NTF Issue Paper: mud7.doc.  1-10.





BACKGROUND.  MUD board members stood poised to vote on December 2 to raise our natural gas and water rates again this year, the latest in a long list of recent rate hikes and probably the first in another yearly series of rate hikes.  The utility maintains that rate hikes appear necessary to fund basic services to customers and to gather additional employees and equipment to replace old water mains and move water and gas lines while the city rebuilds its sewer systems to separate stormwater runoff from sewage, under unfunded federal mandate.  MUD intends to rebuild about 580 mi. of gas lines per year, costing $1 million per mile, plus fund new lines.   


THE DETAILS.  The MUD board raised water rates 2.3% on December 2.  According to utility officials, the average residential customer will garner an annual hike of $4.32 for water.   During 2010, the average customer will spend a total of $193.34 for water.  Moreover, MUD began to charge infrastructure fees for water and gas service in 2008.  It collected $5.95 million in water fees and $11.39 million in gas fees in 2008, supposedly to pay for replacing, renovating, and moving gas and water lines.  The board raised these fees Dec. 2, 2009.  On December 18, the board voted to hike gas rates by 1.2% in 2010, despite a torrent of objections from ratepayers.  Residential customers will pay about $1 more per month, commercial $7, and industrial $125.  Board members voted as follows:  For the water rate hike: Cavanaugh, Dowd, Frost, Lindsay.  Voting for ratepayers were Doyle and Friend.  For the gas rate hike: Begley, Dowd, Friend, Frost, Lindsay.  Voting for ratepayers were Cavanaugh and Doyle.  (See p. 3 for list of board members).  The MUD board and management claim a need for these increases. However, our examination of the budget revealed egregious instances of wasteful expenditures. 


FAT & WASTE.  We are deep in an economic recession, people losing their jobs and savings, everyone cutting back on spending.  Yet, MUD spent a hefty $32,445 on its annual employee picnic attended by 1,055, including kids, in 2008.  Perhaps they serve gold-plated sirloin steak to grateful workers.  $6,215 wasted on an employee recognition dinner. An employee service award dinner, which honored 101 in 2008, cost $13,200.  $39,350 for service awards.   In its budgets, it wastes $2,500 on yearly holiday parties for employee kids. $3,000 expended on an MUD retiree club, plus $500 for retirement cakes.   It spends $5,000 on adopting a school but provides no instructional aids or information.  $4,830 funds 2 mens’ golf, 1 bowling, and 1 basketball league, involving 141 employees.  Free coffee to employees totaled $32,000.  Despite its generous salaries, MUD spends $57,000 on tuition assistance for employees.  $4,231 pays for a membership in a local Rotary Club, probably to engender support. An executive loaned to United Way costs $6,800.   $23,285 pays for leases of vehicles for the top 5 managers.  The director, who earns a $270,441 annual salary, drives a swank 2008 Jeep Grand Cherokee. These execs can afford to use their own cars.  $10,000 for flower seeds to customers, probably to prompt new gardens on which to hose increasingly expensive MUD water. Surprisingly, several board members admitted not knowing of some perks, like the kids’ holiday party.  Approximately 600 union employees will receive a 3.9% wage hike this coming year, above the inflation rate and higher than wage increases many public and private employees received. 


THE DEC. 2 BOARD MEETING.  Three NTF members were the only citizens who testified at this board meeting in opposition to the rate hikes.  No one testified in favor of the increases.  The board voted to hike the capital facilities charge by 2%, which the utility assesses on new connections.  This raise appeared fair, as the increase covers only costs.  A board majority voted to increase the water service charge by 4% as of Jan. 2, 2010. This monthly service charge is weighted by average use per customer, a hike of about $1 per month.  The water infrastructure replacement charge funds replacing cast iron mains during the unfunded, federally-mandated sewer separation work.   Many of the rate hike dollars will pay off the utility debt service, about $68 million for the next 5 yrs.  We blame poor management for accruing such large indebtedness.  The board voted down a gas rate hike that would have increased residential bills by about $22 annually.  The service charge here is 98c per month, with a .0172c increase per gas therm.  As advised by NTF, the board initially voted to eliminate the wellness program, the $10,000 flower seed conservation program, the adopt-a-school program, and retiree club.  Board member Dave Friend supported none of these unneeded miscellaneous programs. During board deliberation on cutting these perks, a union lawyer representing MUD employees warned the board to not remove the perks because of “customary practice” and threatened to initiate legal action for violation of the union contract.  However, a MUD attorney retorted that these perks were not included in the contract.   Because the board voted NO on the gas rate hike, management planned to make more budget cuts and deal with a larger deficit in the gas sector.  Management offered the board options at the Dec. 18 meeting. 


THE INDIVIDUAL VOTES, 12-2-09.  To retain the retiree club, costing $3,000.  YES(-):  Dowd, Frost.  NO(+): Cavanaugh, Doyle, Friend, Lindsay.

To retain retirement cakes that cost $500:  YES(-): Cavanaugh, Dowd, Frost.  NO(+): Doyle, Friend, Lindsay.

To retain the $32,445 employee picnic:  YES(-): Dowd, Frost.  NO(+): Cavanaugh, Doyle, Friend, Lindsay.

To retain the employee kids’ holiday party: YES(-): Dowd.  NO(+): Cavanaugh, Doyle, Friend, Frost, Lindsay.

To retain the employee $13,200 recognition dinner:  YES(-): Cavanaugh, Dowd, Frost, Lindsay.  NO(+): Doyle, Friend.

To retain employee service awards, costing $39,350.  YES(-): Cavanaugh, Dowd, Frost.  NO(+): Doyle, Friend, Lindsay.

To eliminate $8,000 for bereavement flowers:  removed from list that board voted on.

To eliminate $10,000 in flower seeds for conservation: removed from list that board voted on.

To eliminate the wellness program: removed from list that board voted on.

To retain employee tuition assistance payments: YES(-): Cavanaugh, Dowd, Doyle, Frost.  NO(+): Friend, Lindsay.

To eliminate the loaned executive to United Way, saving $6,800.  removed from list that board voted on.

To eliminate $4,231 for Rotary Club dues.  removed from list that board voted on.

To retain the $32,000 subsidized coffee fund:  YES(-): Dowd, Frost.  NO(+): Cavanaugh, Doyle, Friend, Lindsay.

To retain sports leagues that cost $4,380.  YES(-):  Dowd, Frost.  NO(+): Cavanaugh, Doyle, Friend, Lindsay.   

The above items cut eliminated approximately $218,700 from the FY 2010 budget. 


To raise the water rates: YES(-): Cavanaugh, Dowd, Frost, Lindsay.  NO(+): Doyle, Friend.

To raise the water infrastructure rates: YES(-): Cavanaugh, Dowd, Friend, Frost, Lindsay.  NO(+): Doyle


To raise the gas rates: YES(-): Begley, Dowd, Friend, Frost, Lindsay.  NO(+): Cavanaugh, Doyle. 

At this meeting, a board majority voted to re-authorize the service award recognition dinner, service awards, free coffee, and employee picnic. 


OUR SUGGESTIONS.  Hire private companies as needed to implement gas line reconstruction and therefore avoid need for a new construction center.  Contracted employees would meet the same safety requirements as MUD workers.  This utility now hires outside contractors for installation or replacement of water mains.  Outsourcing gas main work would save about $3.6 million annually in employee and equipment costs.  Instead of paying a lawyer on the MUD staff, hire an outside attorney on retainer.  Partner with other utilities or government subdivisions to share construction or call centers. Outsource call center work to a private company.  Ask employees to pay a larger percentage of their health care benefits.  In 2009, full-time employees paid only $28.48 per month for Blue Cross/Blue Shield coverage, while the district paid $435.01.  For Coventry insurance, employees paid only $30.76 per month, while the utility paid $470.26.  In 2009, retirees ages 55-57 paid 100% of the cost of their medical insurance, currently $385.80 per month.  At age 58, both employee and utility each pay $192.90 per month; at age 59 and older, the district pays $257.20 per month and retirees $128.60.  Most public employees pay about 30% of health care costs.  MUD should bargain harder with employees to reach this percentage and shift health care benefit responsibility for retirees at age 65 to Medicare.  MUD writes off many utility bills left unpaid by customers, bills that the Salvation Army or the state welfare dept. cannot cover.  Although we feel compassion for those who, because of economic crises in their lives, cannot pay their bills, MUD should require them to pay larger deposits when re-connecting utilities.  Limit advertising, though MUD competes with OPPD.  MUD lobbyists should lobby state legislators and our Capitol Hill delegation to eliminate or delay mandates.  Verify that deposits and investments, in our current financial environment, problems, and scandals are safe, e.g., heavy investments in Freddie Mac and FMNA Discount Notes.  Verify securities risks in insurance companies rated by A.M. Best, especially as MUD places no limit on the amount that it may invest in any one issuer.  MUD has verified that its natural gas vehicles are cheaper to operate than gas-operated vehicles and have lower maintenance costs, as cleaner burning fuel reduces required fluid change intervals, factoring in subsidization and comparative costs over the lifetime per vehicle.  The utility should continue to purchase such vehicles as cheaply as possible. 


TAKE ACTION NOW.  In the 2010 and 2012 elections, volunteer and vote for fiscally-conservative MUD board candidates.  Attend monthly board meetings to speak against utility rate and fee hikes and lobby board members. 


Research and documentation for this issue paper done by Nebraska Taxpayers for Freedom.  This material copyrighted by Nebraska Taxpayers for Freedom.  1-10.   C