Daily Sitka Sentinel

City Weighing Options On Electric Rate Hike

By SHANNON HAUGLAND

Sentinel Staff Writer

While rejecting a proposed ordinance for a 15 to 20 percent increase in electric rates Tuesday night, the Assembly left the door open for taking it up again at the April 14 meeting.

The ordinance to raise rates the full amount failed on a 2-4 vote. Matthew Hunter cast a “no” vote in order to be on the prevailing side, which entitles him to call up the ordinance for reconsideration at a future meeting.

The other “no” votes were cast by Tristan Guevin, Steven Eisenbeisz and Aaron Swanson. Michelle Putz and Ben Miyasato voted in favor. Mayor Mim McConnell was absent.

Members of the Assembly said they would like to see two options before them at the next meeting: the ordinance introduced Tuesday, and an alternate ordinance based on a city staff proposal to transfer all or part of the $3.5 million from the city economic development fund into the electric rate stabilization fund. This would reduce the size of the rate increase that would be needed immediately, and at the same time the city staff is working on plans to increase electricity sales by converting large city buildings from oil to electric heat.

Using the economic development money would “buy us time to increase our usage,” Electric Department Director Chris Brewton said today. “That will delay or eliminate a substantive rate increase in the future.”

Heating city buildings with electricity will do three things, Brewton said. “It allows us to increase load growth in a thoughtful controllable way, it lowers the cost of municipal government for all citizens, and also reduces our fuel usage.”

The city didn’t raise rates last fall when it took out its fourth and final bond for the Blue Lake dam expansion project.

“We were hoping for a cold winter to defer until July (a rate increase),” Brewton told the Assembly Tuesday night. Instead, power usage dropped by 12.7 percent because of the unusually warm winter. 

The city’s bond covenants require the city to have cash flow from operations equal to 125 percent of the annual debt service costs of the revenue bonds.

“Unfortunately,” City Finance Director Jay Sweeney wrote in a memo to the Assembly, “electricity consumption has not returned to normal levels and instead has declined from FY14, thus creating a revenue shortfall which threatens to cause the municipality to not achieve the required coverage ratio (of 1.25).”

Sweeney said he warned the Assembly after the last bond sale that a rate increase might be needed.

“Staff was very explicit in its discussions with the Assembly and the public that a fourth electric rate increase, in conjunction with the fourth bonding, was not foregone, and was simply delayed. The desire was to have a moderate rate increase put in place for July 1, 2015. However, the decline in consumption has made an electric rate increase urgent, compelling a higher than anticipated rate increase and an earlier adoption.”

He said rates need to be increased but the city staff proposal, if adopted, could “mitigate the shock of a rate increase” by implementing it over one to two years.

There was only one comment from the public. Amanda Roberts expressed concern about the rising cost of living in Sitka. 

“People are leaving,” she said. “Businesses are leaving ... It’s getting harder and harder for young families to sustain here. It seems so many rates are going up at once and it seems like it’s one thing after another after another after another.”

Hunter, who was presiding at the meeting, said he and other Assembly members have received numerous emails over the past few weeks on the issue.

He said Assembly members are trying to make the best decisions for Sitka for the next 10 to 50 years. Some tough decisions have come to the forefront now because rates have not kept up with the costs, he said. “No one has paid their own way for years in this town,” he said, noting the reliance on state and federal help. “All of our rates are below sustainable levels in this town.”

In the end, a motion to postpone a vote on the full rate increase failed on a 2-4 vote.

The Assembly directed staff to prepare an ordinance that would use the economic development fund for rate stabilization, along with a plan for a new rate schedule. The economic development fund is the city’s share of federal timber impact funds obtained for Southeast Alaska years ago by the late U.S. Sen. Ted Stevens.

Eisenbeisz said he would like more information on the Southeast Alaska Economic Development fund before taking a vote to use the fund for rate stabilization.

There were a few conversations about city staff actions over the years that resulted in cost savings to rate payers, and to make sure the dam expansion project was built to provide a stable source of electricity for the next 100 years. A few said the Assembly also needs to have a conversation about a more equitable tax structure.

A section of the ordinance on the table would create an Energy Assistance Fund, with money from monthly voluntary contributions by Sitka residents. “The intent of the program is to help provide emergency assistance to customers to pay electric utility bills” through the Salvation Army.

Marijuana Vote?

There was no support on the Assembly to have a public vote about whether Sitka should allow commercial sales of marijuana. 

Putz and Miyasato put the item on the agenda for discussion, after hearing from the public on the issue, but there were no advocates for putting the question to voters on a city ballot in October.

From the public Kristy Crews pointed out that a majority of voters favored legalization of recreational marijuana, and that allowing commercial sales could benefit Sitka through increased electric sales, and economic development.

Assembly members agreed that the public has spoken on the issue, and favored legalizing marijuana by a 70-30 margin.

“I’d hate to be putting this back at people,” Eisenbeisz said.

Others commented that the public will have a chance to weigh in on how they want marijuana regulated in town over the next year as the city develops its marijuana ordinance.

In other business:

– Rob Allen, Sitka Community Hospital CEO, told the Assembly that the facility has $1.1 million in the bank, and 21 days of cash on hand. The hospital posted a $100,000 loss in its February statements after inpatient, outpatient and long-term care came in below budget. He said the hospital will start work on its strategic plan soon.

– under persons to be heard, Allison Bayne spoke about the need to make Sitka more affordable. Young families want to stay in Sitka but costs are going up, and many are not optimistic about the future, she said. “Sitka has become a place for the wealthy, and the rest of us struggle,” she said. She asked the Assembly to avoid spending money on unnecessary items.

– also under persons to be heard, Shirley Robards asked the Assembly to start fixing up Lincoln Street before the busy summer season. “It looks terrible, the roads are uneven ...” she said.

– Public works director Michael Harmon expressed his support for moving forward on a plan to convert public buildings from oil to electric heat. The move would keep money in Sitka, and in the end help reduce rates, he said. “I’m excited to see us have that capacity to do it with Blue Lake and continue to move this forward.”

Also, the Assembly:

– approved clerical changes to the city code.

– appointed Charles Horan to a seat on the Gary Paxton Industrial Park, Kevin Knox to the Port and Harbors Commission and Trish White to the Local Emergency Planning Commission.

– adjusted the fiscal year 2015 budget on final reading.

– approved a sublease in the airport terminal for Delta Airlines to operate its once a day seasonal flight.

– approved a change order to McMillen Engineering Management for a bulk water line upgrade at Gary Paxton Industrial Park for up to $370,000; and a contract award for the inspection of a Jarvis Street fuel tank for $80,000.