A wise profit-sharing plan ignored. Part 2 in a series
COLUMBIA, Mo 1/29/14 (Beat Byte) -- Profits from Columbia's water and electric utility (aka the Water and Light Department) must go toward the city's General Fund, which pays for police, firefighters, and other critical city services; and/or lower utility rates, says a little-known mandate in the City Charter, Columbia's guiding constitution.
But no record exists in the city's financial statements of any such profit sharing.
Instead, a $74 million pool of "unrestricted" capital on the Water and Light Department's books (as of 2013) suggests the utility -- which billed customers over $140 million in 2012 -- is simply stockpiling the cash, which has become a favorite target of special interest groups and senior city managers seeking to pay for special projects.
Twice in five years, city administrators and REDI -- Regional Economic Development -- have tried to tap the money to buy land for development, in violation of Charter requirements.
Now, Columbia city manager Mike Matthes wants to "use the city's cash reserves" to buy the old Ameren site in Columbia's North Village Arts District.
"I've requested a report from the city manager to look into the Charter stipulations as they relate to Water and Light Reserve Funds," Third Ward Councilman Karl Skala told the Heart Beat, referring to a brief Dec. 16 hearing on the issue.
Oddly, no policy exists to assure utilty profits comply with the Charter. Council members took up the matter last month.
Columbia is a "full service City," the annual financial report explains. City Hall provides basic services -- public safety, public works and planning -- and most utilities, including water, electricity, rubbish disposal, and sewers.
As branches of city government, utilities are subject to the Charter, which limits how utility funds are spent. Revenues must pay for operation and maintenance; principal and interest on bonds; equipment and infrastructure; and for the utility's "extension, improvement, enlargement and betterment."
The Charter additionally mandates the Water and Light Department pay a tax to the city every year known as PILOT -- payment in lieu of tax. PILOT is "substantially equivalent to that sum which would be paid in taxes if the water and electric light works were privately owned," the financial statement explains. The utility paid $14,170,229 in PILOT during 2012.
After expenses, including PILOT, profits must go into the General Fund -- or back to ratepayers. Article XII, Section 102 of the Charter does not envision Columbia's utilities holding huge surpluses, or spending the surpluses on development land. Instead, the Charter envisions city services and utility ratepayers getting a boost, especially when times are this good.
Expenses for the Water and Electric utility actually decreased $4,761,507 in 2012, "due primarily to a decrease in purchased power expense," the financial statement explains. The Water and Light Department made a $24 million profit that year.
Nonetheless, the City Council raised water and electric rates in 2012-13, violating the spirit -- if not the letter -- of the Charter, and continuing a rate-raising frenzy that started over a decade ago.
From 2002-12, residential water rates soared 87%, from $1.395 per 100 CCF to $2.59. Residential electric rates rocketed even higher, with the monthly customer charge rising 60% from $4.5 to $7.2; and power rates rising as much as 106%, from $6.17 per kWh year-round to $9.44/kWh in the winter and $12.77/kWh in the summer.
Council members last month questioned water and light director Tad Johnsen about the Charter restrictions, hoping, Skala explained, to formulate "a future policy that constrains water and light reserve funds" as mandated in the Charter.
NEXT: The hot seat
PART 1: CITY CHARTER VIOLATION? Is City Hall misappropriating water and light utility funds?