94°F
weather icon Clear

Study: Utility reserves seem adequate

Boulder City’s utility rate study has started and shows there are enough projected financial reserves for its capital improvement projects, but that could change depending on the city’s needs.

Last year the city contracted with Raftelis Financial Consultants Inc. to conduct a study of the city’s utility rates, the cost of serving the utilities and the structure of the funds to support the city, as well as developing a five-year plan for the funds. According to city documents, the work started Sept. 23.

At the Utility Advisory Committee workshop Dec. 16, Raftelis representatives shared initial results that showed that the electric utility currently has enough projected revenue to cover its capital improvement projects.

“It means that based on the current CIP (capital improvement plan) there should be sufficient revenues plus available fund balances to cover operating and maintenance as well as the CIP for the electric utility,” Utilities Director Dennis Porter wrote in an email. “This is assuming that the current CIP does not increase, which it likely will, and that the utility continues to receive land sale subsidies through at least FY (fiscal year) 2023.”

The required operating reserve is at least 20 percent of operations and maintenance.

According to the preliminary report, the five-year projection of those revenues will keep the electric fund’s operating reserves at a surplus through fiscal 2025. The surpluses are projected to range from 47 percent to 102 percent.

Committee member Eileen Wilkinson asked if that meant the city had more reserves than it needed.

“Need is a relative term,” she added.

Boulder City Finance Director Diane Pelletier said she recommends keeping a higher level of reserves because the city pays as it goes for its projects.

“There could be some major problem that we don’t know about at this time, and because Boulder City is a ‘paygo,’ pay as you go city, we need to have higher reserves than the normal entity,” she said. “If they have a problem, they can go out to bond and have that cash to fix it. So just keep that in mind when you’re looking at the cash balances.”

Pelletier also said the cash balances may look higher, but it could because they are based on the city’s needs for the next five years.

“We don’t know if some major incident could occur and all of a sudden we need cash,” she added.

“It is an industry best practice to maintain certain reserves for a number of reasons such as rate stability, emergencies — catastrophic or otherwise — or debt service coverage,” added Porter in an email. “As an example, if there were to be an earthquake or some type of natural event like that, it could significantly damage portions of our infrastructure and the reserves would go a long way in addressing the damage as quickly as possible.”

Raftelis representative Tom Beckley said the reserves will be drawn down because of the projects in the capital improvement plan.

“When you look at (the reserves) in four years, we’re going to be down to 41 percent,” he said. “Yes, that’s still a lot more than 20 percent, but it’s certainly nowhere near 102 percent.”

He also said the extra reserves do not mean rates should be reduced.

“Well certainly, you could say, ‘We can lower rates 20 percent this year,’ ” he said. “You could, and then you’re just going to have to raise them 20 percent next year because you would draw down all the reserves.”

The initial study also found that the city’s utility rate structure is different than other cities.

With the electric rates, Beckley said the nonresidential rates are higher than the residential ones, and usually it is the opposite. Additionally, the cost to distribute the power is 70 percent of the overall cost, and the electricity itself is 30 percent. Usually, those costs are reversed.

For the water and wastewater utilities, Beckley said the base charges for both were relatively high. With water, he said, base charges for nonresidential and residential customers are different, and usually they are the same.

No reason for the difference in structure was given.

Porter said the project is a “work-in-progress” and the next step will be a cost of service analysis that will be presented in March.

He also said it’s “premature” to comment on rate increases right now.

Contact reporter Celia Shortt Goodyear at cgoodyear@bouldercityreview.com or at 702-586-9401. Follow her on Twitter @csgoodyear.

Don't miss the big stories. Like us on Facebook.
THE LATEST
Schools report smooth return

Parents can finally exhale after a long summer of kids in the house as school is back in session in Boulder City. On Monday, Aug. 8, all four schools in town welcomed back students for the 2022-23 school year in an orderly fashion without any mishaps.

Council OKs plan to remove turf

Water was once again the main focus for City Council. At its meeting Tuesday, Aug. 9, an agreement with the Southern Nevada Water Association that will remove turf in Boulder City to save on water was approved 4-0 by the council.

Council gets first look at Nevada Way remodel

The Boulder City Council was introduced to a project that will remodel and rehabilitate the stretch of Nevada Way from Wyoming to Park streets during its meeting Tuesday, Aug. 9.

More human remains found at Lake Mead

More human remains have been found at Lake Mead, according to officials at the national recreation area.

Fire department targets sites to improve response times

Two locations are being targeted for a new Boulder City Fire substation that the City Council approved last month to help the department improve response time to emergencies. The proposed new fire station, labeled Station 122, is looking at sites at Quartzite Road and Nevada Way as well as near the library at 701 Adams Boulevard. The city owns land in both locations.

Ex-manager sues city; claims retaliation

Former City Manager Al Noyola filed a lawsuit against the city Friday, July 29, alleging that his civil rights were violated when he was fired Oct. 13, 2020.

School begins Monday

School is almost back in session for the quartet of schools in Boulder City.

Storms cause minor damage

Monsoon season brought damage to Boulder City as the town was hit with a collection of storms last week. Luckily, the city was able to handle the storms in an efficient manner, according to officials, who dealt with the typical gravel and rock erosion, power outages and roof leaks.

Lend A Hand awarded $101K from state

In the wake of the COVID-19 pandemic, the state of Nevada has awarded $30 million in Community Recovery Grants to nonprofit organizations including Lend A Hand of Boulder City. The local organization was one of the 30-plus applicants that received money funded by American Rescue Act Plan dollars.

Drought drives tough talks to cut water use

Nevada and two of its neighboring Southwestern states are still working on ways to drastically cut water use from the Colorado River as a deadline set by the federal government to address the worsening conditions along the river quickly approaches.