The $2,000,000 a year subsidy presentation made by Travis Chandler at a recent City Council meeting highlights are below:
The $2+ Million per Year Subsidy
All expenses a private business pays
- expenses Boulder Creek does not pay
= Taxpayer/Utility Bill Payer Subsidy
“Enterprise fund” defined. “Enterprise fund” means a fund established to account for operations:
1. Which are financed and conducted in a manner similar to the operations of private business enterprises, where the intent of the governing body is to have the expenses (including depreciation) of providing goods or services on a continuing basis to the general public, financed or recovered primarily through charges to the users;
Intent of Boulder Creek:
“Investing available excess [Utility] fund balances in a new golf course that represents a significant source of revenue for utility services . . .”
“and provides a fair rate of interest return on the utility investment.”
Are We Making Money Yet?
Net Income (before transfers) 7/1/09-12/31/09 (first half of FY 2009-2010) ($555,328)
BCGC is on track to lose $1,110,000 this FY
This doesn’t count the hidden expenses that have been moved off the income statement
“Show me something that’s hidden.” – Cam Walker, January 12, 2010
Hidden Expense I
Charged wholesale, not commercial retail rates for water & power
Utility charge FY 2007-2008 (retail) $1,021,232
Utility charge FY 2008-2009 (wholesale) $344,569
Utility Fund Subsidy (1 year) $676,663
Charging only the wholesale rate for water & power provides nothing to the utility fund in the way of a “significant source of revenue”
Instead, it makes you subsidize the entire cost for BCGC’s fair share of:
*Utility Department labor,
($3,284,804 total Utility Dept. labor expense in FY 2009)
*utility infrastructure material and capital maintenance, and
*interest on the $34 million raw water line bonds
($1,446,906 total interest charged to the utility fund in FY 2009).
At 1,595 acre-feet per year commitment, Boulder Creek is the largest single user of water in Boulder City. This is about 13% of the total actual water use by all the businesses, residents, and the City itself. This is a significant burden on the utility department - which you are paying.
Hidden Expense II
Unpaid/Wrong interest on Utility Fund transfers/loan
a “fair rate of interest”?
5% proposed by City Council: see Council Agenda Packet, May 8, 2001, p 53
Accrued interest due on all transfers to BCGC over 8 years @ 5% $4,414,699
Interest for FY 2009 due on all transfers to BCGC @ 5% $1,073,867
Actually paid since 2002 inception (1.5 years at 90 day T-bill rate on less than half of the transferred funds) ~ $52,000
The 5% interest rate reflects the creditworthiness of the City of Boulder City, not the golf course. This rate itself is yet another subsidy. Any standalone business that has lost millions over its 8 years existence would have a far poorer credit rating. It would pay far higher interest - if it could borrow money at all.
The debt burden of Boulder Creek has adversely impacted the overall balance sheet of the City, resulting in higher interest rates the City would have to pay for other debt - another hidden expense.
Hidden Expense III
Prior years unpaid utility bills
$1,710549 – see December 2009 monthly monitoring report, Council Agenda Packet, January 26, 2010, p. 100
This does not include interest on the unpaid balance
Hidden Expense IV
Deferred capital expense
“I’ve been deferring capital purchases. . . . I’m not funding equipment, maintenance equipment at each golf course. So what I need to address going forward is to set aside some money for capital.” – City Manager, January 12, 2010
Hidden Expense V
Losses at BC Municipal Golf Course from competition with Boulder Creek
“Is it hurting the other golf course? Yes. No question about it.” - Cam Walker, January 12, 2010
Hidden Expense VI
Avoided costs of a private sector business
I. Lease value of land, or Purchase price of land – 389 acres
If the land is worth $500,000/acre $195,000,000
If the land is worth only $200,000/acre $78,000,000
Annual lease revenue to BC on the lower value ~$7,800,000
II. Property tax paid by BCGC $0.00
Nothing available for schools and teachers, police and firemen, hospitals and libraries, streets, buildings, and parks maintenance.
Loss as shown on income statement: $1,110,000
Utility rate subsidy: $676,663
Interest rate subsidy: $1,030,000
Other subsidies: you pick a number
Total cost: at least $2,800,000
Next year we do it all over again.