Alva Review-Courier -

Gas franchise agreement raises questions

 

Marione Martin

City of Alva employees are honored with certificates of recognition Monday, June 17, during the city council meeting. From left are Benny Perks, Patrick Hawley and Ben Orcutt.

Other than the citizen comments, which are covered in a separate story, the only controversy during the Alva City Council meeting Monday involved the Oklahoma Natural Gas franchise.

City Business Manager Joe Don Dunham presented three employee recognition awards early in the meeting. He convinced police officers to attend by asking them to report on the Pack the Park event from last weekend. The public works manager was asked to be available to answer questions about a possible pickup purchase. Instead, Dunham surprised them with the awards.

Police Chief Ben Orcutt and Assistant Police Chief Patrick Hawley were recognized for helping the Nescatunga Arts Festival. A local group who intended to cook for the event was unable to do so. The two officers and Woods County Undersheriff Keith Dale volunteered to do the cooking. When Nescatunga offered a donation to Kids & Cops for their effort, they asked that the money be given to the group originally scheduled to cook. Dale was unable to attend the meeting to accept his award.

Public Works Director Benny Perks received recognition for coming in on his day off to pick up trash service for the Nescatunga event. The trash dumpsters were full and he responded.

The employee recognition award for service above and beyond includes a certificate, two movie tickets, dinner for two at an Alva restaurant and an extra vacation day.

Fire Department Award

Alva Fire Chief Kirk Trekell told council members a private donor provided the funds for some special challenge coins. After a delay the coins were designed and finished. Trekell handed out coins to everyone present including the very large number of visitors. On one side the coins show the Alva City Hall and Fire Station from 1911 with the words "A Tradition of Pride and Service 2019." On the other side is Alva's first fire truck from 1917 with the words "Alva Fire Department" and "In God We Trust."

Firefighter Derek Nusser was present at an Oklahoma State Firefighters Association meeting where Alva received an award. He showed off the large plaque recognizing the local department as a 100 year member. The OSFA was begun in 1894, and Alva joined in 1902.

ONG Franchise

After numerous summary reports from city board and commission meetings, Mayor Kelly Parker reported on some events he attended including the annual Oklahoma mayors' retreat. Dunham gave a shortened report due to the length of the agenda.

Parker read proposed Ordinance No. 2019-002 granting a franchise to One Gas, Inc. acting by and through its Oklahoma Natural Gas Company division (ONG). The current ONG franchise is set to expire in September and needs to be renewed. This is a 25 year agreement and will need to be voted on by the citizens of Alva..

Councilmember Daniel Winters asked, "Am I reading this correctly that we are asking for a one percent increase in the franchise fee – from three percent to four percent – which is essentially a tax because it is a pass-through cost?

"So we're asking essentially to pass a one percent tax on to our citizens. I have a problem with that."

He said not every city in the state has to pay a franchise fee. He based this on having seen his mother's and his grandmother's gas bills. Winters said he also had an issue with the franchise being for 25 years because "we don't know what's going to happen in 25 years."

Dunham said the city discussed this with ONG, and there is no city which ONG services where the franchise fee is not passed through customer bills.

"We looked into this." said Dunham. "I've read several franchise agreements from across the state. Of those I've read, I did not see language that was anything different than what we've been presented."

"I look at it as basically what a franchise agreement does is provide them to lay lines and everything without having to go to the city for a permit," said Winters. "If I want to do anything, I have to get a permit. I pay for that permit. In this case, I'm paying for ONG's permit. That's how I look at this."

Dustin Frederick, managing attorney for ONG, said, "As far as the franchise, we're regulated by the Oklahoma Corporation Commission so all of our rates are regulated and set by the commission. So we do have a franchise fee that is negotiated with the cities that is a pass through."

He said ONG rates are based on their expenses, and the franchise fee is an expense to operate "so there's nothing earned off of that."

Councilmember Brandon Sherman asked what would happen if Alva citizens did not approve the franchise agreement. "In theory, what happens? You guys still service gas, you're still regulated by the state of Oklahoma, you can't raise the gas rates so what happens if you don't have a franchise agreement?"

The City of Alva would feel the financial impact, Frederick said. "There is an opportunity to pass a gross receipts ordinance. It is a two percent max ... but it obviously doesn't cover all classes of customers so the impact to you all is obviously, initially financially. I think you (the city) get about $60,000 a year in franchise fees currently, so with the increase from three to four percent that's about $15,000 to $20,000 additional a year."

He said if the franchise fee went away or went down, the city would lose revenue. "As far as operationally, we do prefer to have a franchise because it does lay out the rights to utilize right-of-ways with each city we have. So from that perspective we'd prefer to have a franchise."

Councilmember Mary Hamilton asked if all other communities served by ONG have the same three or four percent fee. Frederick replied that the fees vary.

Winters said he researched it and found fees vary from two to five percent. Frederick said ONG doesn't have any as high as five percent. "The majority would be three, but four is not outside the scope of ones that we have across the state," he added.

Councilman Randy Stelling asked if the 25 year franchise locks the fee in for that period.

Frederick said the agreement allows a city to increase the fee if another community goes up during that time. He said the company prefers the maximum allowed of 25 years because of the investment they put in the community such as piping "so we can make long-term decisions for the investments we make in those communities."

Sherman wanted to know how much ONG puts into the Alva community. At first, it was thought he was asking about the cost of pipelines, meters, etc. that ONG has in Alva. He explained he was asking about donations or grants.

Dunham said ONG did give some money for the Bud Rose Park project. Frederick added that One Gas has a foundation that gives grants based on applications. He said One Gas is over three states including Oklahoma.

Because of deadlines to get the matter on a ballot in September, the council needed to make a decision at this meeting. If it were delayed a month, there would not be time to get the election scheduled in September, and the city would lose out on franchise tax revenue.

Councilmember Bo Hannaford made a motion, seconded by Stelling, to approve the ordinance. The vote passed seven to one with Winters voting against it.

An emergency clause was needed to make the ordinance effective as soon as it is published. That motion was approved unanimously. The vote on the 25 year ONG franchise will probably be on Sept. 17 although the date had not been set officially.

Other Business

The council approved Resolution No. 2019-005 establishing the investment policy for the city for the fiscal year beginning July 1. It authorizes the city treasurer to invest and reinvest available funds on a continuing basis.

A resolution authorizing the fire department to charge for certain fire protection related services was tabled. Mayor Parker said he and most council members had received enough questions and comments from citizens that he thought it best to send the matter back to committees to consider changes.

The council passed next year's budget for July 1, 2019 through June 30, 2020. Dunham went over the general figures of the budget, and there were no questions from council members.

The renewal of the city's workers compensation insurance with Oklahoma Municipal Assurance Group was approved. The $136,327 bill will be paid quarterly. The city has a $3,204 escrow credit that will be used to lower the total premium.

A number of items, mostly vehicles, were declared surplus so they may be disposed of.

An executive session was held to discuss negotiations with the firefighters' union. No action was taken on that matter when open session resumed.

Marione Martin

Left: Firefighter Derek Nusser displays the 100 year membership plaque presented to the Alva Fire Department by the Oklahoma State Firefighters Association. Right: Dustin Frederick with ONG answers questions about an upcoming franchise election in Alva.

At the beginning of the meeting, the council approved minutes of the special meetings on May 23 and June 11, approved claims of $138,107.28 and payroll expenses of $246,919.49.

Authority Meetings

The Alva Utility Authority met following council adjournment. They approved minutes of the special meetings on May 23 and June 11, claims of $115,327.84 and payroll expenses of $60,070.64. Trustees, consisting of the council members, approved the budget for the next fiscal year. They voted approval of a change order adding 55 days to the well field chlorination station project which was delayed by rain and waiting for a part to come in. They also declared a truck and a commercial freezer as surplus.

The Alva Economic Development Authority held the final meeting of the night. The trustees approved minutes of the May 23 meeting, claims of $30,342.50 and payroll expenses of $16,244.01. They also approved the budget for the next fiscal year.

 

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