Another short and sweet Town Council work session. There was the continued discuss on the $550,000 replacement radio system for the Town Police Department.
TOWN/STAFF RELATED ITEMS
1. Donation of Poles to RMA – Director of Energy Services
2. Continued Discussion of Radio System for Police Department – Chief Magalis
COUNCIL/MAYOR RELATED ITEMS:
3. Council Discussion/Goals (time permitting)
4. CLOSED MEETING – Consultation with Legal Counsel – cancelled
Town okays arts grant application and bad debt write offs
In business other than explaining rising costs of service causing Town electric rates to go up and moving toward covering those expenses, on Monday, March 11, the town council authorized contributing funds toward a Virginia Commission of the Arts Creative Partnership Grant for three local organizations; and approved a resolution updating its Bad Debt Policy in conjunction with dropping five years of accumulated bad debt off its books.
First, by a 5-0 vote with Meza absent, Council approved a total of $4,500 that would be matched by the state Commission of the Arts Creative Partnership to be divided between the Blue Ridge Arts Council, the Front Royal Oratorio Society and the Blue Ridge Singers. The Town contributions would be $3500 to the Arts Council and $500 each to the Oratorio Society and Blue Ridge Singers, resulting in state-local matching grant totals of $7,000 to BRAC and $1,000 each to the singing groups when awarded.
Then by the same margin, a bad debt total of $277,974 (and 34 cents) was approved for removal from the Town ledger as uncollectable. No positive action toward collections on those 17-plus pages of unpaid bills was reported over a five-year period. A quick look-over showed unpaid bills as low as $34.25 and as high as $5,346, the latter likely on the commercial side.
Councilwoman Letasha Thompson observed that the Town averages a collection rate of 99.5%, adding, “I think staff is doing a tremendous job” on the collection front.
See discussion and the votes on this Royal Examiner video:
Traversing the maze of inter-departmental municipal finances
During Monday’s citizen-town staff question-and-answer on Town electric utility rates, it was explained that increases already reflected in the Power Cost Adjustment (PCA) line item on utility bills is a reflection of the rising cost of doing business to provide the Town’s electric utility service.
A question on how the Town does business with its enterprise fund utilities and services departmental budgets came from a former councilman present at the Q&A. Current Shenandoah District County Supervisor Tom Sayre asked how much Electric Enterprise Fund money had been transferred to support Town General Fund (administrative) projects. After some quick research Town Finance Director B. J. Wilson replied $1,950,000.
Responding to a later Royal Examiner question, Wilson said, “The transfer is a contributing factor to the overall (electric) rate as are all expenses in the electric department, but is not a factor for the proposed increase.” Rather, he explained that the transfer is part of the annual town budget process and was already incorporated into the existing rate prior to the jump seen in recent months. See related story:
Wilson elaborated that the $1.95-million transfer is a typical annual enterprise fund budget item that covers administrative support of the electric, water, sewer and refuse departments. That support includes administrative functions such as Human Resources, IT, billing and collections.
Wilson told Royal Examiner that while the annual administrative support transfer of $1,950,000 is not reflective of an internal loan process, one such internal loan is outstanding on the Electric Fund books. That $1,500,000 loan dates to September 2011, when the sitting council authorized an interest-free internal transfer to pay for the purchase of and renovations to the current Town Hall building at 102 East Main Street. As some of you sports fans may recall, the new Town Hall was most recently used as a bank when the Town purchased it in 2011.
That purchase facilitated a move out of the old Town Hall on North Royal Avenue that was in need of its own renovations and was deemed to small to continue to function as the Town’s administrative seat of government. The old Town Hall building was eventually traded by the EDA, marketing it for the Town, for the Afton Inn. But THAT is a trip down Memory Lane for another day.
According to Town Finance Director Wilson, the $1,500,000 Electric Fund loan for the new Town Hall is being repaid over the course of 10 years by way of annual payments of $150,000. By law municipalities must pay back such internal loans, though whether to include any interest in that payback is at the discretion of the municipality’s elected officials. The interest-free internal payback to the Town’s Electric Enterprise Fund began in Fiscal Year 2013 when the renovations at 102 East Main Street were completed. The full payback is scheduled for completion in 2022.
And that is the long answer to Supervisor Sayre’s query on the status of the Town Administration’s financial relationship to its Energy Services Department, which as staff noted Monday evening includes emergency operational reserves that have dipped below the recommended three-month reserve. Numbers in the Town Budget indicate a recommended reserve amount of $5,012,883 for the Energy Services department, compared to the $3,851,179 on the department’s books at the end of the last fiscal year.
The bottom line appears to be that neither the existing $450,000 balance on a seven-year-old internal loan or an annual administrative operational funding transfer of $1,950,000 to the current general fund budget, have anything to do with rising electrical costs seen on Town utility bills in recent months.
It’s just the rising cost of doing business, as town staff explained in detail Monday evening.
WATCH: Q&A Forum – Town staff answers concerns from utility customers
The Town of Front Royal held a Q&A Forum on Monday, March 11, 2019 from 6:00 PM – 7:00PM in the Warren County Government Center Board Room, 220 N. Commerce Avenue, Front Royal, Virginia. Town Director of Energy Services David Jenkins, Director of Finance B. J. Wilson and Town Manager Joe Waltz answered questions from concerned electric utility customers regarding the proposed electric rate increase and the Power Cost Adjustment (PCA).
Royal Examiner’s camera was there:
See related story:
Town staff fields questions on electric rate and bill increases prior to vote
With a public hearing and first reading vote on adjustments to Front Royal’s electric service rates on its meeting agenda of Monday, March 11, town staff addressed citizen concerns at a question and answer session held at 6 p.m., an hour prior to the beginning of the first regular town council meeting of the month. Present to field questions were Town Director of Energy Services David Jenkins, Director of Finance B. J. Wilson and Town Manager Joe Waltz.
Council observers from near the outset included Mayor Hollis Tharpe, Vice-Mayor William Sealock, Councilwoman Letasha Thompson and Councilmen Eugene Tewalt, Gary Gillespie and Chris Holloway. Jacob Meza was absent from Monday’s Q&A and regular meeting.
“Everyone on Facebook is complaining about increases up to $200 dollars or more,” one woman told those present.
“Everyone on Facebook” translated to six citizens at the session’s outset who asked questions about the dynamics involved in creating that higher electric portion of town utility bills in recent months. That number grew to nine and then 12 with the addition of three downtown business people, Rick Novak, Mike McCool and Ann Orndorff, and a few others as the regular meeting time approached.
Only one of those, Springtime Garden Center owner Orndorff, spoke at the public hearing preceding the regular meeting first-reading vote on the proposed increase. That vote was 4-1, Holloway dissenting and Meza absent, for approval of the proposed rate changes. A second and binding vote is scheduled for March 25.
At issue for those present on March 11, and the social media multitudes absent, are substantial increases in the electric portion of town utility bills in recent months. Thus far those cost-of-service increases have been reflected in a Power Cost Adjustment (PCA) line that has been included in Town utility bills since November 2008.
“What is that a tax? Will it ever go away,” the first citizen to speak asked of the PCA line item on utility bills.
The PCA aspect is generally utilized to accommodate costs that fluctuate in the short term, sometimes monthly, to allow those service provision costs to be met without necessitating a lengthier – Waltz cited two months – political process of approving base rate adjustments back and forth on a continual basis.
“The PCA is a tool used by most electric utilities so they can recover those costs without having to increase their actual electric rates,” Director of Energy Services Jenkins and his Administrative Assistant Mary Ellen Lynn explained to this reporter in response to earlier questions, adding, “A big part of it is also the fluctuation in fuel costs to generate the power. The PCA provides an avenue to adjust dependent on any differences in the average cost from the base cost of wholesale power.”
“We were hoping the increases were anomalies but they stayed,” Town Manager Waltz told those assembled Monday at the Warren County Government Center meeting room, noting that when that permanence in power provision costs became apparent the Town commissioned a consultant rate study. That study resulted in a series of recommendations to increase rates to cover the Town’s electric utility expenses.
“It is the cost of doing business – we have not raised our base (electric) rate in 10 years,” Waltz told those present on March 11.
In response to previous questions from Royal Examiner, Jenkins and Lynn elaborated, “The Town has seen an increase in wholesale power cost, transmission and congestion charges on the transmission network over the past year. This increase has prompted staff to engage GDS Associates to perform a Cost of Service Study to determine the appropriate rate structure. The Town’s distribution system is continuously changing, and we must adjust accordingly to accommodate any changes and ensure that our rates recover our costs to serve our customers.”
As Waltz noted several times, by law municipal utilities are not operated for profit and can only charge fees necessary to maintain and expand their service as necessary.
And while aided by its municipal energy cooperative membership in American Municipal Power (AMP) Front Royal was enjoying its place as one of the three cheapest municipal power providers in Virginia, including several years in the number one spot on that list, no one took notice of those monthly PCA adjustments. But when the PCA started adding $100 or more to monthly bills in recent months, people definitely took notice.
When a rate change is approved following the required second reading those cost increases now showing on the PCA line of utility bills will be incorporated into the kilowatt hour usage aspect of those bills (ELEC-RE) and will vanish from the PCA line.
“The energy charge increase and PCA decrease almost balance each other out,” Energy Services staff told this reporter. The proposed adjustment in the Town’s residential electric rates would see a hike in the charge per kilowatt hour from the current 8.49-cent rate to 9.85 cents (+1.36 cents); and a corresponding drop in the PCA from 2.3-cents down to 1.0 cent (-1.3 cents).
The bulk of the estimated two-dollar hike per 1,000 kilowatt hours of residential usage come from a $1.50 increase to the “facility or customer charge” aspect of the electric bill from the current $7 level to $8.50.
According to energy department staff the facility or customer charge, “is essentially a fee on each customer’s bill that helps pay for the equipment, infrastructure and upkeep associated with providing electricity – transformers, power lines, etc.”
However, it is the increase already felt and thus far reflected in the existing PCA line on utility bills that is the basis of citizen complaints and confusion. And as Waltz explained early on, those increases “are the (rising) price of doing business” after 10 years of not having to do so on the power provision front.
On the commercial side of the increase the monthly facility/customer charge will go from $7.16 to $20; with the charge on the first 700 kilowatt hours rising from 11.5 cents to 12.6 cents; and from 7.56 cents to 8.8 cents per kilowatt hour over 700.
That commercial facilities or customer charge jump from the seven to twenty dollar range (200%) compared to the $1.50 jump (about 23%) on the residential side definitely attracted the attention of commercial customers Novak and Orndorff, as did a base rate hike five times the residential rate – $2 per 1,000 kilowatt hours per month residential versus $11 per month on the commercial side.
When Novak asked if the rate hikes couldn’t be spread more equally between residential and commercial customers, staff explained the proposed changes reflected the consultant study of how commercial and residential rates are generally balanced.
And if adjusting to the increased costs has taken the Town of Front Royal down a notch in the cheapest municipal energy provider “sweepstakes” according to a chart provided by the town staff, Front Royal does remain favorably positioned among energy providers statewide. With its PCA adjustment in place the Town ranked eighth of 31 various types of municipal providers across the commonwealth; after the rate adjustment on the table the Town will fall to 12th place.
Where does the Town of Front Royal rank among other utilities in VA?
Egger lambasts supervisors for ‘foolish things’ and lack of oversight
FRONT ROYAL, VA – The Warren County Board of Supervisors on Tuesday morning were admonished by Front Royal resident Mark Egger for what he called “foolish things” including the board’s decision to postpone the appointment of two new EDA Board members to fill the seats of Greg Drescher and Ron Llewellyn, whose terms expired on February 28.
Egger told the panel that they should be ashamed of themselves for allowing either man to remain on the EDA board beyond their term expiration.
He also re-visited the issue of the alleged May 18, 2017 break-in at the EDA office and the subsequent hiring of private investigator Ken Pullen. He said EDA board members Drescher and Llewellyn had different accounts of who hired the P.I. than did former Executive Director Jennifer McDonald.
Egger also provided copies of a check written from the EDA bank account on June 6, 2017, and signed by Dresher and McDonald, that were made out to Ken Pullen and notated as being for “retainer fees” that he obtained by filing a Virginia Freedom of Information Act (FOIA) request.
He also displayed a check from Jennifer McDonald’s personal account made out to the EDA, dated on the same day, to reimburse the EDA for the P.I. retainer fees. Egger noted that the check from McDonald was not deposited until Aug. 16, 2017 – more than two months after it was written. He then relayed details of an email exchange between himself and McDonald in which he said she claimed she had and had not hired a private investigator.
Egger encouraged the board to “clean house and move forward” regarding the EDA board and to hold interviews for prospective new members in an open meeting.
Town of Front Royal to write off more bad debt & update policy
The Town Council is requested to approve a revision to the Bad Debt Policy, and approve additional write-offs associated with the revision, and to review other possible alternatives for collection on bad debt.
The Town of Front Royal has had a large dollar value of uncollectable “bad debt” recorded yearly on the Town’s ledger, due to non-payment of utility bills which had not been addressed for over 30 years until 2012. The Town’s auditing firm, Mitchell & Company, requested that Town Council approve a policy that would allow the Department of Finance to review outstanding uncollectable debt annually, and abate the bad debt from ledgers after all avenues for collection had been exhausted. Town Council adopted a bad debt policy on November 13, 2012 that deemed an uncollectable account as having no activity for a period of 7 years.
Code of Virginia § 8.01-246 allows action to be taken to collect on written contracts for a period of 5 (five) years. Written agreements are used for Town of Front Royal Utility Accounts. Based on the Code of Virginia, a Town of Front Royal Utility Account would be deemed uncollectable after there has been no activity from the account holder for a period of 5 (five) consecutive years.
Town Council is requested to approve the removal of 5 years or older of outstanding accounts receivable (bad debts) on the Town’s ledger in the amount of $277,974.34 from enterprise and general fund liability accounts. This value includes 652 utility accounts. All recourse of attempting to collect these amounts has been completed and the accounts have no activity for at least 5 years.
Based on the utilities billed during FY2018, the Town of Front Royal Department of Finance currently collects approximately 99.5% of the amounts billed annually before an account is deemed uncollectable and written off. Town Council is requested to review the additional options for the collection of bad debt that follow this cover sheet and provide staff with direction if an option would like to be reviewed further.
BUDGET/FUNDING: No funding is required. Journal entry will be done effecting balance sheet only.
STAFF RECOMMENDATION: Staff recommends, to approve the revisions to the bad debt policy,approve the write-offs, and to review additional collection alternatives.
Staff has determined that the accounts presented meet the criteria for uncollectable as determined by the Town’s bad debt write off policy:
- No activity on closed account for at least 5 years
- All other methods of collection have been exhausted
The amount of bad debt approved to be removed by Council continues to decrease:
- Dec 2013 – $848,191 – approved for removal
- Dec 2014 – $144,049 – approved for removal
- Feb 2016 – $225,318 – approved for removal
- Feb 2017 – $203,808 – approved for removal
- Nov 2017 – $175,999 – approved for removal
- Oct 2018 – $166,191- approved for removal
- Mar 2019 – $277,974.34 – requested to be approved
The FY19 budgeted revenue for the sales of electric, water, sewer, & refuse totals approximately $30.8 million. The amount of $277,974.34 represents approximately 0.9% of the budgeted sales and is approximately 2 years of bad debt.
Royal Examiner’s camera was at the March 4, 2019 Town Council Work Session when this was discussed: