By ED PILOLLA

Staff writer

The Hillsboro city council will consider increasing its utility rates for the fourth time since 2008, with council members planning to discuss the measure at a work session Tuesday following their regular meeting.

City officials last year decided to take an “incremental approach” to increasing the utility bill rather than implement one large fee hike for residents and businesses, said City Administrator Larry Paine. Paine has been the driving force behind the higher utility rates since he became the city administrator in 2007. Paine wants to build cash reserves for each utility in case of emergencies and to strengthen the city’s bond rating, he said.

“The hard part of doing something like this is when you ask the city council to raise rates to have cash in reserve, you’re taking it out of people’s pockets, like a bank,” Paine said. “In the big picture, it’s a hard thing for a city council to do. The question I’m going to put in front of the city council is what do you want our reserve policy to be, and will they have the wherewithal to vote to keep it at that number.”

A strong bond rating means the city would pay less interest on any future bonds in case of an emergency, Paine said. Standard and Poor’s Financial Services, which analyzes stocks and bonds, assigns higher ratings to cities with 120-day cash reserves, which Hillsboro does not have for water, sewer and electric service. The city does have a 120-day reserve for trash service, but Paine expects the city to purchase a new trash truck soon, eliminating that reserve.

Besides cash reserves driving the need to increase rates, the price of electricity is going up throughout the country and state. Industry experts blame higher costs largely on retrofitting coal plants to limit toxic emissions and upgrading the renewable energy delivery system.

Hillsboro is part of the 23-city Kansas Power Pool that purchases electricity from hydropower, wind, natural gas and coal generating stations. The pool also owns a portion of the natural gas-powered Dogwood Energy Facility outside Kansas City.

“It isn’t a single thing that affects costs. It’s a variety,” said Mark Chesney, CEO and general manager of the Wichita-based Kansas Power Pool.

Although the price of natural gas has been low as recently as a few years ago, the switch away from coal to alternative energy resources has increased the demand and price for natural gas, Chesney said.

“The complexity and deliverability of natural gas is changing,” Chesney said. “The transmission has not been set up in the volumes needed for the future.”

Overall, the price of wholesale electricity is expected to jump from $69.49 per megawatt hour to $71.35 at the beginning of the year, a 2.9 percent increase.

The previous three utility rate increases in Hillsboro since 2008 have impacted businesses hard, said city council member Shelby Dirks. Dirks has suggested that any increase in sales tax revenue from the new Walmart Neighborhood Market expected to open in the spring could offset the need for another utility rate hike.

“A lot of business owners are somewhat disgruntled with the Walmart coming to town,” said Dirks, who is co-owner of the local Circle D. Corporation, which manufactures trailers.

“Why can’t we do some good with that Walmart coming in and use the, hopefully, increased sales tax to help offset utility costs to where we don’t have to burden the business owners anymore with that.”

But both Dirks and Paine said no sales tax projection has been made yet for the new Walmart.

“It’s not going to be that easy,” Paine said. “And if I had that ability to project what it was, I’d be working on Wall Street.”

Paine added that with the Alco closing down, any Walmart sales tax contribution might simply offset the loss of Alco’s.