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,
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.
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.
year, Bloomfield said, the local utility company was required to pay AEP
$467,000, up from $60,000 the year before.
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.
said the last change to sewer rates for customers was in 1991 and the water rate
schedule was established some 30 years ago.
contacted a firm to look at and give us a rate study,” Bloomfield said.
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.
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.
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.
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
audit report shows the utility company’s net assets at the end of the fiscal
year were $14,046,470.
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.
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.
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.
the year ended June 30, 2009, there were payments in the amount of $289,740 made
to the City of Vanceburg.
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.”
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
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.
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.”
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.
recommend the City of Vanceburg be billed for utility services under the
same rates and terms as similar customers.”
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.
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.
Board has engaged outside legal counsel to confirm the findings presented by
our auditors and is currently awaiting the advice of counsel.”
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.
city has budgeted the payments as income and has not budgeted for the
expense of paying for local utilities.
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.
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.
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.
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.
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.
said Vanceburg is one of 17 municipalities in Kentucky under a federal court
order to update wastewater systems and called it a “classic unfunded
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.
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.
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.
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.
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
members voted to go into closed session to discuss personnel matters.
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
did a great job and will be missed by the Electric Plant Board,”
members also voted to hire Darren Troy Hughes to serve as a field technician
for the gas, water and sewer department.
board approved financial reports and payment of bills before adjourning.