The Martinsville City Council received information about the financial background of a proposed electric rate increase at its December 19 meeting, after taking no action at its Dec. 12 meeting, when Durwin Joyce, utilities director, recommended a 5.2 percent hike in the Power Cost Adjustment (PCA).
At the most recent meeting, Mandy McGhee, director of finance, said there were two rate increases between the audited years of 2018 through 2023.
“We had a rate increase of 4.5 percent in July of FY 2019, followed by a 2.5 percent increase in 2020. We did not see any increases in FY 21 or FY 22, which you saw some of our expenditures exceed some of our revenue, which impacted that deficit line,” she said.
The ending cash and investments for FY 2023 totaled $343,461, McGhee said, adding the total is dwindling lower and lower. She explained that cash on hand is another calculation her department uses during its cash reserve policies.
“That gives you a little understanding of how many days you could operate given your cash on hand if there was an emergency,” she said, noting the city has six days in reserve.
City Manager Aretha Ferrell-Benavides said there is a projected $198,251 deficit at the end of the audited FY 2023, even though there was a seven percent increase.
“Which was not the amount that was recommended, so we are ending that amount and a negative $198,000 in that year. However, it then depletes our fund balance to $343,000, with six days in reserve,” she said.
“This is the only fund that’s operating in this, and it’s a hard one to swallow, but I think it’s very important for us to share with the council and the public as to why we have to do this,” she added.
McGhee said the request for the 5.2 percent PCA adjustment to the rate is driven by the purchase power contract that goes into effect in January.
“For example, one weather event can lead to an increased demand in generation at times costing electric funds an estimated $500,000 in that one year. There are multiple examples of it, and I think everyone recalls last Christmas Eve when Duke (Energy) had put some rolling outage in North Carolina.”
McGhee said energy costs are increasing, and there is an estimated $1.2 million deficit compared to the current budget.
Ferrell-Benavides said if the PCA is not increased, the city will have to take funds from another fund balance to cover the difference.
“It means it takes it from another fund balance and other projects within the city. It also could mean that we ultimately will not be able to service our citizens because if we can’t pay our bills, we can’t provide electricity for them,” she said.
Ferrell-Benavides said the presentation at the meeting was important so that city residents would understand the proposed PCA rate hike is not easy for the city’s government or the council.
The proposed electric rate increase will be returned to the council in January.
In other matters, the council:
*Approved the October 24 meeting minutes.
*Authorized the city manager to draft and executive a contract for the development of the West Church Street and Rives Road properties.
*Approved requesting the General Assembly to amend the City of Martinsville’s Charter.
*Discussed information related to the city’s proposed 2024 legislative agenda.
*Heard a presentation on the Martinsville Guided Career Exploration by Natalie Hodge on behalf of the West Piedmont Workforce Development Board.
*Heard from Ural Harris about the suitability of the Rives Road site for industry and the city’s funding for education.
*Heard from Rico Johnson, of Korner Kitchen, about the crosswalk in front of 37 Main Street and the level of traffic.
*Heard comments from council members.