Jasper’s $50,000 study stalled as Utility Service Board considers proposal

Members of Jasper’s Utility Service Board were skeptical about jumping into a $50,000 contract initiated by the Jasper Board of Public Works to examine all the utilities practices and procedures and their impact on the city.

During the October 25 board of public works meeting, Mayor Terry Seitz requested the board enter into the agreement and share the cost with the utility service board. Seitz resides over the board with his two appointees, currently Tim Bell and Councilwoman Nancy Eckerle.

The proposed study would be conducted by H.J. Umbaugh and Asssociates and the Indianapolis law firm Barnes and Thorneburg. It would examine several aspects of the utilities including: studying the city’s utility service areas as well as competing service areas; determine how Jasper Municipal Utilities could expand or retain territory and customers; reviewing how the utilities relate to the city’s master plan; determine how to deal with new developments; review the services and payments in lieu of taxes (PILOT) the utilities give to the civil city to make sure the utilities is giving its fair share; determine whether they are using best practices between the civil city and utility department; and determine if the rate of return on utilities be adjusted to allow for support for other services and reduce the impact of tax caps on the civil city.

The study would be completed by February 2017 and would provide a list of options to potentially adopt for best practices and future operations.

Seitz told the board that a question he often fields from citizens is why some citizens of Jasper don’t have Jasper utilities. He added that he had also been approached by a developer to provide gas service to a planned development without charge to the developer. “That is not the first time this developer has asked and we felt this question would be answered in the study,” Seitz explained. “Therefore, we moved it up a little quicker.”

Board chairman Rick Stradtner indicated he was in favor of the study and although the other members did not shoot it down, they were leery about the need for the study for the cost and scope as it was described by the firms.

Additionally, referring to budgetary impacts on the city, Stradtner said he did not feel the utilities should be used as a “cookie jar” to fill in shortfalls on the city side. “We are in fact an asset of the City of Jasper and if there are expenditures that are just and fair we should consider based on best practices around the state, then I think we should consider them,” he said.

The Civil City and Utilities work together on various projects and some practices could be examined. For example, the utilities cut into streets to reach underground utilities. When finished, the street department will patch the cuts.

As part of the payment in lieu of taxes (PILOT), the utilities has an agreement with the civil city to return 90 percent of the costs associated with its utility (gas, water, electricity and wastewater) usage. Essentially, the city only pays 10 percent of its bill. This amounts to over $500,000 in savings for the civil city annually and impacts the amount needed from tax payers to pay the bill.

Also, the utilities are not tax funded. They are totally funded through the ratepayers.

In that aspect, the growth of the utilities is based on the impact on utility ratepayers. “We need to grow economically, not politically,” Electric Commissioner and former board chair Wayne Schuetter explained after the meeting.

If the utilities were to extend services to a new development for free, the cost to do so would be spread to all the ratepayers in the city and likely push up utility rates. Rather than having the ratepayers field the cost of the expansion, Schuetter explained the Utility Service Board has left that cost to the developer. “It seems the developer could add that cost to the price for the lot,” he said.

In regards to the utility services being provided by other municipalities or utility companies, in the early 70s Huntingburg installed a gas main to the west of Jasper and can more easily provide the service to the area.

With the infrastructure in place, Huntingburg has taken the stance that it will eat the cost to extend those lines with the potential to gain a return from selling the utility to the consumer. It gives a developer the option to add the service without added costs and they have taken that option. So, Huntingburg provides gas to certain areas on Jasper’s west side.

However, Huntingburg’s utility rates are higher than Jasper’s, according to Schuetter.

During the utility service board meeting, Schuetter pointed out that the board of public works seemed to be pushing a study on the utility service board.

“It’s a city statute: This board (Utility Service Board) has responsibility for the management and oversight of the utilities for the city of Jasper,” Schuetter said. “I would like to know what the ordinance is that gave the board of public works the authority to go ahead and start doing this study and approving it? Is there a statute that allows that or are they taking it on theirselves?”

City Attorney Renee Kabrick stated the board of public works has the right as a contracting agency for the City of Jasper. “To the extent they desire or the city desires to understand these issues in respect to its asset — the city utilities — then I think, yes they have the authority,” she said.

“That is your opinion, but where is that statute,” Schuetter asked rhetorically.

Schuetter further stated that he felt the utilities should conduct a thorough review of their own processes to understand what they currently do before seeking a consultant to complete a study to tell them best practice options. He indicated some items on the contract could be removed with this understanding.

For example, there are only five municipalities that have gas utilities, two of which are in Dubois County. “I think Tim (the gas and water manager) could get on the phone and call the other three to determine what they do in terms of territory,” Schuetter said.

He added, “Bottom line is, if you start taking utility money and investing it into development, it’s not equal risk,” he said about adding utilities to developments without charging the developer. “The risk is put on the utility customers. That risk is spread across about two-thirds of the city. If we decide to pay for the installment of those utilities for the developer, we are taking the money from those ratepayers and putting it at risk.”

As a non-profit entity funded by ratepayers, the utilities success is not based on the economy of scale. By expanding into new territories, they take on additional costs and bring the utilities closer to having to invest in new facilities like multi-million dollar lift stations to service the higher demands.

“Am I saying we shouldn’t expand? No.” Schuetter said. “Right now, we have the developers put in the utilities, then we take over the maintenance of those. Because of that, we have some of the lowest utility rates in the state.”

Schuetter opined that maybe the study would reveal if the utilities were receiving their fair share from the civil city.

He suggested the upcoming committee meetings that are planned for capital expenditures could also be used to discuss the steps to take to conduct an internal study of the utilities. “It could save a lot of time, might even save a lot of money,” Schuetter said.

Water Commissioner Roger Seng added that since the utility service board only received notice of the study two weeks ago via email, it would be best to hold off on agreeing to it pending further review.

With several board members agreeing, they decided to table the proposal until the December 19 regular meeting. Stradtner indicated that if the study would be discussed in committee meetings prior to the regular meeting of the Utility Service Board, he wanted it included in the public notices for the meetings.