Thursday, December 4, 2003

Fees, Fees, and More Fees

Mayor Herenton puts MLGW's request for a rate hike in context of other tax increases.

Posted By on Thu, Dec 4, 2003 at 4:00 AM

We're doing great, says MLGW.

You can do better, says Mayor Willie Herenton, and you're not the only one with budget problems.

The city is also in "critical need" of a sewer rate increase next year and faces "a very real probability" of a property-tax increase of 25 to 35 cents in fiscal year 2006. Depending on how the economy does, the city might even need a 10 cent increase next year (about $2 a month for a $100,000 home). In light of that, Herenton asked MLGW and the Memphis City Council to consider delaying part of the utility's requested 7 percent rate hike for another year.

The proposed sewer rate increase, the first in 22 years, would raise the average residential sewer bill by $2.17 a month. Rather than present it separately, Herenton put it in context with property taxes and utility fees in a personal presentation to the City Council Tuesday.

It was Herenton's first specific warning of a property-tax hike during his upcoming fourth mayoral term. He apparently decided to lay out all his cards while the council was examining MLGW's budget and getting the public stirred up about their utility bills.

While it may be a monopoly, MLGW would like to be seen as both more compassionate and efficient than those corporate monoliths in the Internet, cable television, and telephone sectors which raise rates whenever they feel like it.

Your hometown utility wants to be your trusted friend.

MLGW took out a full-page newspaper ad and President Herman Morris wrote an opinion column for The Commercial Appeal's Sunday editorial page. The average residential customer increase, it was helpfully noted, was projected at $10.35 a month, or 35 cents a day, or less than the cost of a postage stamp.

The mayor, noting a number of service complaints, was not entirely sold or, according to aides, appreciative of Morris for pressing ahead.

In addition to his comprehensive look at taxes and fees, Herenton presented plans for a call center for city government and its affiliated agencies. FedEx will lend its expertise.

If the mayor gets his way, MLGW will get a rate increase but not all at once. The utility has proposed the 7 percent general rate increase to compensate for increased costs of anti-terrorism measures and the extraordinary costs of the summer wind storm -- not all of which have been reimbursed by the federal government.

Political decisions have also raised MLGW's costs. One year ago, City Council members, not wanting to play Scrooge, ordered the utility to defer winter cutoffs and reduce home deposits and reconnection fees to assist cash-strapped customers. MLGW says the measures, coupled with other programs to help the poor, cost $9 million a year.

Two years ago, city officials agreed to finance $30 million worth of bonds for the FedExForum with MLGW's annual $2.5 million payment in lieu of taxes from the water division. Otherwise, that money could have been used to lower rates or offset costs.

The last time the utility raised its water rates was in 1995. Gas and electricity have been steady since 1993. There were small rate reductions in 1998-2000.

In a letter to council members last week, Herenton said MLGW appears to spend an unnecessary sum on advertising even though it is a monopoly and has invested $30 million in an automated billing system he says has problems.

The call center is in part a response to growing concerns about customer-service complaints regarding MLGW that got worse after the July wind storm. Herenton is well-attuned to citizen complaints from community and business leaders. Like most Memphians, he lost power himself for days after the storm. The mayor appoints Morris and the five MLGW board members, including the mayor's pastor, the Rev. James Netters of Mt. Vernon Baptist Church, and his longtime political supporters CME Bishop William Graves and minority business consultant Franketta Guinn; television executive Olin Morris; and businessman L.R. Jalenak.

They oversee an operation with 2,800 employees, nearly 400,000 customers, a $250 million annual operating budget, and a $112 million capital-improvements budget. Utility financing is a complex entity in itself. MLGW uses 12 percent of TVA's total electrical output. Earlier this year, MLGW struck an agreement to prepurchase $1.5 billion worth of electricity, a move the utility says will save it $15 million a year for 15 years.

All in all, a lot of numbers to digest, but Herenton decided that citizens deserve to see them all at once and prepare for the worst.

E-mail: branston@memphisflyer.com

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