Wednesday, September 17, 2008

9/15/08 council meeting

The statement that I read last night is posted below and the research that went into this statement is accredited to Greg Sokerka.

Last night city council was presented with the perfect opportunity to turn the page of wasteful government and near abuses of power into something Springfieldians could have been proud of. Last night council was presented with evidence that C.U. hasn't given them all the information as it pertains to the proposed gas rate increase and yet not one council member challenged the presentation of Mrs. Officer of City Utilities.

Mrs. Officer clearly stated during questioning from Denny Whayne that the 40% rate increase in Southern Star pipeline rates had been approved but were being challenged by various energy companies. Nothing could be further from the truth as the FERC hasn't even heard this case yet as was pointed out by Greg Sokerka, Fred Ellison and myself. This should have been a signal to at least challenge John Twitty and city utilities to present factual information showing the rate increase had been passed but was under dispute. KUDOS to Denny Whayne for having the fortitude to at least question along these lines.

Later in this very same council meeting an item on the agenda was the approval of Mr. Greg Burris' salary, to which is excessive in the manner of his experience level in how a city operates and his over all management ability. Just like NFL teams will pay someone unproven massive amounts of money in hopes they perform up to expectations, the city of Springfield has done the very same by over paying a man who has yet to show he can handle the job or work this city out of management mediocrity. His lone claim to fame since accepting the position of City Manager is telling the people he plans on placing a 1 cent tax increase on an off election ballot, and requesting that everyone except the city "put some skin in the game".

The approval of this salary structure should be a slap in the face to one Bob Cumley. Never mind what he achieved or didn't achieve at this position at least the man had EXPERIENCE and that experience was worth approximately $150K to the city and the citizens who paid his salary. Let's fast forward to yesterday when with the approval of council bill 2008-208 gave Mr. Burris a base salary of $197K with incentives and allowances that make this compensation package worth about roughly $240K on an annual basis. Granted Councilman Deaver used the excuse that this was the middle ground on a recommended salary and thereby shouldn't be questioned because this salary is in line with this position. Keep in mind however this is also the same individual that likes projects where we get federal or state matching funds so the taxpayer isn't burdened with paying the complete cost of the project. Yes you read that right.
To her credit Councilwoman Rushefsky stayed principled and once more voted NO on this salary just like she voted NO on the hiring of Mr. Burris, with that said, I guess I can say the rest of council was principled as well since NONE of them changed their vote either. The main difference is Rushefsky voted in the manner of fiscal responsibility while the rest of council voted the status quo of larger more expensive government.

If I'm wrong in my assessment of this situation I'll be more than glad to admit my mistakes but it appears that generally business as usual is the moniker of even this newly elected city council, unless the term "green" is mentioned.

Two Council Bills on the 9-15 agenda pertaining to City Utilities

  1. Bill # 2008-263, a general ordinance to approve the City Utilities Annual Operating Budget for the Fiscal Year ending September 30, 2009; and,
  1. Bill # 2008-264, a general ordinance to approve establishing gas rates and repealing previously established gas rates.

    • As set out on the Agenda, approval of the Annual Operating Budget first, would require the passage of the requested natural gas rate increase also. The Operating Budget, which was established to support the Annual Operating Plan, can not support attainment of the goals set out in the Operating Plan without the additional funds generated by the natural gas rate increase and an anticipated 2% annual growth in population. The Board of Public Utilities, in support of the General Manger, approved the Annual Operating Plan as presented without considering the fact that the natural gas rate increase request could be “tabled” again or voted down. And, without City Council’s approval of the rate increase, City Utilities would not be able to achieve everything set out in the Operating Plan, in the predetermined time frame, therefore the city would suffer as a result of the gas rate increase being denied. Of course, in addition to the rate increase being passed there would also have to be a 2% growth in population, which cannot be controlled or dictated by City Council, City Utilities, the Chamber of Commerce or the Board of Public Utilities. Consider: due to various tax and utility rate increases in the recent past, out-sourcing to the surrounding communities has occurred. In the past, there may have been a 2% population growth in Springfield, however it’s presumptuous to think that that will continue. Thereafter, transference of responsibility will occur with lots of ‘finger-pointing’ taking place. City Utilities would fault City Council, who would fault City Utility customers, who would then be cited as the reason why City Utilities was unable to accomplish what had been set out in the Annual Operating Plan that had been approved by the Board of Public Utilities; when in fact, the Operating Plan that had been approved by the Board of Public Utilities was done so in a totally irresponsible manner based on material misrepresentations made by the General Manager.

    • Material misrepresentation: (J. T. Memo, 9-12-08)
      1. Rate increase adjustment is necessary beginning in Nov. 2008, in response to a rate increase for pipeline storage and transportation charges from the primary pipeline provider (Southern Star Central) to Springfield.

    Fact: The Federal Energy Regulatory Commission approves rate increase requests, pipeline-by-pipeline, and no such rate increase has been granted to Southern Star Central. Pipelines must go through a lengthy, public process whenever they request a rate increase, and the FERC sets rates on a pipeline-by-pipeline basis, approving for each pipeline what amounts to a maximum allowable rate, or a rate cap. Pipeline customers can and often do demand discounts from these maximum rates, with the net outcome being that many pipeline customers pay less than the maximum rate a pipeline has been given permission to charge by the FERC. Further, since Southern Star Central only utilizes approximately 21% of its pipeline capacity in its’ Kansas/Missouri operations Springfield City Utilities would certainly be in a strong position to negotiate a lower rate than one that might be approved by the FERC. In the alternative, other inter-state and intra-state pipeline companies (35 total) serving the Central Region might want to meet the needs of Springfield’s natural gas customers and be more willing to negotiate.

    Bottom-line: No rate increase for storage and transportation charges currently exists from Southern Star Central.

    • Natural gas prices have been on the decline, with the lowest year-to-date prices realized on September 3rd and again on September 11th, and nearly a 40% rate decease since June 6, 2008. Further, the Energy Information Administration, official energy statistics from the U. S. Gov’t. , indicate a 10% decrease in the price of natural gas in 2009. Springfield City Utilities management would have consumers believe Natural Gas prices will increase.

    • Natural gas production figures, as well as natural gas stocks in storage, are both UP.

    • Natural gas consumption, by retail customers, is DOWN. The only increase in consumption is in natural gas-generation for electricity production. City Utilities is well aware of this fact, as borne out at City Councils’ public hearing hosted in April, questioned by Councilman Whayne, and resulting in the rate increase request being “tabled”.

    • By purchasing natural gas on the commodity futures market, rather than the “options” market, Springfield City Utilities could lock-in a fixed rate today, ensuring a constant fixed price for natural gas through Dec. 2020, taking delivery on any quantity purchased at any time in the future. Thereby passing the savings on to the City Utility customers who use natural gas. Purchases made in the past, on the options market, have resulted in millions of dollars ($2.5 million in ’07) in losses.

    • Rate comparisons done between City Utilities and peer utility companies are generally performed in January, when C.U.’s rates are at their lowest. It’s not until later in the year, when gas rate adjustments are added-in, and higher electric rates are in effect that a factual comparison could be made. However, the rates that are in effect currently have absolutely no bearing on what rates “should be” in the future. It’s merely supply/demand economics based on the utility’s cost of goods, along with distribution to the customer. At this time, City Utilities is behaving like a spoiled-brat child: Bob gets a quarter, but I only get fifteen cents!

    • Rate increases “should be” granted only after consideration is given to other factors impacting the utilities’ customers and the utility itself. All people, not only C.U. customers, are experiencing actual – not projected – increases in rents, mortgages, utilities, insurance on homes, autos, health, and life; groceries, taxes, school tuition, and trash service. There are some CU customers that have difficulty currently paying their utility bills, then have a 10% late fee added-on and then compounded if left unpaid, who could not afford any rate increase at all, let alone what CU is requesting. In February, 2008, 24.5% (25,970) had late fees, and in June ’08 there were 15+% (15,900) customers who still had late fees being tacked-on to their bills.

    • With natural gas prices down, consumer usage down, production and storage figures up, continued price declines being forecasted by the U. S. Gov’t, and other economic factors taken into consideration there is no justification for City Council’s passage of, or City Utilities request for, a rate increase.

    • Bottom-Line: Leadership, at City Council and the municipal utility are responsible and accountable to the citizens, the Board of Public Utilities have failed in that responsibility, hopefully City Council won’t.

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