Wrangell Sentinel -

Good news for subscribers to the Wrangell Sentinel: Our new website features the paper's full contents and in available to all subscribers. You can purchase online-only subscriptions, too!

Nolan cuts, electric rate hikes possible in 2015 budget

 


Preliminary budget figures show a looming $64,000 reduction in funding for the Nolan Center.

The draft budget, released publicly for the first time May 13, and discussed in a budget workshop before the regular borough assembly meeting, also shows a possible five percent rate hike for electricity consumers in the borough, as well as two other looming concerns.

The Nolan Trust board has told the borough that a reduction of $64,000 will be required to allow interest from the $2 million funding to continue at sustainable levels, according to a draft budget preamble.

“We have two choices,” the document reads in part. “One, we increase the current level of funding from the general fund or two, drastically reduce the labor force in some fashion. Neither choice is a good one.”

The reduction from $164,000 to $100,000 was made at the recommendation of the board managing the trust, according to borough documents and Finance Director Lee Burgess.

“We’ve been asking for more money from the trust than we can sustain,” he said. “This is at Wells Fargo’s advice, and they said that it’s not really sustainable to keep drawing it down as we have.”

The trust will continue to provide slightly less than two thirds of previous contributions, Burgess said.

“It still can support the facility, but just not at the amounts that we’ve used in the last few years,” he said. “The basic news is that the assembly will have some discussing to do about that and decision-making to do, because the alternative would be that it be funded from the general fund to a greater degree or that we have to look at what to do on the other side.”

More funds from the general fund would mean cuts from other areas, possibly including capital requests, Burgess said.

“It has the potential to basically bring up a sort of tradeoff that we need to explore,” he said.

An additional potential funds change relates to the electric bills. The Southeast Alaska Power Agency (SEAPA) has discussed ending a rebate program in preparation for large-scale construction projects in the near future, including the raising of the Swan Lake Dam in Ketchikan and several other electrical inter-ties, according to Wrangell Light & Power superintendent and SEAPA alternate board member Clay Hammer.

“We have been told not to expect the SEAPA rebate,” the draft budget preamble said. “This represents about five percent of the fund’s revenues and was factored into revenues in our last rate study.”

Alongside the nixed SEAPA rebate, higher-than-anticipated increases in health insurance benefits for power employees, and a third, less-profitable electric price tier introduced to encourage a switch to electric heat have all contributed to shortfalls in the light fund, according to the budget.

As a result, bills could rise by five percent as early as July 1, and an additional five percent Jan. 1, 2015. The increases would be lobbied on top of the total electric bill, Hammer said.

The fund draws its revenue primarily from amounts tacked on top of the wholesale power rate set by SEAPA at 6.8 cents per kilowatt hour. For those who use less than 300 kilowatt hours, the rate with Wrangell’s addition is 12.6 cents per kilowatt hour, with a profit margin of 5.8 cents per kilowatt hour for the light department. Residents using more than 300 kilowatt hours pay 10.2 cents per killowatt hour, with a 3.4 cent profit margin to the light department.

A third tier, established to encourage residents to switch to electric heating and typically monitored separately from other consumption, charges 8 cents per kilowatt hour, for a profit margin of 1.2 cents per kilowatt hour.

The average residential consumer uses about 905 kilowatt hours per month (not including heat), for a total bill of about $110. A five percent increase would thus mean an additional $5.50 per month, or $66 per year, not including the seven percent sales tax.

The average electric heat consumer uses about 2,000 kilowatt hours per year, for a monthly bill of about $160. A five percent increase would mean an additional $8 for each month the electric heater was in use. Assuming a five-month winter (October through February), that could mean a $40 annual increase for the winter months, according to figures provided by Hammer.

In addition to the short-term concerns, borough officials are also warily eyeing moves on the federal level over the next couple years. The Secure Rural Schools funds could be phased out over the next seven years, and was only saved this year thanks to an unexpected helium surplus. This would ultimately represent a $850,000 decrease in school revenue. Were the elimination to go forward and the borough to make up the funding, a property tax increase of 6.8 mills would be required to make up the difference. That means a house appraised at $200,000 would pay an additional $1,360 in property taxes to make up the difference, according to the budget’s preamble.

The borough also faces potential cuts to the Payment In Lieu of Taxes federal program. The Department of the Interior pays Wrangell about $390,000 per year for federal lands in the borough which could otherwise be on the payroll taxes, according to the preliminary budget.

“It’s hard to know whether that will be cut or not,” Burgess said.

The borough assembly will hold a public budget hearing at 6 p.m. May 27. An assembly meeting originally intended to approve the budget and adopt the mill rate has been cancelled do to the lack of a quorum.

 

Reader Comments
(0)

 
 

Our Family of Publications Includes:

Powered by ROAR Online Publication Software from Lions Light Corporation
© Copyright 2018