Some business thoughts

As a business leader in Decorah for over 30 years that has run a $10,000,000 a year business, employed 100-plus people and ran a successful contracting business, I have learned to look beyond what is on the surface. With a business mindset, I have never made large business decisions with no guarantees. I could not afford to do so. This MEU vote is a reckless gamble that will allow the city council to spend a tremendous amount of taxpayer money with little or no oversight in an attempt to fix a system that is not broken. As a citizen I am voting no on March 4 and encouraging you to do the same.

The following is information I have gathered in my seeking the city council seat and about the city having an MEU.

I heard many times “our Alliant bill has gone up every year since the last referendum.” Yes, Alliant had a rate increase shortly after the last referendum that was approved by the Iowa Utilities Commission. All rate changes by investor-owned utilities are severely scrutinized and approved by the IUC. In the New Gen feasibility study dated January 2018, with information by Decorah Power — page 2-7, second paragraph. They acknowledged that there was an increase pending with the IUC and estimated rate increases of 2.1 percent per year over the study period. When people state that Alliant lied about future rate increases, that is false, as even the proponents of the MEU projected rates with annual increases.

Our city council, with the current Alliant Franchise Agreement on Sept. 8, 2020, imposed a “franchise fee.” This was put in place to provide a revenue source for the city, with this fee also serving another purpose. Due to the city’s minimal public input and marketing; it made Alliant look bad that their bills were increasing again. Most people I talked to have no idea that there was a franchise fee on their Alliant bill. The fee started at 2 percent January 1, 2021, 3 percent July 1, 2021 and 4 percent July 1, 2022. It is the last line item on your bill. It is a fee that is collected by Alliant from all of its Decorah customers and passed on to the city of Decorah. The city council has split the use of this revenue, half to streets and half to the Sustainability Commission. This commission was formed after the last referendum in 2018.

In 2023, the Alliant franchise fee that was charged by the city to Decorah residents and businesses was $390,676.08. The Sustainability Commission received $195,338.04 and currently have a balance of approximately $400,000. They have minimal expenditures planned and the majority is there for the purpose of exploring an MEU and getting a petition to the Iowa Utilities Commission. As a businessman, I find it very despicable to have a business collect a fee that is being used to fight against that same business. I also find it despicable for the city to fund a cause that was voted down once. Especially when there are many projects that need funding; Heivly Street/North Alley reconstruction, waste water facility need updates and rebuilds, fire station/city hall, fiber optic, new ball park complex, Carlson Park and the never-ending street improvements.

Supporters claim that they need this yes vote to be able to get information from Alliant to do studies. The following statement is the last paragraph from the findings from the Iowa Utilities Board on July 11, 2022 — Docket C-2021-0179.

“While the board finds it lacks the statutory authority to require IPL (Interstate Power & Light, Alliant) to turn over the information to Decorah, the board’s conclusion does not forestall any additional conversations between IPL and Decorah. Furthermore, there is nothing stopping Decorah from completing its own feasibility study using the information it already has, and can gather from other sources, to assist in deciding whether Decorah should put the municipalization option to a vote of the people.”   

So why haven’t the proponents updated or done another feasibility study?

Let’s talk about the vote.

A simple majority yes vote will allow the council to spend the franchise fee funds as well as take out on additional general obligation bond (up-to $700,000) without any resident vote. If the vote is successful for the MEU and the IUC approves the sale, the city can fund the purchase of Alliant’s system with “revenue bonds.” Let me be perfectly, crystal clear, a yes vote means that the city council can take on tens of millions and tens of millions of debt via revenue bonds without any input or additional votes from the citizens. The council has said that if the price is too high, they can stop the entire MEU process. I find it amusing to think that the proponents of this MEU would back down if it becomes financially unfeasible. As a businessman, I’ve learned to cut my losses when I’m spending too much and not getting a return. I doubt the city council would do the same. The IUB has turned down the last six cities that have attempted this.

Now to the business side of this. These are figures I have put together from basic items I see needed to run this city-owned utility.

For a starting point for a buyout of Alliant, I used $30 million. This is between the two studies done in 2018 and is not updated for current cost increases or any new improvements to the electric grid. I used an online mortgage calculator; I know bonds can work differently, but the bottom line is the debt needs to be repaid. Using 4 percent for 20 years, monthly payments are $181,974.10, divided evenly over 3,800 meters, according to the “Decorah MEU Voter Educational Information.” Per month per meter cost to cover debt. $47.84

The utility will need to hire staff. The figures below are just salary and estimated 30 percent for benefits. Note, these are estimates and probably on the low side.

Head lineman/supervisor – $100,000

Lineman to cover 24/7 (2 employees at $90,000) – $180,000

Billing/office assistant – $60,000

Total per year – $340,000

Per meter per month – $7.46

The need to make up the 4 percent franchise fee of $390,000. Per meter per month – $8.56

The need to make up property taxes paid by Alliant in 2024 ($171,904.50 – not including their new building) – $3.77

Total of the above per meter per month costs – $67.68

Today “Basic Service Charge” $0.5096 x 30 days by Alliant per month – $15.29

This is before any rates for kWh are used. Can rates be low enough to make up this difference? $67.68 vs Alliant at $15.29.

Keep in mind this is without any expenses of contracting with other area utility companies for services, mutual aid, everyday operating expenses and repair supplies. Truck expenses, fuel.

Keep in mind that Alliant currently has its operations center here in Decorah for quick 24/7 service and access to hundreds of additional lineman and supplies at no additional charge to Decorah should a natural disaster occur. This goes away with a Decorah MEU.

Alliant is not the low-price option; they are the best-price option. With Alliant, we have guarantees of reliability and for the next five years, rate stability.  As a businessman I’ve come to understand that sometimes you get what you pay for, and what I pay to Alliant each month I think is more than worth it.

This is why I am voting no on March 4, and I ask you to do the same.