Big News, No, BIG NEWS!

Residents of Eagle Mountain,

 

Today or Tomorrow, you should receive a letter in the mail about some big news regarding the City’s gas and electric utilities. The City has reached tentative agreements to sell our gas utility to Questar Gas and to sell our electric utility assets to South Utah Valley Electric Service District (SESD) and annex in to the service district.  The final agreements will still need to be approved by the City Council in the coming months.  Here is a digital copy of the letter.  The letter was sent to you to give some of the “what” details.  Here, I hope to give you some of the “why” details.    The result of this deal will be that we will eliminate roughly 26 million of our debt.  This is more than a 50% reduction!  We will also retain approximately six million dollars in gas fund balance, the new energy building, and some other assets.  I am presenting this to you because I believe this deal is in the best long term interest of our residents and our City.

In the letter referenced above, I stated that the average household would save just over $50.00 a year when comparing Eagle Mountain’s utility rates to Questar Gas and SESD.  We completed this analysis for a period of January 1, 2013 through December 31, 2013.  Those calculations were correct for that period, however Questar Gas has adjusted their rates as of yesterday (June 2nd, 2014).  This adjustment took place after our letter was mailed to you.  With Questar Gas’s updated rates, the average customer would have saved $1.24 in total utility charges for the year and not $50.00 as was the case under the previous rates.  I want you to have the most current data available, and I apologize for any confusion this may have caused.

While this may not appear to offer a significant financial benefit now, it will in the near future.  For a period, Eagle Mountain City did not adjust gas rates which resulted in over-collection of gas funds. If we retain the utilities, those collected gas funds will be consumed through operational expenses and capital improvements on the gas system over time.  Once those gas funds are consumed, it is unlikely that our gas rates would be lower than Questar Gas on a consistent basis.

If we sell the gas utility, the gas fund balance we retain will allow us to make significant investments to improve our community.  This transaction will also decrease the size of our government without any detriment to our current employees.  We have negotiated positions for all of our existing utility and utility billing employees that would be effected.  While these are great reasons to sell, there are other reasons which will have an equally important impact, the greatest of which are long term benefits to our utility infrastructure, utility service capability, and long term access to future energy supply.  With over 25,000 residents and growing, running gas and electric utilities is growing in complexity.  To stay in the utility business will require that we adjust to meet those complex needs.  Meeting these challenges will take significant time, resources, and money.  There are efficiencies to be gained from partnering with two companies that have served their customers well in these capacities for many years.  From manpower, access to future energy resources, and operational experience, there is benefit to partnerships with Questar Gas and SESD.

We intended to bring this decision to the public for a vote, but through conversations I held with our Utah County Clerk who is the county elections official, as well as the State Director of Elections, this item cannot be on the November ballot.  There is no state code that governs the sale of a gas utility, and while we will be selling assets associated with our electric utility, the electric utility transaction will be an annexation which is governed by a specific section of Utah code. This code does not allow for a public vote as a proposition on a ballot.  In spite of this, we will communicate with you and give plenty of opportunities for you to give your feedback before City Council votes.  There is a good amount of information available to you at www.eaglemountaincity.com under the News section.  If you have questions, please post them here as a comment or email utilitysalequestions@emcity.org and we will do our best to respond promptly.  Also, as noted in the letter, we will be holding a Town Hall Meeting to present information and address questions on June 19th at Frontier Middle School at 7 p.m.

53 thoughts on “Big News, No, BIG NEWS!

  1. “For a period, Eagle Mountain City did not adjust gas rates which resulted in over-collection of gas funds”

    So I have a great Idea, why don’t you refund the people who overpaid you? Like me that struggles every month to pay my utilities in EM.

    • Jared, he’s not saying that they made a billing error. He’s saying that, for a time, gas rates were higher than required to cover operational costs. How do you expect them to refund a net gain? The best way to “refund” this money is to do exactly what Mayor Pengra is proposing: funnel it back in to the community.

      • I totally understand making a profit. but mind you if the billing error was the other direction they would be coming to us for that money.

        Don’t let my comment make you think I am not in favor of this. I have lived in EM for 11 or so years. This is a good thing for us. but admitting that you overcharged your customers by 6 million and not offering anything back besides “funneling it into the community” well that doesn’t sit well with me.

    • I would like to clarify this point for you if I may. The Gas and Electric utilities always collect their own revenues through the rates that are charged. What happened with the gas and electric utilities is that the rates had not been adjusted for multiple years. The cost of power went up and the cost of gas went down. Because we did not adjust rates to keep in line with those costs, our electric fund under-collected and the gas fund over-collected against real cost. The net result is that our gas fund has a high balance and the electric fund has a low balance. In simple terms, Our electric rates are artificially low and our gas rates are where they need to be due to the recent rate adjustment that took place last year. Gas and Electric utilities should be managed as independent entities, even if kept within the City’s control. One utility should not subsidize the other. I hope that helps to clarify the situation.

  2. I am very much in favor of this. Removing debt from the city is a very good idea, no one wants to end up like all those cities in CA that were hundreds of millions in debt without a dime to pay it back.

  3. This is HUGE news for Our City! It will be nice to see Eagle Mountain with less LT debt and more resources focused on building EM as THE place for families!

  4. I am ambivalent. I really am on this. On the one hand, it is excellent that we are lowering our long term debt. On the other, people have complained that EM’s utility rates are so high (which they aren’t, nor have they ever been). Now, with Questar, the rates truly will skyrocket. I used the calculator provided in the link on the City’s website. Although it claims that my yearly savings will be $13.00, my gas bill goes up nearly every month; sometimes by over $30. I worry that come next January, when the switch is made, and rates go up, residents will be shocked when their bill comes in February from Questar. I made a tongue-in-cheek remark on Facebook about who will be to blame for this looming “utility scandal”. So, although I am all for lowering our long term debt, I am concerned that the “savings” won’t be realized; or, rather, recognized by the general population.
    Is it too early to ask if the City portion of our property taxes will be lowered since we will no longer have the utility infrastructure to manage?

    • Adam,

      Thank you for your comments. I would like to be clear that the reasons for exploring this sale go far beyond any short term benefit to customers. In reality, this will likely be near neutral for most residents. Even a $50.00 savings over 12 months is less than $5.00 per month. While I have no doubt there are residents who may be impacted by a $50.00 savings, the expense of staff time and my time that has been dedicated (and will be dedicated) to this endeavor would display poor management of resources. This is truly a decision of long term impact. To continue in the gas and electric utility business will come with costs. Those costs will be significant, as will the challenges to secure future power and gas resources. While most residents will see a nominal financial benefit, it is not the short term benefit that is driving this consideration. It is the long term benefit. The inevitable cost of running two major utilities as we cross the threshold of 25,000 residents will absolutely have an impact on customer rates. The considerations behind this deal are aimed at securing the best possible future for our residents and preventing negative future consequences. I hope that sheds a little light on why we are considering this action. We are focused on our future and the present, not just the present.

      • “The inevitable cost of running two major utilities as we cross the threshold of 25000 residents will absolutley have an impact on customer rates.” What does this mean? If we have been running these utilities, paying the debt, & builing infrastructure to support growth & making a decent profit while doing so with the number of residents we have …… wouldn’t getting more residents & more paying customers just make our profits go up and in return our rates go down? The utility cost comparison chart the city released a while back showed cities with their own utilities as the cheapest (such as Provo, Lehi, etc). So I would assume as cities grow & get more customers (especially in our case where we have the infrastructure to support growth) that it would mean more profits & in turn lowering rates for the citizens. What am I missing?

      • Ashly,

        By that standard, all businesses that gain new customers would have profits. Profits and revenues are very different. Adding new customers to the electric and gas systems is easy. We simply keep building homes. Unfortunately, there are many other variables involved in a business that determine its degree of success or failure.

  5. So if I’m doing the math right, each household has overpaid by about $1000 in gas? And now there’s 6 mil in over collection? Maybe I’m missing something, but that’s a LOT of money.

    • You are correct Emily. This happened before my time in office and rates have since been adjusted. There are several reasons why this happened which I won’t detail at this time, but this does serve as an illustration of some of the complexities that come along with managing utilities as a municipality. I can assure you that if we stay in the utility business for some reason, we will maintain tight control on appropriate rate adjustments in a timely manner.

    • Emily,

      I am posting some clarification from a comment above, so forgive the duplication. I want to clarify the scenario for you.

      I would like to clarify this point for you if I may. The Gas and Electric utilities always collect their own revenues through the rates that are charged. What happened with the gas and electric utilities is that the rates had not been adjusted for multiple years. The cost of power went up and the cost of gas went down. Because we did not adjust rates to keep in line with those costs, our electric fund under-collected and the gas fund over-collected against real cost. The net result is that our gas fund has a high balance and the electric fund has a low balance. In simple terms, Our electric rates are artificially low and our gas rates are where they need to be due to the recent rate adjustment that took place last year. Gas and Electric utilities should be managed as independent entities, even if kept within the City’s control. One utility should not subsidize the other. I hope that helps to clarify the situation.

  6. Will we still be blessed enough to have one utility bill? What benefits does this change offer the condos? Does this mean we have to mail in our payments if we can’t afford internet at home to do.online bill pay? Speaking of internet…. When can we have more options? We could really use a few. Oh, and I agree about refunding the citizens that were over charged for gas. We all could use our hard earned money back. Lots of questions, concerns and hopes for our future. Thanks for at least doing more than nothing. Big step forward. :@)

    • Camille, I’m sure a refund would be welcomed by all, but it’s out of the question. It wasn’t a billing error – it was simply due to the gas rates being higher than they needed to be. I think Mayor Pengra nailed it on the head when he said that this money could be used to improve our community – something I’m all for.

      As for ways to pay your bills, Questar offers many options for payment: http://www.questargas.com/PayBill/PayBillcdx.php

      As far as SESD, it looks like you’ll either need to pay online or mail it in. I’m assuming since you’re using the internet to post a comment, this won’t be an issue for you though. 🙂

      • Clint, next time keep your sarcasm to yourself. She had good questions. Your answers carried no love and not even simple respect.

      • We are negotiating currently, but we want SESD to offer a payment drop box within city limits or we would like them to have an office where payments can be processed. The prospect for this reality looks positive. They have been a great business to work with and I am certain we can find solutions to many of the concerns residents may have.

    • Camille – FYI… I always thought our only internet options were Direct Communications & Digis. I wasn’t happy with Direct and at the end of last year found another company “Utah Broadband” and absolutely LOVE them! Also, if you are in the condos there is another company that is cheap & everyone says is great (but I think you have to be north of Pony Express Parkway) and I believe they are called signal west. There was one other company but I can’t remember their name for the life of me!

  7. HUGE first step! Glad I voted for you! Once you have this tackled please look into the internet monopoly direct com has on the city. More choices (Google fiber) would be awesome.

    Thanks again for your hard work!

    • @Mike – See my comment above to Camille! There are quite a few other options out here (I had no idea about the other options until the end of last year & was THRILLED to find others & love my service with Utah Broadband). So don’t get stuck with a service you don’t like just by thinking you have no other choices 🙂 Good Luck with the internet!

  8. Be careful what you wish for. This is not a good thing for the City. Dan at SESD is not a good guy he tried this @ Payson city but they were smart enough not to let this pass. The utility’s do require a lot of time and work but they are a major revenue for the city and could be for along time. Wait for it, because in due time your property tax will go up because it will be the only real income the City will have.

    • John,

      Thank you for your perspective. I’m sorry you had a negative interaction with Dan. My interactions with Dan have been positive, though my like or dislike for an individual or a personality have very little to do with any decision that will have a long lasting impact on the well being of current and future residents. Your point that the utilities are a major source of revenue is exactly the problem however. Many cities that have their own utilities have grown dependent on inter-fund transfers. This is exactly what I want to avoid. Dependency on a utility creates an unhealthy relationship between government and business. We are now, for the first time in our history, at the point where the gas and electric utilities can be sold with relatively little impact to the normal functioning of our local government. Property taxes will only go up if we are relying on utility funds to pay for government functions and need to replace those funds somehow. Right now, we are not dependent on the revenues and I certainly intend to keep it that way.

      • You say right now we are not dependent on the utilities but the general fund only had just under $800,000 excess for FY2014 with revenues of that much included from gas/electric taxes. Plus over $1 million interfund transfer. Bottom line is we have relied on that source of income (at least from everything I can see in the budget) and honestly once the money runs out from the sale I highly doubt we can do with out that income unless we jack up the property taxes even more!

      • Ashly,

        I am looking at the challenges of this deal with a sober mind. Will it be hard? Perhaps. Have we accounted for the challenges and actively looked for solutions? Absolutely! We are not in the business of “winging it”. I believe in doing the right thing, even if it is the hard thing, and we CAN do hard things! As we discussed the other day, the gap that will need to be made up does not represent an insurmountable challenge.

  9. This news should be shouted from the Eagle Mountain’s mountain tops. I am currently looking to buy a home in the Eagle Mountain area and came across the debacle about EM utility rates and long term debt and many other “shady” things of the past years. Needless to say, I was very concerned about moving the EM community. This news brings me great relief that the current mayor is undoing some of the bad decisions made in previous (recession) years. No doubt I will be signing the home purchase agreement today and looking forward to moving to a community that has the interests of its residents in mind. Mayor Pengra, keep up the good work!

  10. When the city was considering joining the Unified Fire Authority (UFA), the then mayor sent out bulletins explaining that the tax increases as part of the UFA assessments were largely going to be offset by reductions in the utility rates being charged by the city. I specifically asked the mayor if those offsets were going to be permanent since the UFA fees were certainly going to be permanent and likely to increase over time. Now, with the sale of the utilities there will be no assurances that property owners will see any savings on utilities. It is most likely that utility rates will go up as will UFA assessments. Mayor Pengra, you mentioned that this sale will free up funds for significant city improvements. I wonder if it would be more appropriate to use those funds to help offset the UFA assessments that I truly believe were sold to the voters based on misleading, if not entirely false, information. Thanks, Jim Bright.

    • Jim,

      Thanks for being patient with me. I got your email, and I didn’t want you to think I was ignoring your post by not responding. The truth is, you have brought up some valid points and I have been rolling some thoughts around in my head over the last few days (which have been very busy). I suppose, I just didn’t feel like I had made up my mind how to answer you. Before I do answer you, I want to say I’m sorry if residents were told that utility rates would be lowered to offset the UFA assessment. The two are completely unrelated, and independent of one another. Gas and electricity are comodities and their value is constantly changing.

      As for the answer to your suggestion that we use the retained gas funds to repay residents for the UFA assessment, I will say this. My initial thought is that this would not be the best use of the funds, though it is allowed, and will remain a possibility. My reasons for my initial (but not final) thought on this issue is that the retained gas funds have a finite lifespan against an assessment that will occur every year for many years to come. Also, with the current growth, there are now many more homeowners than existed when we annexed in to UFA, there are many others who have moved out of Eagle Mountain, but paid in to be part of UFA. I don’t know if it would be possible to distribute those funds equitably. In spite of those challenges, I am not opposed to considering this as an option as we move forward.

      We could use the funds for just about anything we want to, and I think this too will be a topic for conversation if the sale of the utilities goes through. I hope that is helpful. I will be communicating more with you in the coming weeks to bring some clarity as to the reason behind the sale. I will tell you briefly, while saving resident’s money on their utility bill now would be nice, my goal goes far beyond that. I intend to maintain utility rates that are stable against the true commodity cost. This means, if we keep the utilities, we will keep both utilities separate and the rates will not go a year without review. We will change rates to reflect true supply cost. This had not been done for years prior to last years rate study. Both Questar and SESD already do this and don’t need to add policies, programs or expense to complete these functions. We can do it ourselves, though I’m convinced, there isn’t much reason to keep the utilites and do so. Those are some of the considerations, though they are fairly minor in relation to the primary concern. That concern is whether or not we will have adequate access to long term energy supplies at reasonable cost if we go-it-alone. More to come on that topic though.

  11. It’s so nice to finally have a competent mayor in our city. Thank goodness Heather Jackson didn’t win that county commissioner seat. She would’ve been a disaster for the county, much as she was for our city.

    Keep up the good work, Mayor!

    • Brock, I find you comments toward Mayor Jackson quite offensive. I’m not sure how long you’ve been out here, (going on 15 years for me) but I would cringe whenever I said I lived in Eagle Mountain before major Jackson. We had 10 Mayors in as many years and it seems they were always in the news for one thing or another. Mayor Jackson brought this city stability and respect in the community.

      Were things perfect, of corse not. New Mayors bring new perspectives and focuses. Personally I liked that we have our own utilities because of the local control with people who live and share our community. I doubt we will have the same in the future if this goes through. If you have a complaint with questar or SESD, good luck with that.
      Just remember that when Eagle Mountain started and we wanted to put this oasis in the desert, questar wanted nothing to do with us. Rocky Mountain Power wanted nothing to do with us. If we wanted to build this community, we had to do it on our own.

  12. I think this is a great move forward even though it doesn’t directly affect us in the White Hills area. We are currently on Questar and Rocky Mountain Power. Are there any talks with moving us to SESB? Also, are there plans to finish taking over our water and sewer systems?

    • Chad, the discussion has come up only to the extent that we are aware that Rocky Mountain Power can and I assume will turn the area over to them at some time in the next couple of years. The legislation will require SESD to take over the service of the area if they give notice. As for the water and sewer, they are issues that are known to me and require some improvements from the developer before they can be turned over. I wish I could give you a specific time frame, but I can’t right now unfortunately.

  13. Is there any way that the city can remove or at least enforce the HOSt’s to do what they are supposed to do. Instead of just taking our money?

    • Jayson,

      I don’t have any authority over the HOA’s and they are protected by documents that were established before any houses were built in the development they govern. They are not likely going anywhere. While I don’t have authority over them, I am happy to communicate with them on your behalf if you are having difficulty resolving an issue. At the very least, I can help smooth out the communication by being a neutral party. Sorry, that may not be the answer you wanted, but I hope it helps in any case. Just email me an explanation of your issue and I’ll do what I can to help you out. My email is mayor@emcity.org.

  14. If you guys do the math of pretty much anywhere in utah. Eagle mountain utility costs are right on par. All utility companies make money, or they would not be in the business. If the city makes a small profit and use the money to fund things this city desperately need, like a rec center, a ballpark that didn’t look like it was the one used in the sandlot movie. Why do you think Lehi has such nice facilities for the community. Instead of giving the profit to a private utility, why not spend it on our community?

    • Bree,

      Unfortunately, it is illegal to use the utility funds to spend on whatever we would like to use it for. The state requires revenue made from the water utility to be spent only on the water department or the administration thereof. The same for each of the other utilities. For about as long as these rules have been in place, there have been cities that have found ways to stretch the boundaries through creative methods. The current state auditor has no tolerance for this (as he shouldn’t). This is why Eagle Mountain was recently audited. A resident believed we were doing exactly as you suggested, though we were cleared of those accusations as there was no finding. Here is the reason this is sooooo very important. When the government needs money to operate government (for parks, recreation centers, etc.) they charge residents property tax and sales tax. Because no one wants to have the government in their pockets whenever they want (present company included), there is an arduous process required of the government to study and disclose the details of any proposed property tax increase. If the government cant make it on the allowance they have been given (the tax rate), and they ask for more of your tax money, they have to tell you about it first so you can speak up and say no if you disagree. For those governments that have their own utilities, they can use them to get around this disclosure process.. The City Council can just vote on a rate increase and it happens. Then the municipality say’s we need to move some money from this utility to the General Fund (where the governmental functions are run from) and they can transfer the money. That is to say, they can go around the rules and instead of increasing the taxes and going through the “Truth in Taxation” process, they simply increase the utility rate, transfer the money over and spend it on something they shouldn’t have. You may see why this is not a good thing. Because municipalities have taken liberties in reaching in to residents pockets without being transparent about it, the state auditor has been concerned about this practice. I hope that makes some sense as to why this can’t happen. Government should never be given free access to your pocket book!

      • If it is illegal why did the auditor not do anything about the transfer for Pony Express Days? Like you said there are ways around that.

        Honestly I think the best way around that is to keep on the path we are on…. keeping paying the debt for these with the revenue plus the extra revenue goes into the bank and as the debt gets paid off lower the utility bills so that we could all afford paying extra tax for a rec center. As is we are switching to a gas company that charges 33% more than we do. Switching to a power company that is under “rate review” so we aren’t even sure what they will be charging. Our utility bills will be higher (and never with the chance of these companies saying “this is our community let’s cut rates down now that our debt is paid”. Plus with the city losing half it’s revenue eventually property taxes are going to be raised. Sure it would take a little time and patience on the route we were on waiting for the bonds to be paid but wouldn’t it be better to patiently wait for great things to come than sell off for instant relief ($) that is going to run out and then the only place to recover the loss with be the citizens pocket books?

    • Lehi has nice facilities because it generates revenue from the many, many businesses that are within their city limits. If Eagle Mountain wants to have some other source of revenue outside of their utilities, they have two reasonable options:
      1) Home-owners
      2) Businesses

      We have very few of #2, so that pretty much leaves only #1. I have felt that EM utilities have been steep since we moved from Pleasant Grove, but not outlandish. I am concerned where this other revenue source is meant to come from. What I read in Mayor Pengra’s post is this:

      “We are removing a revenue source, haven’t fired anyone from our staff, and we’ll still pay the same man-hours to continue running everything else as we have previously (sans utilities now).”

      So how does that work? Dropping a load of management work and utility maintenance/upkeep costs but not actually dropping the cost associated with it? I am confuse.

      • Blake,

        We will not have any of the departmental expenses associated with those two utilities. The utility billing staffing is shrinking. While no one will be left without a job, some employees may move to SESD and there will be unrelated attrition of two staff members. On the executive side of the house, we have reduced expenses by 30k due to recent changes as well. The expenses will go away along with the revenues. I hope that helps to clarify. When I said no one will loose their job, I meant that we secured positions for all employees, though some of those positions are with EM City, others are with the other service providers.

      • What about the new energy building you will be keeping, I am sure it will cost a lot to maintain and pay the utilities for. I am guessing it was being paid for out of the energy budget. Who is going to pay for that?

      • Bree,

        You make a good point. Thank you for that and I will make sure we account for that expense as we continue working through the MANY details and logistics of this deal. We have calculated and accounted for the future cost of utilities (to the city) in the current budget, though I don’t think we have specifically broken down the cost for the new energy building. We will certainly do so.

  15. I guess I don’t see it as free access to my pocketbook, I am going to be paying the same rates anyway, why not get something for it. I understand there are rules I may not understand, but I have found nothing indicating that it is illegal. Somehow cities everywhere do it. What about state funded universities that use there football program revenue to carry many other sports and departments. I don’t know, I am sure you know more about it. And I believe you are trying to do the right thing. I don’t have a problem with the government using the money I would pay to a private utility anyway for the community.

    • Thanks Bree. I believe I understand what you are trying to say. While part of me wishes there weren’t so many rules and regulations governing every little transaction, I believe the laws generally protect the public from misuse of tax funds. I don’t know much about the rules for educational institutions. I don’t have any experience with their laws.

      • I think maybe Bree is also saying that if she is going to pay the same rate anyway isn’t it a greater benefit to the residents of Eagle Mountain to know that any excess revenue is guaranteed to be spent locally on infrastructure maintenance and expansion or improved quality and service, rather than on some old and failing system in another city or to pay for executive salaries and to shareholders pockets?

  16. The $6 million gas fund balance…does it have strings attached? Meaning, if this doesn’t go thru that money must be used on gas/electric expenses only. (Right?) But if this does happen are we left with money that we will end up having to spend on improving Questar’s infrastructure because legally we can’t spend it elsewhere.

    • But does it become applicable to be used in a “general fund” sense? I almost feel like this is merely a way to get to $6 million in excess funds that couldn’t be used how the city wants to otherwise.

      • Blake,

        There are two ways to handle these funds. After speaking to the State Auditor’s office, the way we would likely handle the funds is to leave them in the Enterprise Gas Fund and hold a public hearing each time money is moved to the general fund for a specific purpose. I appreciate your questioning if this whole deal is a way to get access to six million. I suppose I would have the same concern if our positions were reversed. While I am not sure if you can take me at my word or not, (I hope you will) I can only tell you that my goal is to do what is best for the city’s long term future. I simply believe that this is the direction that will best serve residents and the overall health of the city in the long term. Residents questioning the action of their government is a good thing though, and this is only the start of our communication before a city council vote. My hope is that transparent communication will build trust. You can always email or call me directly if you want to talk more to alleviate your concerns. My number is 801-564-9342

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s