Archive for Monday, June 8, 1992

WARM WEATHER, REFUND SLAM CITY REVENUES

June 8, 1992

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The warm winter and a suprise refund for natural gas customers hit the city with a double-whammy this year, taking a $110,000 chunk from revenues the city expected from local utility bills.

As natural gas use dropped during the winter, so did the cut the city takes from Kansas Public Service, said Ed Mullins, city finance director. The cut is called a franchise fee.

In addition, KPS customers have received refunds on excessive rates they were charged last year, which will result in a $82,725 loss in franchise fees to the city.

All told, the two suprises have taken about a $110,000 slice out of the $500,000 pie the city expected for gas bill revenues, Mullins said.

Under franchise fees, the city siphons a portion of the money residents spend on utilities in exchange for allowing utility companies to use public land to install and provide their services.

THE FOUR utilities with franchise agreements with the city are KPS, KPL Gas Service, Southwestern Bell Telephone and Sunflower Cablevision.

Under its franchise agreement, KPS must pay the city 5 percent of its gross receipts. In other words, from every $100 the utility collects from its natural customers, $5 goes to the city.

The city collected $294,185 from KPS for the first four months of 1992, about $38,000 less than the first four months of 1991.

However, because Mullins budgeted $10,000 less than the city recieved last year, the actual loss is about $28,000, he said.

The city also will suffer a loss in fees after a settlement in a lawsuit that Utilicorp United, KPS' parent company, and other utilities brought against several natural gas suppliers they accused of price fixing.

KPS said in April it had recovered all of the alleged overcharges it had passed on to customers from February 1991 to January 1992. KPS customers received refunds for their share of the settlement, totalling about $2.4 million.

WITH THEIR refunds, customers are paying less for their current gas bills and franchise fees, thus making up for last year's inflated franchise fees, said Mike Hertling, KPS vice president of administration.

As a result, the city will take a $82,725 loss. "Everybody is made whole," Hertling said.

Franchise fees help fuel the city's $12.5 million general fund, which is used to pay for day-to-day operations of the city, including police and fire service and the salaries of planning staff.

Mullins predicted the city would make up the difference with increases in other revenue sources, including fees on electrical service and sales tax.

FOR EXAMPLE, the city has collected about $280,000 more in sales taxes a total of $2,509,212 in the first five months of 1992 than it did at this point in 1991, Mullins said.

Mullins said he didn't budget for such a large increase.

"Sales tax is doing real good for us, and I think it will bail us out," he said.

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