Mayor blasts proposed LES rate increase
It’d be tough to find two more mild-mannered soft-spoken gentlemen to go after each other in public.
But there they were — the mayor and the head of city-owned Lincoln Electric System — having a public smackdown Thursday over news the electric company may seek up to a 12 percent rate hike.
Mayor Chris Beutler lashed out at LES officials for delivering a “broadside” to the city by telling him Tuesday they’ll likely need a “back-breaker” of a rate increase.
Lincoln Electric System's Terry Bundy responded in kind, accusing Beutler of “jumping the gun” and using the rate hike as a “scapegoat for city budget issues.”
LES officials say that they, like many other utilities, will need a substantial rate hike to cover a $9.3 million shortfall this year caused by skyrocketing costs to purchase, produce and deliver energy.
Saying he was deeply disappointed in the utility’s failure to inform him sooner, Beutler threatened to veto the rate increase, and said he will withdraw his proposed 1-cent city property tax rate increase.
“Government cannot operate in isolation from the other financial pressures faced by Lincoln families,” Beutler said during a news conference Thursday.
Two hours later, LES held its own news conference, at which Bundy seemed shocked by the mayor’s reaction to a rate hike that’s far from finalized.
“Mayor Beutler has unfortunately chosen to jump the gun and turn an open, public, collaborative process into a political one,” Bundy said.
He said LES has not deviated from its normal practice of giving the mayor a heads-up as soon as feasible. He said it became evident in June that wholesale power costs were significantly higher — about 45 percent higher than LES projected. A series of meetings with the LES administrative board’s budget and rates committee ended Monday, and LES officials met with Beutler on Tuesday.
Bundy said Beutler was surprised at the news, but they had a good discussion. He said it was uncharacteristic for a mayor to “jump in front of cameras” rather than allow the normal process to play out. LES increases must be approved by the LES administrative board and the City Council, via a series of meetings and hearings.
A 12 percent LES increase would increase the average Lincoln homeowner’s electric bill by $108 a year and take effect Sept. 1.
Beutler said he would veto a 12 percent LES increase and would not approve any increase until LES shows it has cut its budget.
“I simply cannot in good conscience quietly accept an increase of that magnitude in light of today’s economy,” he said. “They have asked for a huge rate increase without, to my knowledge, offering any significant corresponding cuts in expenses.”
Bundy questioned whether Beutler even has the authority to veto a rate increase; he said the City Council is charged with approving rate increases.
And he took offense at Beutler’s assertion that LES hasn’t been fiscally responsible, outlining some of the operating costs it has cut over the years, including closing a bill payment center.
While personnel costs eat up more than 70 percent of the city’s revenue, power-related costs eat up a similar percentage of LES’ costs, Bundy said.
“These are costs that are being incurred by LES customers,” he said. “We need to have revenue to pay the bills.”
He said LES’ travails are being experienced by the industry nationwide.
“For the past 20 consecutive years, LES rates have been in the lowest 10 percent in the country,” Bundy said. “We expect them to remain competitive.”
Beutler said he would not have sought a property tax increase had he known of other governmental entities’ budget increases and the proposed rate hike.
However, the City Council was already unlikely to go along with Beutler’s tax increase, and LES and council members speculated his Thursday announcement was an attempt to overshadow his flip-flop on increasing taxes.
But Beutler said resistance to a tax increase did not play a role in his decision to back down. Asked why he is withdrawing his tax increase if he plans to veto a 12 percent LES hike anyway, Beutler said: “Clearly we’re going to have a big (LES) increase, even if we succeed in knocking it in half.”
Rather than increase taxes, the City Council had been talking about dipping into a little-used $10 million Special Assessment Revolving Fund the city attorney recently ruled can be tapped for other needs.
Beutler wanted to use the money to create an economic development fund and repeatedly has urged the council to resist the temptation to use “one-time” revenue sources as temporary solutions to permanent budget gaps.
On Thursday, however, Beutler said he’s open to using the fund to balance the budget, even though he said it will likely lead to another budget deficit next year.
“It is not a decision I come to lightly,” he said. “I stand by my deep conviction that ending the structural imbalance between revenues and expenditures must be the ultimate solution to the city’s budget crisis.”
Bundy took a shot at the Special Assessment fund, saying, “Unlike the city, we don’t have a $10 million pot of money sitting around to cover these costs.”
He does, however, have a $4 million rate stabilization fund that could be tapped to offset rate increases. An LES subcommittee has recommended addressing some of the shortfall by using $1 million from that and cutting half a million dollars from its operational budget.
That would leave a $7.7 million shortfall, which a 12 percent rate hike would cover.
The LES administrative board will discuss that proposal July 18, hold a public hearing Aug. 5 and make a decision later that month. That recommendation then goes to the City Council.
Bruce Bohrer, executive vice president of the Lincoln Chamber of Commerce, said a double-digit electric rate increase would be “quite a shock to the business community.”
About two years ago, more than 20 of Lincoln’s largest employers — including Linweld, Goodyear and Nebco — successfully blocked a proposed flexible energy surcharge to deal with fluctuating energy prices.
Bundy noted that such a surcharge would have helped LES prevent precisely this type of situation.
Reach Deena Winter at 473-2642 or dwinter@journalstar.com.
But there they were — the mayor and the head of city-owned Lincoln Electric System — having a public smackdown Thursday over news the electric company may seek up to a 12 percent rate hike.
Mayor Chris Beutler lashed out at LES officials for delivering a “broadside” to the city by telling him Tuesday they’ll likely need a “back-breaker” of a rate increase.
Lincoln Electric System's Terry Bundy responded in kind, accusing Beutler of “jumping the gun” and using the rate hike as a “scapegoat for city budget issues.”
LES officials say that they, like many other utilities, will need a substantial rate hike to cover a $9.3 million shortfall this year caused by skyrocketing costs to purchase, produce and deliver energy.
Saying he was deeply disappointed in the utility’s failure to inform him sooner, Beutler threatened to veto the rate increase, and said he will withdraw his proposed 1-cent city property tax rate increase.
“Government cannot operate in isolation from the other financial pressures faced by Lincoln families,” Beutler said during a news conference Thursday.
Two hours later, LES held its own news conference, at which Bundy seemed shocked by the mayor’s reaction to a rate hike that’s far from finalized.
“Mayor Beutler has unfortunately chosen to jump the gun and turn an open, public, collaborative process into a political one,” Bundy said.
He said LES has not deviated from its normal practice of giving the mayor a heads-up as soon as feasible. He said it became evident in June that wholesale power costs were significantly higher — about 45 percent higher than LES projected. A series of meetings with the LES administrative board’s budget and rates committee ended Monday, and LES officials met with Beutler on Tuesday.
Bundy said Beutler was surprised at the news, but they had a good discussion. He said it was uncharacteristic for a mayor to “jump in front of cameras” rather than allow the normal process to play out. LES increases must be approved by the LES administrative board and the City Council, via a series of meetings and hearings.
A 12 percent LES increase would increase the average Lincoln homeowner’s electric bill by $108 a year and take effect Sept. 1.
Beutler said he would veto a 12 percent LES increase and would not approve any increase until LES shows it has cut its budget.
“I simply cannot in good conscience quietly accept an increase of that magnitude in light of today’s economy,” he said. “They have asked for a huge rate increase without, to my knowledge, offering any significant corresponding cuts in expenses.”
Bundy questioned whether Beutler even has the authority to veto a rate increase; he said the City Council is charged with approving rate increases.
And he took offense at Beutler’s assertion that LES hasn’t been fiscally responsible, outlining some of the operating costs it has cut over the years, including closing a bill payment center.
While personnel costs eat up more than 70 percent of the city’s revenue, power-related costs eat up a similar percentage of LES’ costs, Bundy said.
“These are costs that are being incurred by LES customers,” he said. “We need to have revenue to pay the bills.”
He said LES’ travails are being experienced by the industry nationwide.
“For the past 20 consecutive years, LES rates have been in the lowest 10 percent in the country,” Bundy said. “We expect them to remain competitive.”
Beutler said he would not have sought a property tax increase had he known of other governmental entities’ budget increases and the proposed rate hike.
However, the City Council was already unlikely to go along with Beutler’s tax increase, and LES and council members speculated his Thursday announcement was an attempt to overshadow his flip-flop on increasing taxes.
But Beutler said resistance to a tax increase did not play a role in his decision to back down. Asked why he is withdrawing his tax increase if he plans to veto a 12 percent LES hike anyway, Beutler said: “Clearly we’re going to have a big (LES) increase, even if we succeed in knocking it in half.”
Rather than increase taxes, the City Council had been talking about dipping into a little-used $10 million Special Assessment Revolving Fund the city attorney recently ruled can be tapped for other needs.
Beutler wanted to use the money to create an economic development fund and repeatedly has urged the council to resist the temptation to use “one-time” revenue sources as temporary solutions to permanent budget gaps.
On Thursday, however, Beutler said he’s open to using the fund to balance the budget, even though he said it will likely lead to another budget deficit next year.
“It is not a decision I come to lightly,” he said. “I stand by my deep conviction that ending the structural imbalance between revenues and expenditures must be the ultimate solution to the city’s budget crisis.”
Bundy took a shot at the Special Assessment fund, saying, “Unlike the city, we don’t have a $10 million pot of money sitting around to cover these costs.”
He does, however, have a $4 million rate stabilization fund that could be tapped to offset rate increases. An LES subcommittee has recommended addressing some of the shortfall by using $1 million from that and cutting half a million dollars from its operational budget.
That would leave a $7.7 million shortfall, which a 12 percent rate hike would cover.
The LES administrative board will discuss that proposal July 18, hold a public hearing Aug. 5 and make a decision later that month. That recommendation then goes to the City Council.
Bruce Bohrer, executive vice president of the Lincoln Chamber of Commerce, said a double-digit electric rate increase would be “quite a shock to the business community.”
About two years ago, more than 20 of Lincoln’s largest employers — including Linweld, Goodyear and Nebco — successfully blocked a proposed flexible energy surcharge to deal with fluctuating energy prices.
Bundy noted that such a surcharge would have helped LES prevent precisely this type of situation.
Reach Deena Winter at 473-2642 or dwinter@journalstar.com.
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