City utility revamps its investment policy
by Noreen Cochran
January 07, 2013 11:55 PM | 1744 views | 0 0 comments | 10 10 recommendations | email to a friend | print
MARIETTA — The Marietta Board of Lights and Water voted 6-0 Monday to change the way it invests nearly $13 million annually by holding the money closer.

The board, which governs the city-owned utility Marietta Power and Water, will put about $1.2 million it invests through automatic billing by the Municipal Electric Authority of Georgia, its major supplier of electrical power, into a short-term portfolio within Municipal Competitive Trust and nearly $12 million annually in an intermediate-term portfolio.

The new action refines a 2011 billing procedure by making the funds immediately available to the city’s finance department for further allocation.

“The transfer is our agreement with MEAG for them to transfer these funds into an account that (the finance department) has access to,” City Councilman and board liaison Jim King said at Monday’s meeting at City Hall. “And then the city of Marietta will transfer those funds, at least some of them, and bring them into a fund that we are managing.”

While the funds will be nearer at hand, the bulk will not be needed until 2036, according to a memo from board Business Analysis Director Herb Edwards, “when the cost of the new (Plant) Vogtle nuclear units commence.”

“It will ease the transition when we get that capacity,” Edwards said.

King elaborated regarding the expansion of the two-reactor nuclear power plant near the South Carolina border, in which the city invested $408 million in 2008.

“The biggest reason these funds are being set aside is there’s going to be a new-generation facility coming online. What that does, that’s a big load on the system,” he said. “There are a lot of expenses that go with that. This is to diminish the rate shock. That’s the reason for setting this aside. It is a certainty that’s going to happen.”

While the City Council must approve the change in accounts at its Wednesday meeting, Board General Manager Bob Lewis said individual transactions do not come to a vote.

“As they are needed for operations, (Finance Director Sam) Lady takes the dollars out of the flexible trust and brings them inside into Marietta’s account,” Lewis said. “To my knowledge, there’s never been action taken by the board or Council to make that happen.”

He said the trust, which contains between $90 million and $100 million for capital projects or technology, was funded by a city bond issuance in the 1970s.

“They were originally bond reserve dollars when all the cities financed projects that we had. We also had to finance the reserves to them back up,” Lewis said. “Consequently, those dollars were freed up when we used bond insurance to replace cash for the reserves. These are dollars that actually belong to Marietta, but they’re given back to us over a 10-year period, and this is the way they’re given back. They’re transferred from the MEAG trust to the Marietta trust.”

The board will likely save an additional $38,000 in June by declining to renew a contract for safety and training with Atlanta-based nonprofit Electric Cities of Georgia.

“(It) is an organization of 51 cities across the state,” Lewis said. “That organization was originally part of MEAG Power. Its distribution services group is the most important to us because they provide ongoing training to our linemen and our engineers.”

He said the nonprofit tried to renegotiate its contract last month.

“What we had is an organization that came to us, broke the contract, said there’s going to be a 25 percent increase in your payments and we can increase the contract 10 percent a year,” Lewis said. “After all the cost studying we have been through, I cannot recommend to this board that we sign this contract. We’d have to cut our internal budget by $38,000 to be flat. We just don’t think that makes a lot of sense.”

Former nonprofit employee Tom Vale has volunteered to help find better, more cost-effective providers.

“We will be using other consultants. We will be getting more capability,” Lewis said.

He warned the board to expect a negative reaction from the nonprofit, because its two largest customers are defecting.

“There might be some fallout because Albany and Marietta decided to drop out and there may be some others that may do the same,” Lewis said. “But we believe we are doing the right thing.”

The utility provides $16 million in annual revenue for the city and has 45,000 electric customers, 18,000 water customers, and 16,000 sewer customers.
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