CU board seeks to educate council

City Utilities General Man-ager Robert Roundtree wants City Council members to be educated so they understand the need for a water rate increase. Otherwise, he warned, council may find that the money comes out of its own pocket.

Council needs to trust that the utility board knows what it's doing when it requests a rate increase, said John Whittington, board vice chairman, at the June 28 meeting of the Board of Public Utilities.

But it was abundantly clear to Roundtree, from his observation of the joint council-utility meeting held June 26, that council members just don't get it, the general manager said.

Roundtree "left the (joint) meeting with the feeling we had really not got the council to understand" that the problems the utility faces today are different from the problems faced by local government.

If the water company isn't granted an extra $1.5 million for next year's budget, funded through the proposed rate increase, the money will come from somewhere else and the somewhere else could be from the millions of dollars in free services the water company provides to the city, Roundtree told board members.

He added that he and the board have "the responsibility to say things that people don't want to hear" because the best interest of the ratepayers is their prime directive.

There's been no water rate increase in 11 years, he said, "and we can't responsibly defer them any more. I won't recommend any reduction of the level of services."

Roundtree wants to educate the council that the water company which operates separately from the electric-gas-transportation utility but is regulated by the board "cannot continue to pay inflationary escalated costs for every single ingredient required for the acquiring, treating and delivery of water services."

Instead, he advised the board that it could look at the voluntary payments the water company makes to the city as a source of income for needed capital improvements.

By law, the electric utility must adequately light the streets, alleys and public ways without charge to the city. It also must pay more than 3 percent of the gross operating revenue and 4 percent of the gross operating revenue of the gas works and transportation system to the city's general fund. But the law is silent on the water company's free services to the city.

It didn't have to spend the $3.3 million out of its budget to relocate utilities for free in the Jordan Valley Park, a payment which incensed board member James Fossard.

It didn't have to provide $2 million in fire protection services this year.

It also didn't have to pay the city $94,000 in voluntary payments in 1999, or $270,000 in 2000. Those payments were recommended by Roundtree in April 1999, a recommendation he said he "regretted."

But because the board approved those voluntary payments, the water company could pay over to the city another $445,000 in 2001 or not, Roundtree suggested. Just by cutting those payments, the water company could save itself about $2,755,000 in the next three years, according to Roundtree's figures.

It also could save millions of dollars more by not paying the costs to relocate utility services at "supposedly tax-funded street and intersection improvements." Roundtree suggested that the city might have to defer some of those projects. The water company started absorbing those costs in 1998, he said, which by 2004 will total about $8.7 million if unchecked by the board.

Fossard added that the $3.3 million costs to relocate utility services in the Jordan Valley Park area came "out of the ratepayers pockets." He said the city told the citizens who voted for the park that it wouldn't cost them a dime.

Board member Dan Manna said he understood from public comment that many people think there are huge money reserves at the utility company and that the water company's needs should just be met from that.

"We're on the marginal side of reserves," Roundtree said, according to a study that he said was ordered by City Council.

CU has $26 million in reserves and really should have $44 million, Roundtree said. He agreed the reserve issues "haven't been understood."

Manna suggested that CU's financial staff prepare a "white paper" explaining the reserves, the actual amount and for what purposes the funds are earmarked. Roundtree agreed that would be appropriate, adding that their are specific rules for using the reserves under emergency and contingent circumstances, and that as soon as the dollars are taken out, they must be put back.

"We have tried mightily" to explain the reserves, Roundtree said, and will continue to do so.

He said that reserves are a factor in maintaining City Utilities credit rating, which affects its ability to borrow money.