Kirkwood Electric Rates Rise as Money Transfers to Streets

I want to share some concerns I have about some recent city council votes.  I think it is important for the citizens to have some additional information about these votes.

The city council was asked to vote on an electric rate increase in February.  As was widely discussed and reported in the media - it was noted that Ameren had increased their rates so now they were higher than Kirkwood (the first time since 2010) and Kirkwood was in need of increasing rates as well.  The stated reasons for the increase were as follows: the city needs to continue to increase the reserves to the recommended target set by the Citizen's Finance committee and City Council, to have additional money for much needed infrastructure improvements since we need to replace 2 substations in the next several years, and to show bond raters that the city wasn't afraid to raise rates.  

Per the Patch article (2/16) "....the increase is needed to modernize the public utility, particularly to pay for new substations........ensure healthy fund balances in the coming years.....it also will help maintain the public utility's bond rating..." 

The majority of the council believed the reasons to increase the rates were
compelling enough to do immediately and not wait until the council had time to assess and discuss all the needs/issues we were facing over the next month or two - like water rates, street improvements, etc.  The second vote on the rate increase was 4-2 in favor on Feb. 7.  The city's projected profit from the rate increase was $760,000.  Once the electric rate increase was in place, it was time to move to one of the next city needs.

Within 3 weeks after the rate increase, it apparently became evident that there was going to be more than enough money coming in to use elsewhere...... somewhat magically as far as I could tell.

At the council's work session on 2/28/13 - the mayor brought a proposal to the council that was his plan to fund more street improvements.  The proposal was to take an additional $300,000 per year out of the electric dept. funds and $300,000 out of the water dept. funds - (even though the water dept. is undergoing an evaluation of water rates and infrastructure needs that will no doubt require a rate increase this year).  A possible rate increase needed for water bantered around last year was around 22-25%.

The mayor reported that both department heads said that taking out that money from their funds to move to streets would not affect their abilities to do what they needed to do within their departments.  I would assume this might change if rates were not increased frequently or high enough to fund their projects and other city projects - but all was well now.

The city council spent a very short period of time discussing the mayor's proposal to use electric and water funds for streets.  I asked for Mike Brown's alternative plan to fund streets (he had mentioned this in the past) - and he gave the council a copy the week of our vote on the mayor's proposal - but no one other than Gerry B. and myself had any desire to discuss it - so it was put aside. 

On March 21, the council voted to take a total of $510,000 from each of the funds - electric and water - to use to fund street improvements this year - and plan on taking $300,000 per year from each fund every year.  The $510,000 represents 67% of the anticipated total from the much needed rate increase for electric.  The water dept. will now have to come to the council with a rate that will help them make up the $510,000 given for streets and also fund their much needed improvements. There is a good probability that the Kirkwood water rates will have to be significantly higher than Mo. American Water rates.

The council did not feel like they could go to the citizens for a bond issue since they did not think a tax increase would pass.  Even though only 2/3 of the citizens have Kirkwood Electric and not all have Kirkwood water - the majority on the council felt that it was easier and made more sense to just take money out of electric and water...................rate increases must be easier than asking for a tax increase.  This council has definitely demonstrated to the citizens that they are comfortable raising rates for some services to fund a wide variety of city projects that span several departments.  It has yet to be seen how far this council will be willing to go when considering future rate increases. Time will tell what the limits will be.

I continue to be perplexed as to how we really, really "need" the electric rate increase to meet electric dept/service needs - then we move what mounts to 67% of the anticipated rate increase to streets and possibly other projects yet to be identified.  I know we will soon face an opportunity to vote to increase water rates because we really, really "need" to do it.........especially since they are down $510,000 to start off with this year. 

I am hopeful that Kirkwood citizens will give me feedback, let me know if this is all ok with you, and if possible, help me understand the logic in this.....if there is any logic.