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Benton City Council * $12,200,000 Utility Bonds

On December 19, 2011, The Benton City Council passed Resolution 50 of 2011 to authorize the Benton Utilities Commission’s proposal to offer public utility revenue bonds in the amount of $11,200,000 $12,200,000.  This Monday night (March 12), the council will consider Ordinance 13 of 2012 to authorize the new debt. 


I have no criticism of the listed projects to be funded by this new debt.  I support increasing water capacity in partnership with Saint Gobain’s plant expansion plus their possible second plant, adding a fourth electrical substation (increase reliability, redundancy and capacity) and replacing dilapidated infrastructure.  I do question the urgency (we are currently at 86% of total electrical capacity during peaks) and I have the following concerns:



During the December 19 council meeting, the aldermen were told we (aka: you, the ratepayers of the utility system) could borrow this money “without raising utility rates” and without increasing our monthly payment or extending the term of the debt (pay off in year 2036).  I questioned how Benton could generate net proceeds of $11,200,000 $12,200,000 and pay all of the attorney’s fees and broker’s fees/commissions without increasing our revenue stream, our debt service payment, interest rate or loan term – it seemed too good to be true to me (“Free Money”).  Since then, I have learned the new debt is not free:


  1. The Benton City Council imposed an automatic 2% increase of water rates effective on 01/01/2012 with additional 2% increases scheduled on an annual basis (please call your aldermen and request a revision of the water rate structure).  The purest use of the term “no rate increase required by the new debt” is true; however, there will definitely be rate increases during the term of this new debt.
  2. The ratepayers will lose the advantage of scheduled decreases (as the principal is paid down) in the monthly debt payments on the 2005 debt.  As a result, the ratepayers will not be eligible for rate decreases resulting from the decrease in monthly payments.  Again, the purest use of the term “no increase in our monthly debt payments” is true but we abandon the possibility of decreasing our monthly debt payments and paying off the 2005 debt early. 



During the December meeting, I shared the fact that the new utility debt will cause the City of Benton to lose its status as a “Bank Preferred” borrower which would increase the borrowing costs of future debt.  I reminded the aldermen the citizens of Benton recently passed the convention center bonds in a historic landslide election.  I warned them of the increase in the borrowing costs of the convention center bonds that will result from passing the new utility bonds due to the city’s loss of “Bank Preferred” status.  I offered a suggestion to wait by saying, “we (Benton) need an opportunity to catch our breath and see how we are going to come out on the A&P bonds before we commit to this additional amount.”  We can only estimate the increase costs of the convention center bonds approved by the people.  But, we can safely say it will be more expensive for Benton to borrow money as a result.



Based on conversations with utility’s personnel and Benton’s CFO, it seems feasible to use cash reserves to pay for the fourth (4th) electrical substation that accounts for about $3,000,000 of the debt proposal.  Why not negotiate an interest free cash payment schedule with the substation vendor instead of increasing the ratepayer’s total debt? I suggest we work with Saint Gobain to get a firm timeline of their proposed expansion and the exciting possibility of them adding a second (2nd) plant.  Can we defer this project to 2013 or 2014? What other purpose for cash is there for our utility system but to fund expansion, maintenance, and response to catastrophic events?  If not used for those purposes, why not rebate the excess funds to the ratepayers in the form of a lump sum payment?



In support of the people’s mandate to fund the new convention center and to take advantage of a multi-million dollar private investment, I believe the people’s project must be an absolute priority in 2012.  It concerns me that we are proposing additional new debt so soon after the November 2011 election.  Instead, the focus should be on minimizing the cost of the people’s project.


Time is of the essence – the original meeting date to consider this new debt was March 26.  Please make yourself available Monday night (March 12) to attend the required public hearing scheduled at 6:45 and the Benton City Council meeting at 7:00.


Alderman Brad Moore

City of Benton

Views: 686


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Comment by Kenneth Ray on March 14, 2012 at 1:10am
This is disappointing Brad...I guess you were the only no.
Comment by Shirley Reynolds on March 13, 2012 at 4:35pm

Be Careful you might get sued for expressing your first amendment right.

Comment by Evan Prickett on March 13, 2012 at 11:58am
Interesting stuff
Comment by Brad Moore on March 13, 2012 at 11:27am

A customer rebate of the utility's cash on hand would net $230.76 for each ratepayer ("household"):

$3,000,000 - cash

13,000 customers (households and businesses)

$230.76 rebate/customer


$12,200,000 - debt

13,000 customers (households and businesses)

$938.46 of debt/customer


Comment by Greg White on March 13, 2012 at 11:06am

Amazing! How is it that we can so easily continue to allow a commission to run up debt without questioning their actions? Obviously, as long as the commission is comfortable with current rates and no fear of decreasing customer base, they will continue to raise our debt level with no regard for the other needs of the community.  Time to consider replacing commissioners?

Comment by Brad Moore on March 13, 2012 at 10:35am

It took eleven (11) minutes to approve $12,200,000 of new debt for Benton Utilities.  The vote count was 9 to 1.

Comment by Cara Smith on March 13, 2012 at 10:27am

I didn't see this until today.  What happened last night?

Comment by Greg White on March 12, 2012 at 7:49pm

Aldermen Moore is absolutely correct.  By the passage of this bond issue, the cost of the convention center bond project will increase!  If the leverage of the city is too high, the rate of the bond issue for what the people voted on will definitely go up.  I would agree that the consideration of this bond issue above is not for the benefit of the citizens as much as it is for the benefit of an industrial expansion.  Seems to me, that there are other ways to do the same financing without increasing bond debt.  Bond debt is the easiest way to continue to burden the citizens without being transparent in spending measures.  Who will make how much in commissions on this transaction?

Comment by Harper on March 12, 2012 at 11:16am

What the hell happened to the Pay-As-You-Go philosophy from the not so distant past? It's about time the Council reined in that Utility Commission.

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