Oak Ridge got some positive buzz today! The city is number 3 on Money magazine’s list of “Where homes are affordable” — “Residents who live in these 25 growing towns see their incomes go the furthest.” The profile of Oak Ridge says our median home price is $102,950 while median annual family income is $72,770 (those numbers are about right, I think). In the text, the magazine says: “The town has weathered the economic storm thanks to a strong base of professional jobs in health care at local hospitals, and technical and research jobs at a range of plants. Furthermore, Oak Ridge is a short drive from Knoxville, making it a nice spot for commuters who work in the city but want to live in a quieter community.”
Added July 16: Today’s News-Sentinel documents part of the reason for that upbeat description of Oak Ridge. So far this year, the federal government stimulus package has created or saved 465 direct jobs here — and that only counts jobs related to DOE.
The issue of guns in municipal parks has aroused a lot of emotion and is generating a lot of e-mail to City Council members. On one side are people are strong proponents of gun rights and residents who believe that having a concealed gun when they are in a public place helps to ensure their safety. On the other side are people who believe that introducing guns into public parks is a threat to public safety. Among the people I’ve heard from are friends with strong views on both sides of this issue.
Following is text from a message that I have been sending to people who’ve e-mailed me on this topic:
The matter of guns in parks is on the agenda for the next City Council
meeting next Monday, July 20.
Guns are currently not permitted in our city parks. A new state law that
allows people with handgun carry permit holders to carry their guns in
public parks will take effect September 1, 2009, and will apply in Oak Ridge
city parks unless the City Council decides by resolution to “opt out.”
The “opt-out” resolution that City Council will consider next Monday
would maintain the existing ban on guns in our parks, with exceptions
for law enforcement officers, hunters in an authorized hunt (we do have
them in some city areas), World War II re-enactors at Secret City, and
similar exceptions. It would apply to all parks, natural areas,
greenways, and similar properties owned or operated by the city. (Guns
will continue to be banned on school property regardless of what we do.)
I intend to support the opt-out resolution to continue the ban on guns
in our city parks. As I see it, this restriction is not related to a
citizen’s right to bear arms, but rather is a reasonable restriction to
ensure public safety and allow citizens to feel secure when they use the
city’s public playgrounds, parks, greenways, and other areas.
Added: A recent News Sentinel article helps explain why it is that police officers and recreation managers in Tennessee — and many Oak Ridge citizens — prefer not to allow handguns in city parks, even in the hands of permittees. A man with a handgun permit who “did not seem to be mentally stable” (according to a Knoxville Police) fired his handgun in a greenway area near where children were playing. Fortunately, no one was hurt. Charges against the shooter included impersonating a law enforcement officer and reckless endangerment, and his handgun permit was suspended “and will be revoked if he is convicted.” It’s unfortunate but true that the fact that someone passed a background check and went through firearms training is no guarantee of that person’s future mental stability and responsible handling of firearms. Yes, he was already violating state law by taking his gun into a public park, but the fact that some people violate laws is not a reason for eliminating those laws. I believe that telling people like him that it’s OK to take their guns into parks increases the chances for gun violence in parks — it certainly does not make people safer.
An e-mail from a resident reminds me that there’s lots of public discussion about tax rates, but little public/media attention when city electric, water, and wastewater rates go up — even though most of us pay more for city utilities than we do for city property taxes.
I think the resident was hoping that there was some terrible mistake in his bill when he wrote that since 2006 “my electric and sewage price per unit has increased by 25% and my water price per unit has increased by 50%.” His estimates of the rate increase are a bit high, probably because there are minimum charges built into each of those bills (currently $25 per month for water and wastewater and $7.70 for electric) that mean you can’t calculate the unit price by dividing your total bill for the month by your usage for the month. However, the reality is that the rates have gone up — a lot.
Having dug into the rate increases to respond to this citizen, I’m going to document the information here.
The increases are due in large part to the fact that the costs of many of the items that are required to deliver electricity, water and wastewater service (including natural gas, coal, electrical transformers, and electric cable) have gone up much faster than the consumer price index. The city is simply passing the costs along to us customers. Additionally, though, a portion of the increases is due to decisions the city made several years ago to subsidize part of the cost of extending utility service to remote locations such as Rarity Ridge.
Electric rates have changed several times during the last few years, almost entirely due to changes in TVA’s charges for electricity sold to the city. (There also have been some modest increases by the city.) TVA rate increases have resulted mostly from factors such as big increases in its costs for the fuel it uses to generate electricity (mostly coal) and reduced hydroelectric generation due to drought. Fortunately, sometimes TVA makes downward adjustments in its rates. TVA adjusts its rates quarterly, and our rates change quarterly as a result. The most current Oak Ridge electric rates (from April) are on the web at this address. Those rates are lower than they were a few months ago.
Water rates have increased more than 40% since 2006. Those rate increases received final approval from City Council in May 2007 (the month before I was elected to Council), as documented here.
That increase was related to increased costs of delivering water, but a contributing factor was a big permanent drop in water use by Department of Energy facilities. The fixed costs of operation did not drop when DOE’s usage dropped, so the city now must to divide those costs across fewer gallons of water. (Also, a provision of the city’s contract with DOE limited the percentage by which the city can increase DOE’s rates, meaning that the rest of us are paying more…)
Wastewater rates last increased in May 2008 (see documentation on the city website). I don’t recall the percentage increase, nor the specific reasons for it, but I know that the costs of energy are a big part of the cost of wastewater treatment, so energy price increases are likely to explain a big chunk of the increase.
What to do about this? Well, most of us could reduce our bills by conserving. At my house, we’ve seen our electric usage go down a surprising amount because of (1) replacing light bulbs with compact fluorescents, (2) getting rid of the old refrigerator that we kept as a second fridge for convenience (for example, to hold “fresh” orange juice that we bought on sale), and (3) replacing our old chest freezer with a newer model that’s more efficient. Not only does that reduce our household bill, but if our society could significantly reduce its overall demand for energy, America would become less vulnerable to the price manipulation by the international oil cartel that causes energy prices to go up…
The widening of Hwy. 95 will help with future rates, as it will facilitate extension of water lines to westernmost Oak Ridge, which will in turn lower future costs of provding services there by eliminating the need to purchase water for Rarity Ridge. Economic development that adds more water users (ideally in areas already on the main water system) would help by adding more users to split those fixed costs.
Oak Ridge is now participating in TVA’s Generation Partners program that provides incentives for generating green electricity (something that should make a small contribution to reducing the influence of that international oil cartel).
And maybe we can find some ways to increase efficiencies in the utility systems.
After headlines earlier this year about Tennessee local governments suffering losses after getting involved in interest rate swaps for their municipal bonds (see New York Times on April 8 and April 10, the Associated Press on April 8, and the Memphis Commercial Appeal and Chattanooga Times-Free Press on April 10 ) people are talking about which other cities and counties are affected and “can it happen here?” The media have reported that Tennessee municipalities were “educated” about this form of derivatives by means of state-authorized gobbledygook that did not effectively inform them. Blame for the situation was directed at Morgan Keegan and its First Cumberland Securities subsidiary (municipal bond underwriters), and Bass, Berry and Sims (law firm acting as municipal bond counsel), which conducted the state’s education programs on municipal derivatives, advised local governments, and brokered the deals that got local governments involved with the derivatives market. News reports name Claiborne County and the municipalities of Lewisburg and Mt. Juliet as local governments that got hit with hefty bills when their derivatives involvement went sour.
City Council members have learned that Oak Ridge is exposed to the derivatives market, so “it can happen here,” but staff expresses confidence that we will be OK. Knox County and Blount County governments have made similar assurances.
The Daily Times of Maryville reported that the City of Oak Ridge was approved to issue $91 million in derivatives and the Oak Ridge Utility District (the natural gas utility) another $4 million. The City’s actual current exposure is less than that — a bit less than $26 million of City borrowing is covered by “interest rate swaps.”
As I now understand it (and I probably don’t understand everything correctly), with “interest rate swaps” the city issued bonds with a renegotiable variable rate (subject to the market), but also signed a deal with a bank to guarantee that the city would pay a predictable rate of interest for the entire term of the bonds. If the market rate of interest was higher than the range specified in the contract, the bank would pay the extra interest for us. Also, if the interest rate fell below the guaranteed rate range, the city would continue to pay the higher interest and the bank would pocket the difference between our payments and the amount currently due on the bonds.
An interest rate swap deal ensures predictability in loan payments as long as the bank is a solid financial partner that can hold up its side of the contract. Last year, however, chaos hit the financial system and a lot of banks no longer looked so solid. Although the City of Oak Ridge was still a good credit risk, our variable-rate bonds were “wrapped up” in the securities of the bank that had issued the interest-rate swaps, and that bank was suddenly no longer considered a good credit risk. As a result, it might have been difficult to get investors to buy the city’s bonds for the next variable-rate period. At the same time, if the city had tried to cancel the interest-rate swaps, we would have had to pay a big premium to buy them back — because the current low interest rates made them a valuable investment for the bank that holds them.
Oak Ridge has avoided crisis by finding another bank (in Belgium, of all places!) to provide a letter of credit (at a cost of 0.9% interest) to make our variable-rate bonds marketable again. Our good credit rating helped us escape the dilemmas that some Tennessee local governments faced when they discovered that their bonds were being treated as “junk,” even though the bond issuer was solvent. I feel like we “dodged a bullet” this time, but I see this is a lesson on why elected officials like me need to dig for information and try to fully understand whatever we are being asked to approve — and what we might be getting ourselves into.
Since this blog has started getting search-engine hits from people looking for info about July 4th fireworks, here’s a link to the Oak Ridger story about fireworks this year: Oak Ridger article, July 3, 2009
The city-sponsored fireworks show is Saturday evening at 10 pm at the Melton Lake Marina. Traffic and parking could be a problem — unlike last year, Melton Lake Drive will be open to traffic, but there will be no shuttle bus to offsite parking.
Also, the Oak Ridge Community Band will be holding its traditional 4th of July concert at 7:30 pm in the pavilion behind the Oak Ridge Civic Center in A.K. Bissell Park. However, folks who used to like to go to the concert and stick around to watch the fireworks can’t do that. You’ll have to drive from the Civic Center to the Marina if you want to catch both shows.
I’ll be interested in hearing people’s thoughts on how the show location and other arrangements work out this year. City Council doesn’t make these decisions, but we can communicate public concerns to the staff.
Update on July 4: The fireworks show was impressive. It ran for 29 minutes with any let-up! Traffic seemed to flow pretty smoothly afterwards. How was it for you?
