$32 million in BMU investments have paid off for Berea utility customers

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Berea Municipal Utilities (BMU) Director Ed Fortner likens the city’s investment in utility infrastructure to maintaining a family car. To keep a car in working order, the owner makes a lot of small investments in maintenance to help prevent major breakdowns and bigger costs later.

“The city has invested a great deal in the infrastructure of our various utilities – water, sewer and electric – and our administration section,” Fortner said. “That means we’re a modern, reliable sustainable utility. If we weren’t investing back into our infrastructure, it would actually drive our costs up. We maintain our infrastructure to ensure reliability and efficiency.”

BMU has a lot of infrastructure to maintain: 105 miles of sewer lines serving 5,810 customers; 87 miles of water lines serving 4,023 customers; and 81 miles of overhead electric lines and 11 miles of underground lines, serving a total of 5,285 electric customers.

Since about 2005, the City of Berea and BMU have invested over $32 million in infrastructure improvements and upgrades, not including the 2005 purchase of the electric and water utilities from Berea College at a cost of $19 million.

BMU has funded projects that have impacted the quality of life of the entire city, but it has also drawn support from intergovernmental funds and grants and, in one case, Berea College. The list includes:

2016/2018

$200,000 Farristown sewer;

$1 million Owsley Fork Dam project (NRCS Grant Funding);

$200,000 west end tank paint, mixing system;

$50,000 Cherry Road waterline upgrade;

$170,000 landfill upgrades;

2015/2016

$500,000 Walnut Meadow sewer shed/rehab;

$4 million Oak Street substation/conversion;

$1.5 million mini substation (Berea College);

$50,000 fencing;

$350,000 BMU roof at 200 Harrison Road;

2014/2015

$150,000 Woodford/Clay sewer rehab;

$1 million Terrill Branch sewer;

$300,000 Dixie Park electric conversion;

$300,000 water plant lagoon work;

2013/2014

$130,000 solar panels phase III/IV;

$40,000 Fairgrounds Rd water line;

$750,000 Walnut Meadow pump station;

2012/2013

$125,000 Solar panels phase I, II (grant money);

$10 million water plant upgrade;

2005/2012

$10 million wastewater plant upgrade;

$500,000 roof – BMU building;

$850,000 AMR metering upgrade.

 

Some upgrades impacted customers immediately. For example, whereas portions of the city’s electric system were previously subject to unscheduled outages, the 2015 upgrade of the system in Dixie Park, the rebuilding of the Oak Street Substation, and the city’s conversion to a higher voltage system has made for a utility that is more stable and saves energy.

“Our electric system is now definitely on par with any comparative modern electric distribution system in the state, which is very important,” Fortner said. “That’s reflected in our reduced number of unscheduled outages.” Additionally, Fortner said BMU will continue to see returns on that one investment. “Over time, we’ll recoup that money in savings through efficiency, through the loss of less electricity.”

Other positive changes have occurred as a result of upgrades. By implementing automated, wireless meter monitoring (AMR), BMU can monitor a customer’s electric usage in a way that is less intrusive for utility customers. Instead of going into a customer’s yard to read a meter, technicians can gather that information by driving in the neighborhood, then collecting it through wireless technology.

As for the future, BMU is applying for grants for a $2 million sewer project for the Central Park Subdivision. That, too, will be an investment to deliver better service for Berea’s utility customers, Fortner said. “To me that’s just showing good faith and respect to our customers, who expect safe, reliable delivery of these utilities at a reasonable cost. These investments, made smartly, keep our rates down,” Fortner said.

Keeping utility rates low is one way in which Berea customers see a return on the city’s infrastructure investments, said Mayor Steve Connelly. “Berea’s water, sewer and electric infrastructure is often unnoticed and sometimes impossible to see. However, it is fundamentally a business that not only provides essential services to residents and businesses at a reasonable cost, but it also earns a profit for BMU,” Connelly noted. “In a sense, our utilities pay a financial dividend to our citizens who are the shareholders, and by operating this business, the City ensures that the needs of our citizens are paramount in planning and that decisions are made with their best interests in mind.”

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Mayor Connelly, Jerry Little voice divergent opinions on KyMEA contract

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On Monday, Berea Mayor Steve Connelly presented the results of a study evaluating the merits of an agreement with the Kentucky Municipal Energy Agency (KyMEA), marking what he said will be a broader public discussion of the city’s energy policies.

The study was initiated in the fall of 2017 after the Berea City Council voted 6-1 to terminate all agreements with KyMEA. KyMEA was to provide transmission of electricity as well as 10MW of capacity – additional power the city could count on in the event of a winter energy crisis. The city has also contracted with American Municipal Power (AMP) to provide 25MW of power. Both agreements commence in 2019 when the city’s contract with Kentucky Utilities ends.

The potential savings the city would theoretically gain by purchasing that 10MW of capacity through KyMEA is cited as one of the city’s main incentives for entering into the agreement. Through the agreement, Berea can maintain a virtual insurance policy of 10MW of capacity during the city’s peak usage period – only during winter months – instead of paying for an entire year of that capacity. Instead of paying $360,000 a year for that 10MW, Berea Municipal Utilities will instead pay $120,000 a year, say city officials. Carrying that savings over the life of the five-year contract, city leaders assert BMU can realize a savings of $1.2 million.

Further citing the findings of the report, Connelly outlined five steps the city will take.

  1. On the advice of legal counsel and a municipal auditor, the city will remain a member of KyMEA, since terminating the contract would be, in the words of one consultant, “highly imprudent.”
  2. Form a policy study group to forge an energy policy and seek alternative energy options after 2024.
  3. Direct staff to have the KyMEA contract amended to allow for termination in 180 days, not the 30 days originally stipulated.
  4. Direct staff to clarify KyMEA’s costs and billing procedures.
  5. Instruct staff to document AMP’s commitment to provide 25MW of capacity and finalize a commitment with KyMEA to provide an additional 10MW of capacity.

Council members Jerry Little, Ronnie Terrill, David Rowlette, Jim Davis and Bruce Fraley attended Monday’s presentation. Little delivered a rebuttal to Mayor Connelly’s remarks after Connelly wrapped up the question/answer session, then turned the podium over to the five-term council member. The mayor went directly from the meeting to give an interview to WBON-TV.

At a few points in his presentation, Connelly praised Little’s initiative and diligence in trying to sort through the complexities of both the contract and Berea’s energy policy. Connelly also noted the city will take steps to address the specific concerns raised by Little, particularly when it comes to the length of the contract, clarifying KyMEA’s billing policies, and clarifying the precise cost of the 25MW of power the city will secure through American Municipal Power (AMP).

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After Monday’s report, Councilman Jerry Little remained unconvinced that signing a contract with KyMEA was the best option for the City of Berea.

 

Little remained unconvinced about the need to contract with KyMEA, however. For example, Little disputes the idea that Berea needs to buy the 10MW of additional capacity. Instead, Little maintains that Berea need not purchase that additional capacity for two reasons. In his opinion: 1. Based on history, it is highly unlikely that the system would face a massive power failure that would necessitate a need for what amounts to a $120,000 insurance policy. 2. That in the event of power failure, AMP is contractually obligated to purchase and deliver whatever power the city needs.

The report disputes Little’s assessment, however, noting the entity that would initially deliver Berea’s energy, the Midcontinent Independent System Operator (MISO), had declared 10 maximum generation emergencies in the 18 months since the start of the 2016/2017 planning year. Said the report: “Capacity is important because, in an emergency, the first load that MISO curtails is non-firm exports. However, an export transaction that is supported by capacity is deemed a firm export and will be curtailed only as a last resort.”

At Monday’s meeting, Little stated that KyMEA would probably be a “good company once they get started,” but he has consistently voiced concern about contracting with an entity that was formed in 2015. But the city’s due diligence report asserts that KyMEA is an outcropping of the Kentucky Municipal Utilities Association (KMUA), which evolved from the Municipal Electric Power Association of Kentucky (MEPAK) that was formed to serve local municipal utilities in 1975.

Since it’s inception, KyMEA is now serving 10 other municipal power entities in Kentucky, including members from Barbourville, Bardwell, Corbin, Falmouth, Frankfort, Madisonville, Paris, Providence, Benham and Owensboro.

In past meetings, city council members expressed hope that a representative of KyMEA could come to Berea and address the city council.

U.S. 25 N. off to a good start while councilmen lobby to save Berea Bypass II

US 25 NThere was mixed news this week regarding the progress of road projects in Berea. On a positive note, City Administrator Randy Stone announced that the $8 million U.S. 25 N. widening project from Ellipse Street to the Berea Bypass is off to a good start. That work is projected to be finished by the summer of 2019. Less certain is whether Phase II of the Berea Bypass will be permanently dropped from the Kentucky Transportation Cabinet’s six-year road plan. For the moment, that project, estimated to cost between $24 million and $27 million, is not on the state plan. Councilmen Jim Davis, Bruce Fraley and David Rowlette have been lobbying state officials in Frankfort this week in the hope of getting the Berea Bypass Phase II funded. All report they are cautiously optimistic that the project could be saved.

Berea’s Chief Gregory Receives Children’s Champion Award

Childrens ChampionBerea Police Department Chief David Gregory was honored with the Children’s Champion Award Tuesday night during a meeting of the Berea City Council. In presenting the award to the chief, Phyllis Adams, president of Be a Children’s Champion of Madison County, noted that Chief Gregory was being honored for his leadership in implementing programs such as Too Good for Drugs, which encourages county middle school students to make good life choices and avoid substance abuse.

In a related story, Richmond Police Department Detective Rodney Tudor briefed council members on the activities of High Intensity Drug Trafficking Area (HIDA) task force, a regional law enforcement coalition that includes the Berea Police Department and Madison County law enforcement agencies.

Among other accomplishments, Tudor reported HIDA facilitated the seizure of $300,000 in assets from drug suspects, raided three methamphetamine labs, made 75 drug arrests, and confiscated 32 firearms last year.

Tudor encouraged citizens to help police by calling (859) 623-1714 to report possible drug activity in their neighborhoods. He added that some information citizens may deem insignificant could actually turn out to be the difference in helping police make a drug arrest. Tips are anonymous and confidential, Tudor said.

In the meantime, Tudor noted that heroin and methamphetamine activity is definitely increasing in the county. “We have job security,” Tudor said. “There are a lot of drugs out there.”

Berea working to secure $12 million for Owsley Fork dam improvement Project

Owsley ForkBBerea city officials recently met with a representative from Congressman Andy Barr’s office as part of an effort to secure funding to increase the city’s water supply. The City has been working to gain approval from the U.S. Army Corps of Engineers for a $12 million project to expand Owsley Fork Dam. The plan calls for raising the wall of the dam, thus expanding the capacity of the reservoir by 50 percent, a move analysts say will secure enough fresh water for the region for the next 50 years. In addition, the city has been seeking approval to treat and reuse approximately 1 million gallons of wastewater that is currently diverted into Silver Creek. So far, federal officials have favored a $14 million plan to pipe water in from the Kentucky River. On a related note, officials note reservoirs have been filled up with the recent rains.

David Rowlette sworn in as new Berea City Council member

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David Rowlette was sworn as the newest member of the Berea City Council Monday night during a special called meeting of the council. Rowlette was approved in an 8-0 vote, replacing Councilman Billy Wooten, who formally resigned from council last week. In a letter to fellow council members, Wooten cited personal reasons for stepping down.

Mayor Steve Connelly’s 2018 State of the City Remarks

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This week, Berea Mayor Steve Connelly addressed the state of city government, touching on issues related to finance, personnel, infrastructure and local politics. Remarking that Berea is on sound footing, both from a financial and operational standpoint, Mayor Connelly warned of challenges that confront local government.  His statement before the council was as follows:

“To satisfy part of my obligation to report on the conditions and needs of city government, I will speak briefly tonight on the financial, operational and political state of local government in Berea at the end of 2017.

Berea’s finances, as you know, are sound. Our last three audits show a steady increase in net financial position—assets reduced by liabilities—$57.3 million in 2015; $61 million in 2016; and $63 million on June 30, 2017. This past fiscal year, General Fund revenues increased by $1 million (including an increase of $326,000 in occupational license fees and $503,000 in net profits revenue) and expenses were reduced by $321,000.

As of January 31, 2018, the City had over $22 million on deposit with local banks (including all city accounts). The City had over $7 million in checking, over $4.7 million in CDs, plus over $2.1 million in capital sinking fund CDs. Utilities had over $7 million in CDs, and Tourism had over $874,000 in CDs.

The operations of Berea’s local government are strong and extensive but face growing challenges.

The City employs 140 full-time and 20 part-time people. It owns 136 vehicles and 20 buildings, and insures 93 structures. The nearly completed Operations Center will contain 44,000 square feet and provide better parking and access to services.

The City has an active parks program situated on 80 acres of land with a pool, sand volleyball courts, baseball, softball, soccer and football fields, concessions, picnic shelters, basketball courts, a skate park, an intergenerational center, and the Russel Acton Folk Center.

The Parks and Recreation Department offers 100 programs, and in 2017, held 13 tournaments, rented the Folk Center to 7,500 people, rented picnic areas for events that served 4,200 people, and hosted 1,805 participants at pool parties.

Our utilities provide sewer service to 5,800 customers, water service to 4,300 customers, and electric service to 5,300 customers.

The Public Works Department maintains 113 linear miles if streets. The police department has 30 sworn officers, and the fire department has 25 firefighters.

Since 1993, the City has completed 59 projects costing over $20 million and since 2005, Berea Municipal Utilities (BMU) has completed over $34 million in projects. Lists of these improvements are on our City’s website.

The operation of our government is performing well, but it is challenged at many levels.

General Fund revenue could drop by as much as $896,000 in fiscal year 2017-18 and expenses could rise by $1.3 million, including $519,000 in regular CERS retirement payments, $104,000 in new health insurance costs, and $265,000 in salary increases.

BMU continues to need access to more raw water. The City has worked for the past several years with the U.S. Army Corps of Engineers to raise Owsley Fork Dam and to obtain a permit from the Kentucky department of water to reuse 1 million gallons of the 3 million gallons of treated waste water that BMU currently discharges into Silver Creek.

The pending debate over the City providing special retirement benefits to its police and fire who occupy jobs classified as “hazardous” could become an existential challenge. If council votes to enter that program, the City will have limited flexibility to manage an unknown but likely exponentially expanding financial burden remarkably similar to that which the jail has placed on county governments across the Commonwealth. Voluntarily embracing that virtually unmanageable obligation could lead to merging our fire department with the county like we did with 911 dispatch service, and ultimately, merged government.

And finally, the politics of Berea’s local government is divided.

Berea operates under the mayor-council form of government which grants executive authority to the mayor and legislative authority to the council with the admonition that it not perform any executive functions unless assigned by statute.

This separation took effect in 1982 and has developed into a divide probably exacerbated by the public’s acceptance of the talking points that government is the problem not the solution; and that government should be run like a business.

This attitude was exemplified by Ronald Reagan in his 1981 inaugural speech when he said:

“It is not my intention to do away with government. It is, rather, to make it work with us, not over us; to stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it.”

You too may agree that business should trump politics. But more recently, a consensus has developed among scholars that a successful governmental enterprise requires more than just business skills. That is why universities offer courses in business administration and public administration.

Here are six points to elaborate on that distinction:

  1. Government serves the “public interest.” Business tends to focus on shareholders and customers. Therefore, accountability is much broader for government, and it is harder to ignore particular groups or people.
  2. Business performance is measured by profitability. Governmental performance is measured by outcomes and the public good. Not everything that is profitable has a social value, and not everything of social value is profitable.
  3. Compromise is often fundamental to governmental success. No one owns a controlling share of government. The notion of separation of power between legislative and executive authority is fundamental to government but absent from business.
  4. Efficiency is one of the paramount values in business. But government often has to weigh competing values, and the most efficient plan may trample individual rights or disadvantage particular groups.
  5. Government is often faced with a timeline determined by the next election which may cause politicians to seek quick results. Businesses may be more patient and take a longer view.
  6. Government action must take place in public. Businesses rarely explain decisions except to shareholders or regulators.

Government and business may share many traits, but local government must be open, accountable, fiscally prudent, visionary, courteous, lawful, service-oriented and responsible. And to imply that local government is a problem and should be run like a business is equivalent to saying that Tom Brady was a poor quarterback because he didn’t hit enough home runs. He was not supposed to. Such a test applies the wrong standard.

Where does this misunderstanding leave Berea? Our local government has many strengths and significant challenges. We must work to heal our divisions. Probably, the first step is to focus on the values and goals that we share rather than joust over our differences. We need to stop counting the separate trees that we see around us and look at the forest in which we live.”