Long-term pay plan

Utility consultant Michael Watson discussed a proposal for long-term financing of projects to assure completion of work necessary to set the HSUD on a sound footing operationally and financially.

He spelled out the proposal before the June 16 meeting of the Mayor and Board of Aldermen.

The discussion centered around item 23 on the board agenda to approve rate increases for the HSUD.

Watson said he and the accounting manager, in consultation with the Tennessee Valley Authority, developed a capital spending plan that would be supported by a rate increase.

The plan would allow an additional half-million dollars a year for right-of-way maintenance.

A budget for debt service to support Automated Metering Infrastructure (AMI) was recommended at $5 million.

Proposed budgeting to support pole replacements was budgeted at $2 million.

“This all will impact all areas of the city proper and all other areas in Tennessee, and Marshall and Benton Counties,” Watson said. “We will also pay TVA the $20 million we owe them.”

Watson said the rate change plan, and the policy changes must be approved by TVA, which helped design the plan.

“TVA also said we need a 20 percent rate increase,” Watson said. “In our plan the assumption is we borrow money for capital improvements for projects which reduces the amount of rate increase required.”

Watson said bonds would be sold to pay for the improvements.

“It makes sense to borrow money for 30 years rather than pay for it up front,” he said. “We will need additional rate increases of five percent during each of the next five years.”

“This allows us to make improvements now,” Watson said. “Atwell and Gent will help produce the capital improvement projects plan to be brought to the bond market to get the projects built.

“I believe TVA will push for a 20 percent rate increase. I characterized this move as a rate change (not rate increase) capped monthly at $17 (for residential customers). This stabilizes and levels the cost out to rate payers over the course of the year. I hope we can use this money to get us over pay and par, once we get this in place.”

Mayor Charles Terry said the rate increases would be gradual.

Watson said he thinks TVA will push for larger rate increases than what the utility is proposing.

“I believe this is the right amount today, and we will be able to look at it a year from now to see where we are,” Watson said.

The discussion ended and the board approved the motion for the rate increase.

Some additional matters the board approved with regard to the HSUD included:

• a motion to approve a revised customer deposit policy.

• a motion to review the contract on repairing and replacing the instrument-rated metering installations.

• a motion to approve the line extension policy.