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Wednesday, Dec. 17, 2014

City, BMU study fund transfers

Sunday, August 25, 2002

SIKESTON - Sikeston City Council members will decide Monday whether or not they will ask voters to amend the Home Rule Charter to establish a "Payment in Lieu of Taxes" surcharge to funnel money from the Board of Municipal Utilities to city coffers.

PILOTs are used to bring in revenue that would normally be received by the city if the power provider was a taxable entity.

Meanwhile, the Board of Municipal Utilities did not approve a voluntary transfer of $750,000 during their special meeting Friday. The transfer had been cleared by MBIA, the BMU's bond insurers, and discussed as a way for the BMU to assist the city with its finances.

"City council members have been looking at a variety of options that might be available," City Manager Doug Friend said. "A voluntary transfer was one of the options that had been contemplated."

Friend explained that city officials earlier asked the BMU to delay any action, however. "They wanted to explore all options that were available before accepting a transfer."

The board's protocols dictate that it will now require a new motion to bring the matter back up before a vote can be taken, Friend said.

"It's completely off the table," confirmed Ed Throop, BMU's general manager.

"The board recognizes the need for additional funds at city hall to continue services ... and to do some capitol improvements in the future," said Throop. A one-time transfer, however, will not solve Sikeston's problems.

"The city needs some kind of concrete stream of revenue," Throop said. "And the city is trying to do it right."

The best solution in Throop's opinion is the first option on the city's evening agenda Monday which would establish a fee on all retail electrical sales - residential, commercial and industrial. Throop said it places the decision in the hands of the voters and, as the fee would be a percentage of each customer's bill, it would spread the cost proportionately among those who benefit from city services.

Throop said this is a "nationally accepted method" with the fee's percentage running around 5.8 percent nationwide. He estimated a 6-percent franchise fee would raise about $830,000 per year for the city.

For any additional money needed by the city, "a formula for voluntary transfers of profits from excess power sales could be worked out," Throop said, "with the permission of MBIA on an annual basis."

He added that all bond covenants would have to be complied with. "We run this company according to some very stringent bond covenants," said Throop.

Throop does not believe either of the other two options on the city agenda for Monday evening are feasible, however.

The second option would impose a surcharge on all electrical sales including power going to the BMU'S five long-term wholesale customers: the cities of Columbia, Carthage, Fulton, West Plains and Trenton. Throop said this would impair the contracts with those cities. "And it could give Columbia the reason to cancel their contract," he added.

Throop said the third option, which would put the surcharge on wholesale excess power sales, will not work either as it would make BMU's excess power that much more expensive than their competitors'. "The market is the market and that's what you have to sell it for," Throop said.