Halstead applying for state loan to avoid paying gas bill all at once

By Jared Janzen

HALSTEAD—The city of Halstead plans to take advantage of state loan to help pay its exorbitant gas bill from February. This would mean that residents can expect to have a monthly surcharge added to their bill for the coming years but not worry about paying a bill for $1,000 come April.

At a work session Thursday evening, City Manager Ethan Reimer told the governing body that the state legislature had just made $100 million in state idle funds available to loan to cities like Halstead that are facing extraordinary bills relating to the energy crisis two weeks ago.

The city expects its February bill to spike from $100,000 to more than $2 million, but it hasn’t received the final amount yet. Estimated price points also showed that a resident who normally paid $75 for gas in February would have received a bill for nearly $1,000, Reimer said.

“There is no magic wand that just says we’re not going to have to pay this,” Reimer said. “It was a consumed commodity, and the investigations into whether there was some kind of price manipulation are going to take many months, if not years, probably before those answers are known and what the recovery would look like.”

The state loan would allow the city to pass the cost along to citizens over time. To do that, the city expects to place a monthly surcharge on customers’ utility bills. While Reimer didn’t have a firm number on what that surcharge would be, he said it could easily be $10 or more every month until the loan is paid back.

He said the most feasible way to assess the surcharge given the city’s billing software capabilities would be a flat rate across users.

“I’m going to go out on a limb and say we are probably set up to do something assessed equally across accounts or would only be able to be differentiated between a residential and an industrial account.”

At this point, he didn’t think the software had the ability to let customers pay their sum upfront and avoid the surcharge for the next 8-10 years. He also added keeping track of that would be problematic as people move in and out of town.

“If it’s a per meter charge, someone who didn’t live in Halstead during this crisis is going to end up paying, and part of that just goes to we’re a community; we’re all in it together,” Reimer said.

In addition to the loan, the state expects municipalities like Halstead to draw from their reserves to help cover the cost of the gas bill, according to Reimer.

“By the nature of this crisis, it is kind of one of the reasons we keep reserves, although our reserves we always looked at more from a laying new infrastructure side, not purchasing the actual product,” he said. “They understand that, and we don’t have to completely drain, but they do expect if you have reserves, you use that.”

Even after pulling from its reserves and suspending transfers from the gas fund, Halstead would still The loan would amortize over up to 10 years at a 0.25 percent interest rate, subject to change annually.

Reimer said the council would have to pass an ordinance and resolution during its Monday night meeting next week to move forward with applying for the loan. Applications are due March 15.

Reimer added the city does not have the option of not paying its bill and pretending nothing happened, as this would put the city in violation with KMGA and could lead to the city not being able to buy gas in the future.

Council member Sam Farmer said he was in favor of the loan.

“The nice thing about, in my mind, doing the loan is it stretches it out and also gives us more time for potential litigation and possible rebates,” he said. “I’m not saying it’s going to happen, but the potential could be there to help pay that loan off.”

Mayor Dennis Travis was also in support of the loan but added that the work is not over in getting to the bottom of how the city ended up in this situation.

“The bottom line is this is an avenue that provides us a band-aid for the financial relief we need, but there’s a lot us, myself included, that are very concerned about what caused this situation in the first place, and how do we keep it from happening again?” Travis said. “We’re going to continue to make noise with our governing officials and legislature to continue this investigation and find a solution.”