Utilities board differs on use of lease funds

City Utilities Commission member Ben Funderburg expressed his personal opinion Tuesday, saying $1.3 million in gas lease funds would best serve the citizens in capital improvements.

In an opposite point of view from his new colleague, Utilities Commission Chairman Geoff Goll stated a case for returning the funds to the utilities department since money from utilities customers paid for the land in the first place.

“We would not have to raise water rates for at least the next five years,” he said, adding he couldn’t think of anything that would benefit the citizens more than that.

Despite disagreeing on where the funds should go, Utilities Commission members agreed they should voice how the money should be distributed when the Finance Committee meets at 6:30 p.m. Thursday.

The issue was not on the agenda for Tuesday’s commission meeting, prompting Mayor John Berlin to comment that he was at a loss as to why it might not be on the agenda. He reminded commissioners that discussion of the lease proceeds and how the money should be split up will be part of the Finance Committee meeting.

Goll said they’re aware of when the Finance Committee meets and gave thanks to Council President Mickey Cope Weaver for sending them meeting notices. He said they’re very grateful for the chance to express their views on this matter.

That’s when Funderburg asked if they shouldn’t be doing a motion or something saying they’re going to petition the city for the funds.

He works in the oil and gas industry and said he’s been involved in a lot of leasing in municipalities all over and only one time did he see the money go anywhere other than the city general fund. He noted the land is owned by the city of Salem. He said everybody, both the city employees and the commission, work for the citizens of Salem. He said whatever is best for the citizens may not be what’s best for the commission.

In his opinion, he said it was best for the city of Salem for the money to be spent for capital improvements rather than go into the reserve fund for the utilities department.

Goll said the only reason they had planned to make a presentation to the Finance Committee was because they were asked to by the committee chairman. He said what to do with the money is a decision for city council to make. He also pointed out that Funderburg’s statement was a different opinion that he gave them in the past.

“Our only concern is that citizens of Salem understand where the funds came from,” Goll said.

He said the windfall check was the result of the lease of property outside of the city limits that was purchased with money paid by the people who paid their water and sewer bills. He said the money did not come from income tax receipts or grants – it came from the lease of land purchased by the utilities department for use by the utilities department.

Goll said that state law requires funds from the sale of land to come back to the department which originally bought the property, but this is different because it’s a lease of gas or oil rights.

“I think it’s important that we make sure the Finance Committee knows what benefits would be to the citizens of Salem if the money was returned to the source,” he said.

With the money in the utilities reserve fund, he pointed out the city general fund would still benefit from the interest income of an estimated $10,000 to $15,000 forever as opposed to being spent on capital improvements or paying down debt. He also said they would not have to raise water rates.

Berlin has gone on record asking that the entire $1.3 million be placed in capital improvements while Auditor Betty Brothers has requested the majority of funds be used to pay down some debt, with the remainder placed in capital improvements.

Commissioner Bob Hodgson said it’s the commission’s job to oversee the utilities department and the goal is to present the commission’s case to council and then it’s council’s decision. He noted that the commission was the starting point for negotiations regarding the leasing of property. He also said that sometimes personal opinion conflicts with what the commission must do, noting they have a duty to serve the people.

Goll said it was city council which opted to have the mayor handle the negotiations and claimed it was the mayor’s decision to include only the city-owned property outside of the city for the lease. City Service/Safety Director Ken Kenst said that was not the case, that all city-owned parcels were submitted for leasing consideration. He said Chesapeake only wanted the properties outside of the city limits.

Mary Ann Greier can be reached at mgreier@salemnews.net