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T or C will hold public hearings on grant/loan applications for electrical and other equipment, with implications for utility fees

by Kathleen Sloan | March 5, 2021
6 min read
Would borrowing for new electric equipment be necessary if the city hadn’t spent more than $1 million cash to replace customers’ analog electric meters with smart meters? Source: T or C Electric Department

The public will have a chance to give testimony during two public hearings slated for the March 10 city commission meeting, which starts at 10 a.m.

To be decided is whether the city should apply for two combination loan/grants to, first, fund the replacement of an electrical transformer and related equipment and, second, to fund equipment purchases in general.

Routine equipment purchases are normally paid for out of budgeted departmental expenses, not debt. But years of tapping utilities fee revenues for general operations have required T or C to seek a string of similar grants and/or loans for maintenance, equipment and capital projects, many of them conditioned on utility fee increases to cover principal and interest.

The Feb. 19 legal ads in the Sierra County Sentinel providing notice of the public hearings gave no further details on the equipment the city intends to purchase. It is unknown if the equipment will require engineering, planning and installation beyond city staff’s capabilities. If this is the case, the applications to be considered next week are for capital projects, not just straight purchases.

With the exception of the legal ads, city staff has presented nothing to the city commission or the public about these projects. Further details may or may not be provided in the March 10 meeting packet, to be made available online this afternoon, after the Sun’s press time.

Even if purchase and project details are provided, city staff will still have put the cart before the horse. Well in advance of the hearings, staff should have explained, with fact-based documentation, why these purchases/projects have priority now, how much they will cost and how they will benefit the community.

The March 10 hearings will probably be the first and last discussion the city commission will have about the projects and the means of paying for them. The hearings will be followed by final action, as can be surmised from the legal ads. The commission will not only decide next week if the city should apply for the grant/loans, but will also authorize the city manager to receive and disburse the funds.

The two grant/loans applications seek funding from the U.S. Department of Agriculture’s Rural Development program, which focuses on low-income communities with populations of less than 20,000. Under RD auspices is the “Communities Facilities Program,” which funds infrastructure and housing projects in substantially less-populated and less well-off communities.

Under the Communities Facilities Program, T or C may qualify for the 55 percent grant and 45 percent loan given to rural communities with populations of less than 12,000. To qualify, the city’s median household income must be 30 percent lower than the state’s median income for “non-municipal communities.”

The city may even qualify for the 75 percent grant and 25 percent loan, reserved for communities with populations of less than 5,000, if recent census numbers show the city has lost more population. In that case, the city must also have a median household income 40 percent below the state’s median household income for non-municipal communities.

The U.S. Census data to be released to the public on April 30 may be used to determine which grant percentages the city will receive.

The city borrowed money and received a grant from USDA Rural Development about five years ago for a $6.7 million upgrade to the wastewater plant. (This capital improvement project was completed about a year ago.) The city had to agree to increase wastewater fees in order to receive the grant/loan. The city has since increased wastewater fees 5 percent each year, compounding the prior year’s increase, with no sunset date.

Last year the city was awarded a nearly $10 million grant/loan from USDA Rural Development to replace water pipes downtown and to add a tank and make other upgrades to the Cook Street chlorination plant. That project is still in the design phase. Again, the city had to agree to increase water rates in order to receive the grant/loan. Water rates went up about 50 percent last July, and yearly increases will be considered going forward as a condition of the grant/loan.

The Sun has previously reported (see Related articles below) that USDA Rural Development used unaudited figures, supplied by then City Manager Morris Madrid, to argue the water department was taking in insufficient revenue to cover operations, maintenance and capital improvements. Madrid’s figures did not take into account that hundreds of thousands of dollars had been transferred out of the water department and into the General Fund to pay for deficit spending for many years.

Utility fees are supposed to pay for the utility’s operation, maintenance and capital projects, not to subsidize other government spending. As a result of the city’s longstanding practice of transferring millions out of the electric, solid waste, wastewater and water utilities instead of preserving their self-sufficiency, utility customers’ rates are burgeoning to pay for long-neglected utility equipment replacement and repairs with borrowed dollars. Future generations of residents will be encumbered with this debt.

If the city commission approves the USDA Rural Development applications, it is likely electric fees will be increased along with other utility fees, depending on which departments are to receive the equipment.

Unlike debt paid off with taxes that must be approved by the voters, the city commission does not need public approval to incur debt paid off with utility fees. Consequently, the city commission does not usually require staff to provide cost analyses and planning and engineering reports to justify borrowing decisions.

The public paid for a Tor C electric asset management plan that cost about $130,000 in 2015, but it has not been referred to in recent years at city commission meetings when projects involving the electric department are proposed and authorized to be undertaken. Would borrowing for new electric equipment be necessary if the city hadn’t spent more than $1 million cash to replace customers’ analog electric meters with smart meters, a capital project that was not part of the asset management plan?

There are other examples of unplanned and unexplained expenditures that may have contributed to the electric department’s apparent need to borrow funds. Last year the department built a $65,000 women’s bathroom at its Riverside Drive electric yard without presenting the project to the city commission or the public. Its existence became known when the expense was included in a budget adjustment to be approved by the commission. This year the electric department built a metal building to house its trucks at the electric yard, passersby observed. The cost of the project, which was undertaken without public discussion, is unknown.

City staff has not yet informed the public or the city commission if the transformer and other equipment to be purchased for the electric department are part of T or C’s 2015 asset management plan, or if these are emergency purchases related to the Feb. 14 fire at the electric yard. And, if the $10 million water project is a guide, city staff will also not disclose that rate increases will likely result if the most recent round of USDA Rural Development grant/loan applications is approved.

author
Kathleen Sloan is the Sun’s founder and chief reporter. She can be reached at kathleen.sloan@gmail.com or 575-297-4146.
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HAVE YOU SEEN?

Third day on the job, Swingle brings transparency and reality to T or C’s budgeting process, Parts 1 and 2

In addition to contending with a $1.6 million deficit in the fiscal year 2021-2022 draft budget, new city manager Bruce Swingle informed the city commissioners that they must play a lead role in identifying departmental spending priorities and cuts and devising a plan within two years to end the practice of balancing the budget with transfers from utility fees.

Peter A. Lawton (T or C) commented on Part 1: It is nice to see there finally seems to be an adult in charge in our city. Great article!

Barb Dewell (T or C) commented on Part 2: I’m really surprised so much is going on in T or C that the commissioners don’t know anything about. It’s very disappointing. They don’t even appear to want to ask questions. It seems reports are made, Luna makes her comments, no one else has a question or comment, and the issue either goes the way Commissioner Luna wants or it’s tabled, I guess. This isn’t how our city should be run. Thank goodness for City Manager Swingle. I hope he is able to corral all this spending and these very loose approvals and get the city finances back on track. I know most residents are really worried about all this, as I’ve been, and we have high hopes for City Manager Swingle’s leadership.

Ronn Fenn (T or C) commented on Part 2: For a long time I’ve been questioning why this airport is a T or C-funded facility and not a county facility with its location about five miles from the recognized city proper and serving a largely non-resident user base. It and its annual transfer funds to support its operation needs to be investigated. This facility is not and probably never will be an income-producing asset. Its operating costs should be spread throughout the county and not borne solely by T or C’s residents. Pie in the Sky is not likely to land in T or C.

Lydia Dixon (T or C) commented on Part 2: This is great reporting. People would not know most of this if it were not published here. Thanks!

 

 

Welcome, Bruce!

Now that you’ve had a couple days to settle in as city manager, please consider implementing these 10 doable fixes that will make the governance of the City of Truth or Consequences more transparent, responsive and effective.

Reader Joey Perry (T or C) commented: Great suggestions. Here’s one more. Make the meeting agendas more informational. In addition to the ordinance number, include a sentence or two (in plain English) saying what the item is about and why it is on the agenda—e.g., what is the issue? This would help me decide if I want to attend a meeting, or write a letter to the manager or the commissioners, expressing my views ahead of the meeting.


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