‘Power’ful financial aid

By on November 7, 2012

By: GARY P. KLINGER Review Correspondent, Staff Writer

Ephrata Borough Council is looking to increase the amount the electric fund contributes to the general fund by several percentage points in a measure aimed at giving borough leaders more budget flexibility going into the 2013 fiscal year.

According to a borough financial management policy, the electric fund is to contribute annually an amount not to exceed 7.75 percent of the gross electric sales revenue as a contribution to the electric fund. Council will vote Monday night on increasing that percentage to 10 percent or what would amount to $2.8 million being transferred.

Borough Manager Bob Thompson explained the move in this way:

"First let me start off by saying that the value to residents of a community that is a public power supply supplier is that the net proceeds from the electric utility operation can be reinvested back into the community."

In Ephrata’s case, there are two financial management policies that guide the electric utility operation. Thompson explained that the first identifies the targeted balance for the Electric Fund. The Electric Fund is used to account for the wholesale purchase of electric energy and for the operation of the retail distribution system to customers within the corporate limits of the borough. The Electric Fund balance ensures that there is money available to address unforeseen circumstances such as substation failures and severe weather that impacts the electric distribution system.

Accordingly, the financial management policy states that the unappropriated reserve balance in the Electric Fund should be established at a target amount of 10 percent of the budgeted Electric Fund appropriations plus $1,000,000. The appropriations for the fund are approximately $18,000,000. Therefore the target according to the policy should be a minimum $2,800,000.

"We estimate that the 2012 ending balance in the Electric Fund will be $3,800,000," said Thompson.

Thompson added that a second financial management policy states the Electric Fund shall contribute annually an amount not to exceed 7.75 percent of gross electric sales revenue as a contribution to the General Fund. In 2012 $1,414,762 was transferred from the Electric Fund to the General. Without that transfer, the Borough would have had to either cut services or increase real estate taxes.

Fortunately for borough electric customers, there has not had an electric rate increase since 2008.

"Our goal is to provide reliable service along with competitive rates" added Thompson. "Also I think it is important to note that unlike privately/investor-owned electric utilities, all net proceeds go back into the community where the rates payers either live or conduct their business.

This proposed change in the financial management policy will not have any impact on electric customers.

Interestingly, the borough has actually seen a decline in electric sales over the past few years. The policy is based on electric sales. Thompson pointed to the mild winter last year as one contributing factor for the reduced electric sales. Since the policy is based on electric sales, the amount of money transferred to the General Fund has also declined.

"The change in the policy will allow a greater amount to be transferred to the General Fund," explained Thompson.

But the big question is whether or not this policy change will affect the tax rate for 2013. Thompson said it will not, but added that without the change, less money will be transferred to the General Fund and it could require the need to reduce services (which includes labor such as public works employees and/or police personnel) or increase taxes to make up the revenue shortfall.

Asked why not have funds go to reducing electric rates rather than the general fund, Thompson explained that it has been a long standing practice of the borough to contribute to the General Fund from the Electric Fund. Further, it is also important to recognize that if contributions to the General Fund from the Electric Fund are decreased, those monies will have to be made up by either decreasing services or increasing in real estate taxes.

"We believe that we provide reliable electric service and competitive electric rates which allow us to use the net proceeds from the Electric Funds to better the community," said Thompson.

Another target for the policy is to allow two to three months of operating cost typically to be kept in reserve. At a budgeted amount of $18,000,000 that equates to $3,000,000-4,500,000.

"This gives us the flexibility we need for the budget," explained Budget and Finance Committee Chair Vic Richard. "I don’t think we anticipated the diminishment of sales. That has actually been counterproductive to what we are trying to do."

A final vote will be taken on the measure at next Monday night’s regular session of borough council.

In other news, Police Chief William Harvey updated council on last week’s efforts throughout the community during Hurricane Sandy.

"There were no deaths or injuries and no loss of homes or business, nor was there any compromise of key resources," said Harvey who had high praise for all local volunteers and emergency medical teams as well as the public works staff.

"Since last year’s hurricane we have been refining our emergency response process, taking us to a higher level of service," added Harvey.

Harvey added that the entire borough team performed exquisitely, from the Mayor and Thompson, who were close at hand throughout the storm, to Director of Operations Tom Natarian who spent in excess of 24 hours in the emergency response command center to help assure there no loss of electrical, water or sewer service resulted from the storm.

Harvey also added that he had received numerous reports of local residents helping out by cleaning out leaves from the storm drains. He said the effort contributed to saving what could have been considerably worse flooding as a result.

Thompson reported that there was only one power interruption and that for about one hour in the northeast sector. He added, however, that a few limbs did come down that yanked the power lines from individual houses but that none of them created larger power outages.

"We are blessed to have very reliable public power," commented Thompson. "The electric division did an outstanding job keeping the juice flowing, so to speak."

Mayor Ralph Mowen publicly congratulated Natarian for spending the entire night in the command center.

"Tom was a great help coordinating things with public works," said Mowen. "I was in and out over the two days; things went really well."

For additional information about Ephrata Borough visit ephrataboro.org. Gary P. Klinger welcomes your comments, questions and suggestions via e-mail at klingerglobal@gmail.com. More AID, page A6

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