KAYSVILLE — Residents here may soon pay almost 10 percent more for their electricity.
The city council was presented with a proposal Tuesday night from city staff recommending an electric rate increase of 9.65 percent.
The rate increase is under review and will not be voted on until after a public hearing scheduled for 6 p.m. Oct. 2.
The council is scheduled to vote on the increase at its Oct. 16 meeting, with the proposed rate increase to take effect Nov. 1.
Mayor Steve Hiatt attributed the potential rate increase to three sources.
“There are three numbers we’re talking about … 4.03 percent of this recommended 9.65 percent is operating, 2.21 (percent) is the transfer to other funds, and the remaining 3.41 (percent) is to put us on target to bring our cash reserves back up to the formula that we require,” said Hiatt.
“Over the last five years of operations, we have lost an average of $482,390 each year that didn’t cover our operating costs,” said City Manager John Thacker.
Councilman Gil Miller explained that 4.03 percent of the potential increase deals with paying for operations of the power department.
“What we pay for electricity, what we pay all the folks at the power department, what we pay for any operational thing that happens on an annual basis is subtracted from the revenue that comes in from the citizens. That is what creates this loss,” Miller said.
“The 2.21 (percent) is for a transfer to the general fund for police officers,” Hiatt said.
The council voted in June to hire three police officers at a cost of $265,000 a year, to be funded with a transfer from the power enterprise fund.
“The 3.41 (percent) is to keep a 90-day cash supply on hand and make sure we are in accordance with the ordinance that was put forward a few months ago by the council,” Miller said.
Thacker explained that the cash reserves have been drawn down each year to cover the operating losses.
Councilman Brett Garlick explained that the impetus behind this discussion was an ordinance passed by the council several months ago requiring staff to provide the council with an annual report on the electric fund balance. They also asked staff to maintain a 90-day cash reserve in the fund.
Council members repeatedly addressed the concerns of many residents regarding the city’s practice of using power enterprise funds for economic development.
“In terms of the operating loss every year, nothing that we do in terms of economic development is impacted by that operating loss,” Miller said.
“The average loss of $482,000 over the past five years, and the operating losses for the past five years … does not include interest expense on the infamous Flint property, and does not include principal reductions on the Flint property. I want to make that absolutely clear. These are operating expenses; not interest expense, nor principal deductions for the Flint Street property.”
Hiatt said the city is not required to hold a public hearing regarding a potential utility rate increase; however, they are going to hold one anyway.
Hiatt said: “That hearing may have some impact on our discussion.”