Power Plant Update

We are sad and disappointed and frustrated to report that the run the weekend of the 1st and 2nd at the power plant did not go as planned/hoped for and we felt it important to share some details of the process to this point.

At this point the engine has been repaired a total of two times. The first time the damaged parts (mostly lower pistons and bearings) were simply replaced with new or remanufactured parts, along with several other parts that closely relate to those parts (all new/remanufactured cylinders, rings, etc.). Because this was a covered loss through our insurance carrier, KCAMP, the cost to the City was $1,000 for the deductible. The approval for the repairs was not quick in coming though as the total cost was significant, in excess of $300,000. The City did make some demands of the contractor as well during this process as we insisted on better than the standard 1 year/1,000 hour warranty and were able to secure a 5 year/2,000 hour warranty and a five year maintenance agreement. The City’s commitment for the 5 year maintenance agreement is $30,000, but it ensures proper and thorough maintenance on an annual basis and shields the City from the cost of repairs on normal wear items. Additionally the City purchased a new monitoring and control system that will constantly monitor temperatures, pressures, and engine vibrations, as well as other variables throughout the engine and the generator which will help the City and our contractors to identify emerging problems before they result in large repair bills in the future. This new system will allow our main contractor, Farabee Mechanical, to monitor the engine remotely, which will allow them to identify issues from their location in Nebraska, and to shut the engine down remotely if needed. This new system also changes a somewhat complex startup process into a very simple push button process. This leaves the staff largely with just the task of bringing the generator online once the engine is started. The cost for the monitoring and control system is significant at $89,000, but will benefit the City well into the future.

Sadly those initial repairs were not in and of themselves successful and a next step was ultimately settled upon by the contractor, in consultation with the insurance company and Fairbanks Morse (the engine manufacturer). After the first repairs just two bearings and caps were found to be out of spec and it was determined that these two should be machined. Two others were also machined during this time. These other two were in spec, but required some shimming (not at critical points) to keep them where they need to be. Again, the insurance company did take a significant amount of time deliberating on how they would proceed. Sadly these repairs ultimately proved to be insufficient. Through several steps, running the engine for a short time then stopping for measurements, the engine was operating properly and all the measurements were good. It was during the process of bringing the engine up to 75% of maximum capacity that problems were encountered and it was determined that they would allow the engine to go ahead and cool a bit and then they would check the status again of the bearings and the pistons. These checks revealed that several of the bearings and caps had experienced “flashing”, which is a process whereby the face of the bearing is pitted, basically. At this point the contractor has presented the report from their experiences from the unsuccessful run and have presented the city with the next step, which is to separate the block from the base and inspect the block carefully for damage. It is thought that either the bottom crankshaft or the block will need to be replaced, or the block will be line bored. All of this is per the manufacturer, Fairbanks Morse.

It must be noted that in spite of the difficulties the city has experienced, the fact that the city has had this engine has been a tremendous benefit. This engine was selected by the prior administrator and council for these very reasons. First, this new engine is compliant with new rules by the EPA (called the RICE-NESHAP rules). Second, the fact that the engine is RICE-NESHAP compliant means that the City qualifies for credit toward our required “capacity”. Capacity is defined as the city’s peak annual load + 12%. For Jetmore this is 2733 kilowatts. Before we brought our engine online in November 2015 the City paid about $5,800 per month to purchase this capacity from other cities with excess capacity. With the engine the City not only doesn’t pay this $5,800, but because the engine has enough accredited capacity plus the hydroelectric product the City buys from WAPA (which is also counted toward the City’s accredited capacity) Jetmore actually has excess accredited capacity and receives a monthly check in the amount of $475. In total the value of the amount no longer paid for capacity and the amount the City now receives for excess capacity is $75,600/year. The cost of the bond for the power plant project is $53,000. Therefore, the net benefit to the City is $22,600/year which will buy 1 ½ truckloads of new power poles, about 40 pole mounted transformers, or nearly a whole year of the cost of the previously mentioned WAPA contract. Or, if that amount is saved for about 5 years and 4 months, it would purchase a new main transformer for the substation, which is a possibility in the next several years as the current main transformer is a 1980 vintage. In short, even not running this engine continues to benefit the City pretty immensely. That said, we need to get it running again. That task is the number one goal of the mayor, council, and the city staff and will remain so until it is done.

Consumer Confidence Report

The City of Jetmore 2017 Consumer Confidence Report for Water Quality is available to be viewed at the Kansas Rural Water Association (KRWA) website or by clicking here. Hard copies of the report are available at the City Office for anyone who wishes to have one. If you have any questions, please feel free to contact the city office.

Budget Bill Utility Payment Plan Application

Enrollment for the new Budget Bill Payment Plan for City utilities remains open through October 31 for the current billing year. All utility customers wishing to take advantage of this program, please submit application by October 31. Beyond that date open enrollment will take place each September.

Applications are available at the City office, or by clicking Here.

Consumer Confidence Report

The City of Jetmore 2016 Consumer Confidence Report for Water Quality is available to be viewed at the Kansas Rural Water Association (KRWA) website or by clicking here. Hard copies of the report are available at the City Office for anyone who wishes to have one. If you have any questions, please feel free to contact the city office.

Letter To The Residents of Jetmore Regarding New Water Rates

After several months of deliberations, research, and consideration, the Jetmore City Council has passed an ordinance raising the water rates for Jetmore water customers. The current rates have been in effect since January 1, 2014. The year before the last increase was instituted, 2013, the Water Fund lost a total of $27,198.63. In 2014 the Water fund, from January 1 to December 31, realized a modest profit of $7,356.29, but a much more sizeable profit of $35,376.58 in 2015. Through November of 2016 the Water fund has grown at a more modest rate once again, gaining just $5,953.65. However, it is important to note that in 2016 the city opted to make a transfer of $40,000 to Employee Benefits from Sewer instead of from Water because of a large surplus of dollars which existed in the Sewer Fund. To conduct an apples to apples comparison to the previous years we would have to put that transfer back into Water. If we did so, then through November the Water fund would be down on the year, $30,713.02, due primarily to the fact that sales of water are down this year and the replacing of the line under the creek in February. Additionally, counting all revenue sources for the water utility (customer charges, late charges, Kansas water fee, etc.) the city has received a total of $5.24 per thousand gallons sold through November. In the same time the city has spent $5.04 to produce the water (personnel costs, supplies, contractual costs, testing, etc.). If we make the apples to apples comparison though, the city would have spent $6.20 per 1000 gallons sold to date this year. (It is important to note that this Employee Benefits transfer benefits Jetmore residents because without utilizing the utilities in this way, the city would have to pay for employee benefits solely through the property tax levy, increasing that burden on taxpayers. Transferring from the utilities the cost of insuring our employees, paying retirement benefits, etc. can be shared much more equitably.)

 

The projected need for revenues in Water in 2017 is $212,500. This amount of revenue would give us the opportunity to cover typical expenses as well as plan for future repair and replacement needs by building a healthy reserve account that would be utilized solely for these purposes. In order to realize that amount of revenue it was concluded by city staff that it would require an increase in water rates. What was presented to the Council was a plan to move away from the single rate and introduce a tiered rate structure. After a great deal of research it was determined that the following rate levels would accomplish the projected needs for 2017:

 

$4.50/1000 gallons up to 5,000 gallons, $4.80/1000 gallons from 5,001-15,000 gallons, $5.10/1000 gallons from 15,001-40,000 gallons, and $5.40/1000 gallons for all gallons sold above 40,000 gallons. The minimum charge will be $10.00.

The current rates are $4.00/1000 gallons with a minimum charge of $8.50.

 

It is important to understand that if a customer uses 7,000 gallons (which is the average user in Jetmore among all users) the customer would pay $4.50/1000 up to 5,000 gallons and $4.80/1000 gallons for the 6th and 7th thousand gallons only. Thus, the average user’s bill would increase $5.60 above current costs. It is also important to note that on a month-to-month basis 74% of Jetmore water customers are using between 0-5,000 gallons, the lowest tier in the new rate structure, so the impact to the vast majority of Jetmore water customers will be minimal. For the elderly person living on his or her own, using 1000 gallons of water every month, the increase on the monthly water bill will be $2.00.

 

This is in addition to the $9.15 charge which will begin to appear in January to pay the debt service on the water project which is slated to begin in April or May. This is the main reason why this decision required so much research and consideration. The Mayor and Council do not wish to overburden the residents of Jetmore and considered all options available before coming to this difficult decision. That is why, though a need exists to raise rates in Electric and Sewer as well (for the purpose of building revenues that would, in those funds, also provide for future repair and replacement needs) the Council has opted to delay those increases. As well, the Council directed the Administrator, when crafting the 2017 budget, to hold the line on property taxes.

 

It is unfortunate that this perfect storm of sorts has descended upon Jetmore all at once, when so much has already been asked of the residents of Jetmore, but the sad reality is that many communities across Kansas and elsewhere are dealing with the consequences of 50-100 years of deferred maintenance and those consequences are often proving somewhat uncomfortable. It is the commitment of the Mayor, Council, the City Administrator, and staff to control costs where they can be. Money must be expended to address the deferred maintenance that exists, but where money can be saved, it will be.