Members of the committee responsible for making rate recommendations to the city-owned Marietta Board of Lights and Water unanimously agreed Friday it should absorb a $5 million deficit without passing on raising costs to customers.
BLW General Manager Bob Lewis attributes much of the utility’s budgetary woes to rising costs from the wholesaler it purchases power from, the Municipal Electric Authority of Georgia.
Paulding County Engineer Bruce Coyle, Financial Planner Terry Lee and Realtor Mike Wilson make up the rates committee and agreed reducing the controversial transfer of the BLW’s cash to the city’s accounts could help prevent ratepayers from bearing the burden of the deficit.
They want the City Council to soften its common practice of transferring money from the BLW’s accounts to the city’s own general fund, which foots the bill for most city services.
The committee recommended Friday the city reduce its transfer, which was $11.5 million last year, by $750,000. The rest of the cash needed to avoid a rate hike would come from the BLW’s $10 million rainy day reserve fund.
But that plan still has to pass through two more layers of government before it can be put into action.
The full board will consider it at noon Monday, Feb. 10 at City Hall, 205 Lawrence St.
Still, the final decision is in the hands of City Council.
Council approved in December raising water rates by 40 cents a month, or $4.80 a year, effective at the beginning of this year.
Taxes or rates priority?
Wilson, a committee member, said at the Friday meeting the discussion comes down to choosing between having lower property taxes or lower utility bills.
“I’m saying give the city a chance to look at their budget, they have final approve on this, and see if they can do this because we are out of balance,” he said. “We’re extremely low on property taxes and extremely high on power rates.”
Coyle, also a committee member, pointed to the BLW’s reserve account as a resource.
“It might be time to use the surplus reserves,” Coyle said. “They’re there for hard times.”
General Manager Morgan said the BLW tries to maintain at least $5 million in its reserves. That’s cash to be used in case of an emergency, like a hurricane destroying needed infrastructure.
Morgan also cautioned that tapping into reserves can be risky if the fund is needed later.
“If you don’t do anything this year and you wind up with no surplus, and you’ve got to raise rates by 9 percent next year,” Morgan said.
Councilman Anthony Coleman has been critical of proposed rate increases. His district contains more low-income and elderly residents living on fixed incomes than others in Marietta, and he says he can’t justify a rate increase.
“I don’t think we need to be increasing rates if it’s not needed,” Coleman said.
Taking utility cash commonplace
Marietta isn’t the only local government that takes funds from its utilities.
It’s an accepted practice of governance for the Cobb Board of Commissioners and Smyrna City Council.
Critics say the transfer takes needed money from the utilities and forces them to raise rates to make up the difference. Supporters argue it keeps property taxes low and spreads the burden more evenly.
Marietta took $11.5 million for the city’s general fund and split it between the city’s electric, water and sewer utilities.
Smyrna transferred more than $1.5 million over its last fiscal year that ended July 30.
Cobb’s water system director, Steve McCullers, told the MDJ last fall water rates wouldn’t need to rise for the next five years if the county stopped taking its revenues.
Commissioners took $17.2 million from the water department in October to pad its general fund, about $47,000 more than the year before, but they avoided passing on a rate increase to county water customers.
Other options considered
Before recommending no rate hikes be pursued, the BLW considered a number of other options to curb rising costs.
Lewis, had proposed increasing the base charge levied on power customers by $2 and decreasing a discount offered to ratepayers who pay their bill within 13 days from 10 percent to 5 percent.
That would mean an increase of $7.11 on an average bill. Cutting the discount in half alone raises $4.3 million, but leaves the utility looking for another $700,000.
Utility staff have also proposed suspending payments to the fund the BLW pumps money into for the expansion of Plant Vogtle, a nuclear plant south of Augusta, a plan introduced by Councilman Philip Goldstein.
The city won’t see the money it’s setting aside until 2036 or 2037, Goldstein has said, but there’s a period of about 10 years before then, from 2025 to 2035, when the utility will have paid off its debt and won’t yet see a return from the expansion of the nuclear plant.
Alternatively, the remaining $700,000 needed could come from the utility’s $9.4 million surplus reserve account.
Those two choices would have increased rates on the average customer by $5.21.