By Dennis Brown

The Vanceburg Electric Plant Board met in regular session last week and heard the results of an independent auditor’s report for the fiscal year ending June 30, 2009.

Greg Caudill, with Caudill and Associates CPAs in Portsmouth, Ohio, reviewed the report for Superintendent Eric Bloomfield and board members. Caudill said the utility company had a net operating loss of $426,680 for the year, primarily due to a “true-up” of $467,000 paid to electric provider AEP.

Bloomfield explained the payment to AEP is an annual event in which commercial utility customers square up with the electric provider for the actual cost of fuel to produce electricity. If the cost of coal is higher than the companies actually paid throughout the year, they must pay the difference. If the cost is less, the companies get a credit.

Last year, Bloomfield said, the local utility company was required to pay AEP $467,000, up from $60,000 the year before.

Caudill said the utility company had solid cash flow but recommended the Plant Board consider looking at adjusting the rates for the water and sewer departments.

Bloomfield said the last change to sewer rates for customers was in 1991 and the water rate schedule was established some 30 years ago.

“We’ve contacted a firm to look at and give us a rate study,” Bloomfield said.

He told members that the firm would review the actual cost of services and establish a recommended rate schedule based on that and other data. “It’s something that’s generally reviewed every five to seven years,” he said, adding that the cost of providing the service should be taken into consideration in determining the rates charged.

Bloomfield said there hasn’t been a profit for the gas or sewer departments in more than 20 years and the water department has only been profitable since expansion projects added several new customers to the system.

He said the income from the electric department had subsidized those departments for several years. He also told members that the utility company wasn’t immune from the effects of the recession during the past fiscal year. “Costs are up and sales are down during a recession,” he said.

Bloomfield also noted the importance of providing a service to the community even if some of the system operates at a loss. “It’s important that we provide these services to our customers and it’s important to attracting industry,” he said.

The audit report shows the utility company’s net assets at the end of the fiscal year were $14,046,470.

Caudill noted a review of the federal programs and how the utility company handled grant funds. He said the audit reflected a clean opinion and noted the Plant Board was in compliance with all required regulations. He also noted that the utility company kept very good records in relation to the grant funds.

Caudill also noted two significant findings during the audit. One concerning payments-in-lieu of taxes to the City of Vanceburg and another for not charging the City of Vanceburg for the utilities used by the municipality.

Caudill noted in the audit report that “during the course of our audit engagement, we found that payments in lieu of taxes have been made exclusively to the City of Vanceburg and that there was no computation supporting the value of the property subject to taxation or use of the applicable ad-valorem tax rate in effect to determine the appropriate amount of the payment.

“During the year ended June 30, 2009, there were payments in the amount of $289,740 made to the City of Vanceburg.

“We recommend that any payments-in-lieu of taxes cease and that if the Electric Plant Board chooses to make such payments that they be made in accordance with the provisions of KRS 96.820.”

Kentucky law states that any payments-in-lieu of taxes are to be made based upon a computation that takes into consideration the taxable book value of the Plant Board’s assets in each taxing district the Plant Board provides service. The amount is to be based on the taxable value in each taxing district multiplied by the ad-valorem tax in effect and applicable to other taxable entities within that jurisdiction.

The Plant Board response in the audit report noted that “as a result of numerous conversations with our auditors and following the receipt of an email from our auditors, on February 9, 2010, the Board voted unanimously to suspend payments to the City during our regular monthly meeting.

“The Board has engaged outside legal counsel to determine the correct method for calculating the payment-in-lieu of taxes and whether the Electric Plant Board should continue to provide such payments.”

The audit report notes in the second finding that “… the Board has not been charging the City of Vanceburg for the utilities it consumes. During the year ended June 30, 2009, the value of utility services received by the city was approximately $120,000.

“We recommend the City of Vanceburg be billed for utility services under the same rates and terms as similar customers.”

Kentucky law states that the city and all departments are to be charged for any electric service furnished to them at the rates applicable to other customers taking service under similar conditions.

The Plant Board response in the audit report stated that “as a result of numerous conversations with our auditors and the advice of the Board’s attorney, the Board voted unanimously during the February 9, 2010, meeting to initiate billing the City for all utilities consumed at the prevailing rate charged to other customers.

“The Board has engaged outside legal counsel to confirm the findings presented by our auditors and is currently awaiting the advice of counsel.”

The city owns the utility company and, although payments have been made to the city for many years and utilities haven’t been charged, prior audits of the utility company apparently didn’t question the practices.

The city has budgeted the payments as income and has not budgeted for the expense of paying for local utilities.

Caudill thanked board members for allowing his firm to perform the audit and noted that utility employees worked well with auditors during the course of the audit. Board members approved the audit report.

In other business last week, Bloomfield reported that a new pumper truck for the sewer department had arrived. He said the new International truck is American made and was customized by Abernethy Welding in North Carolina. The company specializes in fabricating equipment for wastewater purposes.

He reported that Asplundh Company recently completed annual tree trimming and line clearing work. He noted that since the utility company stepped up line clearing over the past several years that outages have been minimal.

He added that tree trimming is done in the wintertime because there are no leaves to deal with and less waste to haul to the landfill after the tree limbs are chipped up.

Bloomfield also reported that the General Assembly is presently debating House Bill 504 which would give the state more leeway in dealing with the Federal EPA.

He said Vanceburg is one of 17 municipalities in Kentucky under a federal court order to update wastewater systems and called it a “classic unfunded mandate”.

Bloomfield said sewer systems were approved by inspectors and over the years the requirements and standards for systems where changed, making the sewer systems no longer in compliance with regulations.

He said the cost of upgrading the lines in Vanceburg is estimated at about $6.5 million. That compares to about $18 million for Ashland and $1 billion for a sanitation district in Northern Kentucky.

Bloomfield has been working to secure funding for the project from several sources and said the utility company is in line to meet the required deadline to have the project completed.

He also reported to the board that a $100,000 grant that was intended for the local utility company but misappropriated by the state may finally be straightened out. He said the funds will be used to take video of the inside of the sewer lines to provide to contractors who bid on the project.

He said many of the lines have been in place since 1940 and some sections are in poor condition. By providing the video to contractors he hopes to save money on the project by keeping bids in line with the actual work needing to be done.

Board members voted to go into closed session to discuss personnel matters.

After returning to open session the board approved promoting Danny Enix to Department Manager for the gas, water and sewer departments. Enix will fill the position held by Chad Clark who is retiring from the utility company in May.

“Chad did a great job and will be missed by the Electric Plant Board,” Bloomfield stated.

Board members also voted to hire Darren Troy Hughes to serve as a field technician for the gas, water and sewer department.

The board approved financial reports and payment of bills before adjourning.

Lewis County Fiscal Court met in regular session last week and agreed to suggestion by the Department of Corrections to have a feasibility study conducted to address a continuing problem of overcrowding at the Lewis County Detention Center.

The Deputy Commissioner of the Kentucky Department of Corrections, Rodney Ballard, was on the agenda to speak to court members, but was unable to attend the meeting.

Ballard had earlier met with Jailer Tim Underwood and Judge Executive Steve Applegate addressing continuing concerns with overcrowding of the portion of the jail designed to house county inmates. Another section of the detention center is designated to house state class D felons. The state pays Lewis County to house those prisoners.

Underwood reported at the February meeting that the Department of Corrections informed him they would no longer assign class D inmates to the local jail because of the overcrowding problems. A move that would impact the community, he said, because the manpower provided by inmates to assist several agencies would eventually be eliminated.

The lack of state prisoners would also mean less income for the county because no payments would be received for housing those prisoners.

The county has counted on that income to help make the payments for a major jail renovation several years ago. About $500,000 is still owed on that note.

The problem with overcrowding of county inmates has been an ongoing problem. Underwood also reported at the February meeting that a portion of the class D section had been modified to allow for the housing of some of the county inmates.

During that meeting magistrates approved temporarily hiring extra personnel to monitor county inmates in that portion of the jail.

Also at the February meeting magistrates approved a GPS monitoring system to be used for non-violent inmates to serve their time outside of the detention center. The system tracks the inmates and will report to authorities if they travel out of a pre-determined geographic location.

A local committee was formed last year and made some recommendations to help temporarily alleviate the overcrowding situation. Applegate said he has looked into expanding housing at the detention center and has contacted the Administrative Office of the Courts for use of an adjacent parking lot which is currently utilized for a parking area for Justice Center workers.

Applegate said many other counties are faced with the same situation and have been under scrutiny of the Department of Corrections for some time.

Applegate said he had been contacted by CMW, Inc. to conduct the jail feasibility study at a cost of $7,000.

The architecture and engineering firm, headquartered in Lexington, notes on their proposal that if they are chosen as the architect for a jail project, they will reduce the design fee by $7,000

The study will include reviews of needs and projections and provide design options for three jails. It will also include the estimated annual cost to close the jail and house inmates 

elsewhere.

Thomas Massie addressed magistrates and expressed his concerns over spending $7,000 on the feasibility study and the idea of establishing a regional jail.

He said there are problems associated with other regional jails across the state and that representatives on the regional jail’s governing board would only have a few positions held by Lewis County people. He noted the jailer for a regional jail would be appointed by the judge executive in the most populous county.

Applegate noted that he isn’t interested in creating a regional jail at this time, but is keeping the options open.

Massie also noted it could be costing more to house state prisoners than the county is being paid by the state. He cited a 2005 audit that showed the costs of housing those inmates was more than the state pays the counties to house them.

Glenn Bannister also addressed magistrates and said he had done some research into having inmates pay for their own costs while incarcerated. He said part of the overcrowding solution could be addressed by having inmates work to make products that could be sold and the money returned to the county.

Underwood told magistrates that the Lewis County Detention Center is nearly always number one or two in the state each week for overcrowding.

“They (the Department of Corrections) can set a cap. After that we’ll have to transport prisoners to another county jail and we have to pay for it,” he said. “They’ve said that Lewis County can’t afford to operate a jail,” he added.

Magistrates authorized Applegate to interview and hire a firm to perform a feasibility study.

In other business last week magistrates approved a budget amendment for the Lewis County Clerk’s Office and agreed to advertise for bids to replace a bridge on Manley Hollow. The estimated cost of replacement is about $68,000 and 80 percent of the cost will be paid for by the state.

Magistrates agreed to renew an agreement with Brewer Lawn Service to maintain the entrance area to the Black Oak Industrial Park and approved hiring Brian Grierson as Lewis County Animal Control Officer.

Also approved at the meeting was a right-of-way easement for the Western Lewis-Rectorville Water and Gas District to replace a water line on Dearing Lane at Tollesboro.

Magistrates heard the first reading of a budget amendment ordinance to reflect $275,667 in funds from the state to go toward a bridge replacement project and blacktopping.

Approval was given to renew a lease with Larry Fannin for county property on Fannin Lane at Black Oak.

County officials presented monthly reports and Underwood reported that $4,000 from the commissary fund had been transferred to the county to help pay for medical bills for inmates. Sheriff Bill Lewis noted that many residents have not posted their new E-911 address and deputies have had problems locating residences in the county. “About one in 20 have the numbers on their house,” he said. “It is a problem.”

Magistrates approved claims and transfers before adjourning.