly. I don't go buy a house and then decide to completely re-design it from scratch. That would be some sort of insanity, wouldn't it? The City expects us to spend almost $6 million more than we have left from the Bond money at today's dollar value. That $6 mil will be a heck of a lot more by the time this plays out...guaranteed.
There is still confusion on the Cost of Service charge that was $8.90 last year and then raised to $9.90 for this new Budget cycle that started October 1. Becky Mattey said that it was now $12.65 and that was approved by the Commission in a Workshop meeting. Please note, on August 16, 2011, the Commission voted to implement Resolution 33-2011 to raise the Cost of Service charge from $8.90 to $12.65. Also, there is a $12.50 cost for an Energy Rate and what we are paying per 1000 kWh, a small rate decrease from last year based on a Table provided in the Budget on page 70. On page 69 of the Budget, however, and to further confuse the public, the rates are listed as follows:
less than 500KWh: $11.30 per kw hours
exceeding 500kWh but less than 1000: $13.30
more than 1000kWh: $15.30
The $34.50 charge is for all those who do not use at least 179KWH of electricity says Susan Stanton. Mattey said that was around 2,000 customers during the season. So if you take 2,000 x 6 months (our Snowbirds are gone for at least one-half year) x $34.50 = $414,000. So the savings we are getting on the reduction in the public utility tax from 10% to 8% and the conservation charge from $2.60 per KwH to $1.95 is being made up by those who have turned off their circuit breakers, those truly conserving. It still does not explain the explanation in the Budget on page 69 that says we all will pay $34.50 minimum a month regardless of consumption.
It just seems that the Utility needs to come up with the real numbers and tell us how we will pay for all of the extra millions for any of this to work. Also I would like to see all of the changes from the first Plan to the one given to us last night to avoid confusion. Otherwise, those in charge will just drive us deeper and deeper in debt and closer to a real financial urgency.
Note: Sorry this blog is so damn long!
8 comments:
They have not only changed the low rates as initially promised (they promised a reduction from 0.1276 kwhr to 0.1130 kwhr, but have given you 0.1240 kwhr). It would appear that they have dropped the $34.50 surcharge from the bill. I did the calculations for 750 kwhr/month and it was $1.41 less than their calculated amount. They have also eliminated the 0-500 kwhr classification and rolled it into the <1,000 kwhr class, thereby giving those homes (yours) a greater break than those with <500 kwhr as originally proposed. All told, this new document bears no resemblance to the original.
I think this is a sin to charge people who conserve and use little even more money, it should be the other way around, taxing us who do not use a lot of AC or electricity is a sin. They should be charging those who abuse and use a lot, more, tax consumption more, not people who try to be green and thrifty. This city's leadership sucks! We need to fire all the leaders who proposed such a thing and not elected officials who would allow this added charge to us conservationists. You know, this city takes such advantage of the poor, old, thrifty, and immigrants, yet give nothing to them. Just look at Lake and Lucerne Aves west of city hall, we do not get the nice Christmas lights on our street light poles on this side of downtown west, there are so many inequalities, this is unjust and with the electricity, almost sounding as if prosecutable to do this to people who use less electricity. Thanks Lynn for always sharing all this city news.
I thought your article on the meeting last evening was very good, you are starting to make sense out of a dysfunctional mess. The very reason as to why nobody can answer what the utility is worth is somewhat complicated, it is a long standing issue that over time LW has never captured the real cost of their "plant". They do not subscribe to industry protocol of capital expenditures verses maintenance cost, therefore when items are placed into service that should be added to the base cost of the utility, not happening in LW. To determine the value of LW's utility, if they ever decide to sell it, it will be determined by an administrative law judge. This is an issue that can't be pinned on the current staff and management as it's been a deficiency for many years, again an indication that they shouldn't be running a utility, at some point it needs to be addressed and it isn't.
Boyer said it was an upgrade too. The bonded debt which is only Lake worth taxpayer's responsibility, not those outside our city who are on our power. As far as Thrasher, staff or any government employee loves fees and taxes. It makes their job easier.
The power plant is actually IMHO the Achilles heal of the utility. That is because of the cost to decommission it if the utility is ever sold. With the EPA of today demanding that all spills be cleaned up, the decommissioning could run into the millions. And, unlike yesteryear, when we could sell our surplus turbines to third world countries, I doubt that is possible any longer with the trade agreements that are currently on the books. For the utility to be sold, the outside plant would have to be valued and then have the power plant decommissioning and removal deducted from that.
Can we do an audit of all these staffers bank accounts?
Good morning, I have a few more observation regarding you article on the utility from the FAB meeting the other evening. I would question as to why the inventory is the storeroom is so inflated so as to cost the utility to have the need for a "garage sale". This incompetence is again as a you say going to cost the taxpayers an inordinate amount of dollars, yet did she indicate how it reached the level of over buying of unneeded materials. This is another huge waste of money that is unwarranted, she may not have been in LW when this happened, but other individuals were, who if anyone has been held accountable for this mess. There are currently three individuals on staff (see Mary's blog) who supported the 26 kV plan and were instrumental in its failure, yet are now in place to oversee this 13.2 kV project. are you serious. The very reason the inventory is in the inflated status is the way they purchased the material for the 26 kV conversion. Rather than use industry standard practices of having the materials bought through inventory and charged out against the project, they outright purchased the items and created a second warehouse at a remote location, not only did this result in millions being wasted, but a large amount of missing materials at a large expense. This also resulted in large amounts of dollars being wasted in returning the materials back to the inventory levels from the remote location, rather than do so at the inception of the purchases. Now they are going to be forced to have a fire sale in hopes of recovering some of the incompetence, so why would it be a prudent decision to have the same individuals who were responsible for the previous debacle to manage this project, again where is the accountability of taxpayer monies. Maybe the city can use Bernie Maddoff as a consultant to keep an eye on the money for this project, he has the time and experience that is a good match with the current staff in LW.
No need to apologize for the length of your dialogue – It takes time to unravel what is what. Your blog helps many people to understand the situation. Thanks.
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