Gladstone utility rates
It’s no secret the city of Gladstone has inflated the cost of utility services to pay for non-utility city operations for over a decade. Each year a little more money was needed. The utility rates went up for electricity, trash and water, a dime here a quarter there. September 2016 was the watershed moment. The City Manager, Eric Buckman; the City Treasurer, Vicki Schroeder; and Terra Langham, Municipal Employees’ Retirement System (MERS) came up with a plan to raise utility rates. The total to be generated over 7 years, $2.6 Million. The City of Gladstone had ignored the retirement plan for years and now the City was looking for an easy out. As always, when the City needs money, raise the utility rates. The money needed was not to pay for the retirement for utility employees’. It was for non-utility employees (administration, parks, public works police).
Using the utility to fund non-utility operations is not allowed. In 1978, 40 years ago, the State Constitution was changed to limit property tax increases to the rate of Inflation. “The Headlee Amendment”. Cities, strapped for cash turned to their utilities to create a surplus which could be used to pay for items reserved to be paid by property taxes. The Michigan Supreme Court Ruled this was illegal. In Bolt vrs the City of Lansing Utilities were to provide services at costs. However, a percentage of common administrative costs could be passed on. These costs are: City Manager, Clerk, Treasurer, Assessor and the operation of the building. The costs for staff and the building are approximately $500.000 per year.
The Gladstone the utilities account for 1/3 of the employees, but the city charges the utilities 2/3 of the common cost. When it comes to MERS, the utilities pay 3/4 of the costs. The utilities are called upon more and more to prop up the non utility operations.
In the Constitutional Amendment, there is a provision to take legal action by an individual. It also mandated the municipality shall pay legal fees for action brought under the “Headlee Amendment.” Which brings us to the settlement. The City of Gladstone agrees to abide by the State Constitution. A consulting firm, UFS Consultants, will be providing a full review to determine the methodology and the procedures to ensure the utilities are charged for only appropriate common costs.
This brings us to the net result. The electric utility rates will be reduced by 20%. The surplus in the electric fund is $3 Million. Of the $3 Million, 1/2 Million is needed as an emergency fund, $1.2 Million should be used to fully pay the electric MERS obligation and $1.3 Million returned to the Citizens as a credit on their electric bill. Again, UFS Consultants will be coordinating the project.
I look forward to fair utility rates.
I also want to mention, the $5 Million MERS obligation owed to the City of Gladstone for administration, public work, parks and police to MERS. MERS has requested the full amount be paid by 2022 per the schedule presented in 2016. Bonding $5 Million over a period of 20 years would allow immediate payment to MERS. The cost would be $300.000 per year which is about 10% of the City of Gladstone non utility budget.
Citizen Mike O’Connor