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.