The relationship between the city of Sherwood and North Little Rock Electric has existed for more than 50 years; however, that relationship between the two municipalities for electric service is far from certain now.
On Monday, a resolution authorizing Sherwood Mayor Virginia Hillman to begin negotiate a new contract with North Little Rock Electric was voted down by a 5-3 margin. Aldermen Steve Fender, Ken Keplinger, Mary Jo Heye, Kevin Lilly, and Toni Butler voted against negotiating an agreement with North Little Rock Electric, while Alderman Marina Brooks, Charles Harmon and Tim McMinn supported it.
Emotions ran high during the council session, with a crowd in the audience which seemed to support choosing Entergy over North Little Rock Electric. First Electric Cooperative of Jacksonville also is in the mix but First Electric’s name rarely got brought up.
Several alderman expressed dismay at the fact that they feel stuck between the middle of two facts:
1) Entergy is offering Sherwood customers rates which are cheaper at the present time than North Little Rock Electric, and some residents in the impacted areas are clamoring for lower electric bills that Entergy currently is offering;
2) North Little Rock Electric is the lone utility that has been adding an extra $475,000 annually to the city’s general fund, which was an agreement reached about three years ago between Hillman and North Little Rock Mayor Patrick Hays. As city coffers have been becoming tighter and tighter in recent years, alderman and the mayor have seen the city come dependent on North Little Rock’s extra budget supplement to avoid laying off employees , cutting back city services, or seeking tax increases from city voters.
Aldermen also are currently unsure how dropping North Little Rock Electric will impact the utility rates of the 7,000 impacted customers in Sherwood. North Little Rock City Attorney Jason Carter has told Sherwood officials that if Sherwood drops North Little Rock, the larger municipality is going to expected to be paid for its estimated $20 million worth of electric-delivery infrastructure that is now inside Sherwood.
North Little Rock officials have said lawsuits could result if their city doesn’t get the millions reimbursed for the delivery system, which could end up raising the utility bills of the 7,000 people anyway.
However, aldermen were advised Monday by legal representatives from Entergy that the funds that would be reimbursed to North Little Rock Electric would more likely be spread out to many more Entergy customers than just the 7,000 Sherwood households.
Sherwood aldermen were told the price tag to spread that infrastructure cost to all Entergy customers may end up being two or three cents per months if that amount were bore by all Entergy ratepayers.
The debate led to some aldermen getting a bit contentious with one another over their differences of opinion.
Lilly said the entire issue has had him tied up in knots lately because he knows the city needs North Little Rock Electric’s budget subsidy of $475,000 but he also sees Entergy giving Sherwood ratepayers a cheaper bill.
"I look at my sister’s electric bill who is not independently wealthy," Lilly said. "She would have saved $42 a month (going with Entergy instead of North Little Rock Electric) and that makes the decision really, really tough. Does the city take that profit or do we pass that savings onto the people who pay the bills."
When Lilly ended his statement, a round of applause came from the audience.
Harmon, who made the motion to negotiate with North Little Rock Electric, said dropping North Little Rock Electric would also mean losing almost $500,000 in revenue to the general budget.
"We bit the bullet earlier this year and bought a $300,000 radio system," said Harmon, speaking about the city earlier this year signing a contract with Motorola to buy about $1.3 million worth of emergency police radios for the police and fire departments. The loan to pay for the radios will end up costing about $300,000 annually over the next five years. The first payment on the radios is due in early 2013.
"You sat here an lambasted us about those radios," Harmon told Lilly. "Where is that $300,000 going to come from? So know we are already $300,000 in the hole and then if we don’t go with North Little Rock Electric we will find ourselves another $500,000 in the hole. We would end up being $800,000 in the hole."
Harmon said if North Little Rock Electric is dropped 2013 revenues that would represent a 2.5 percent drop in city revenues at a time that the city budget is as tight as he has seen it.
"Where is that $800,000 going to come from?" asked Harmon."We will probably having to have a raise in property taxes to do streets. How much more will we have to raise property taxes or franchise fees if we do this? They will lose regardless."
Lilly responded, "I understand what you are saying. That is why this whole thing has got my stomach in knots. We got one shot to get this right to get the best deal for the city for the citizens we represent and I don’t know if this is the best deal we got in front of us."
Hey echoed Lilly’s comments and said customers would be paying 15 percent less at the present time if the city went with Entergy.
Heye called for the city to hire an outside, independent consultant to give city leaders guidance on which path to take because none of them are experts in utility rate issues.
Hillman said she supports the notion of going with North Little Rock Electric because the multi-million dollar price tag of ratepayers having to reimburse North Little Rock could more than offset the savings they would get with cheaper rates.
"The infrastructure issue is a major issue," Hillman said.
Keplinger said the city should negotiate deals with both North Little Rock and Entergy and see which utility ends up negotiating the better deal.
Harmon said the longer city officials delay in making a decision the fewer options the different utility companies can provide Sherwood. Harmon’s comments were echoed by McMinn about the need for the city to make a decision sooner rather than later.
Fender said he believes some councilmen made up their minds to go with North Little Rock Electric and were not very open to other ideas.
Fender added he doesn’t want to see the city enter into any agreement longer than 20 years, which brought another round of applause from some audience members.