The city’s electric fund will start the year with $6 million cash. It was broke about three years ago.
In the face of ever-increasing utility fees, it should scare us when Truth or Consequences city officials say the city’s utilities should be run “like a business.” Or that they want to expand the solid waste department to be able to service 500 homes PreReal expects to build in the City of Elephant Butte. Or that it intends to build a vehicular bridge over the Rio Grande to carry water and sewer pipes to the Brown family’s property to spur development over there.
Add to this the latest: City Manager Gary Whitehead said, in a recent interview, that the electric fund may lend money to other departments in order to save loan and interest costs from a bank. This will only happen if capital projects, debt and yearly costs are considered. And the loan process “will be completely transparent,” Whitehead said.
Businesses’ goal is to make a profit. The government’s goal should be to serve the people. Making a profit off of water, wastewater, solid waste and electric services should not be the goal.
The way I figure it, the people were paying too-high electric rates for the last two years. The electric rate study that was used to impose the rate increase estimated the electric facility would take in $1.5 million extra, which was needed to take on capital projects put off too long. But the fund has been taking in about $3 million extra a year, while it does capital projects, albeit not $1.5 millions worth.
The utility fees charged should be gauged to cover yearly operations and maintenance and upcoming equipment and asset repairs and replacements.
To figure out what equipment and asset repairs are needed, the utility should be continually updating its asset management plan, AMP for short. Inspections, taking inventory, documenting the age of and expected life of the asset, each with depreciation, repair and replacement schedules.
AMP reports should be part of any budget, otherwise how is the public supposed to know if it is being over- or under-charged?
In a recent article about the city commission’s Infrastructure Capital Improvements Projects, I had asked for AMPs for the utilities. City Manager Gary Whitehead said that the city is still working on training staff on how to do AMPs. I appreciate his forthrightness. In the interim, the public cannot know if they are being charged the right amount.
The city commissions have a history of transferring cash out of the utilities and using it to cover deficit spending on the parks, the pool, the golf course, the airport, and other pet projects related to attracting tourists and new business.
There has been no change in the city commission’s budgeting practices. Utility rates are increasing every year to cover the increasing debt for emergency repair and replacement projects made necessary by long neglect of the utilities by the city commissions.That is unacknowledged, with talk of expanding all of the utilities to handle “expected growth.”
I went over the monies being transferred out of the utilities and into the general fund with City Manager Gary Whitehead since the total has jumped from $1.5 million in prior years to over $5 million for the FY2027 budget that starts July 1 and ends June 30, 2027.
I was alarmed, but Whitehead assuaged about 80 percent of my fears. The larger transfers are due to centralizing bill paying. Instead of each utility putting together purchase orders for other city utilities, insurance, service-center truck repairs and other bills, Whitehead is having the central office issue and pay one bill for each category. It will eliminate a flurry of purchase orders hitting the finance department and will save hundreds of administrative work hours.
The city’s general fund had been paying the bills in the past, piecemeal. The transfers at the beginning of the year will make it one big transaction instead of a series of reimbursements from the utilities to the general fund.
The same centralization applies to the new practice of transferring $125,000 out of each of the four utilities or $500,000 into the general fund that will fund the internal service repair department. Whitehead said this will also create efficiencies and save money by eliminating a flurry of purchase orders and gaining economies of scale in buying tires, for example.
What is a new deduction from the utilities is Whitehead’s central-office administration fee. One percent of each of the utility’s revenue will be transferred to the general fund. He points out that the utility should pay it since it would have to hire staff to do payroll clerk, human resources, finances, etc. to replace the central office.
Electric will make about $8.8 million and pay $88,000. Water will make about $1.7 million in revenue and pay $17,300 in general administration to the general fund. Solid waste will make $2.8 million and pay $28,000. Wastewater will make $1.4 million and pay $14,400. That comes to nearly $148,000 altogether.
Other generalities about the interim budget (the final will be go to public hearing, probably in July):
–Salaried staff received a 4.5 percent raise which totalled $55,000, Whitehead said.
–Non-salaried staff received an annual “step” or 1.5 percent raise if they stayed another year.
–Health insurance for employees went up 20 percent.
I pointed out that after the general fund is still estimated to be $2.2 million in deficit, even with the new transfers. “Yes,” Whitehead said. “We’re not in great shape.”
If the city commission has also come to a similar realistic assessment of the city’s finances it doesn’t appear to have dimmed their ambitions to expand water and wastewater to the other side of the river, to expand the solid waste department to service Elephant Butte. They also show no interest in having staff do AMPs or in using them to develop the yearly budget or the yearly Infrastructure Capital Improvements Plan.
Their first “goal” for Whitehead makes him responsible for city-wide asset management, for prioritizing capital projects and needs and for finding funding. (see https://sierracountycitizen.org/city-commissions-goals-and-interim-budget-show-preoccupation-with-circuses-over-bread/ )
They require no reports, evidently since they intend to do no real oversight other than to grade Whitehead on his end product based on no criteria. This leaves the city commission plenty of time to dream about the future, while the people grind it out in reality, paying one utility bill at a time. This is kind of like Lewis Carroll’s search for the snark, using a completely blank map to sail across the ocean in search of an illusive creature.