Claremore Mayor Bill Flanagan and City Manager Jim Thomas announced the city’s intention to invite state auditors to review city finances with regards to electricity rates and sales tax in a press conference Monday. The city council subsequently approved the audit with unanimous approval.
“There is a lot of misinformation and misleading information. My mother always told me a half-truth is a lie,” Flanagan said. “We figured the quickest way and the best way to straighten this matter out is to have the state auditor come in.”
The decision is linked to a petition that has circulated in Claremore since April and has failed to meet the required minimum signature count twice.
The petition asks the state auditor to do a special investigative audit of the City of Claremore’s books from July 1, 2013 through June 30, 2017 in order to review possible irregularities in the city budget.
“There are two issues on the petition that are misleading or wrong,” Flanagan said.
The first he highlighted was from item one on the petition which read, “review possible irregularities in the City’s budget including its apparent dependence on utility revenue to maintain municipal operations, the expenditure of the city’s 9.3 percent sales tax revenue, and the existence and purpose of special payout account.”
“The 9.33 percent sales tax, that’s the total for the whole state,” Flanagan said. “That includes the State of Oklahoma, Rogers County and Claremore.”
The City of Claremore collects 3 percent in sales tax, adding to an annual revenue of about $10.8 to $11.2 million. Thomas presented information on how the 3 percent sales tax collected by the city is and allocated, with one penny from every dollar going to streets and infrastructure and the salaries of public works employees; one penny going to the expo center, recreation center and wastewater treatment plant; and one penny divided so that 20 percent goes to police, 20 percent goes to the fire department, 20 percent goes to the parks department and 40 percent to capital improvements.
“We are fortunate in Claremore that the electric enterprise fund subsidizes the general government of the city,” Thomas said. “Last year the city transfered $9.7 million to run the general fund.”
City leaders also took issue with petition item four which requested the state, “review delinquency of payments to GRDA (Grand River Dam Authority) as the city’s electric provider.”
Flanagan said, “The second issue that is completely false, and the person circulating the petition knows that it’s false because they’ve had conversations with GRDA, says that we are delinquent on GRDA payments.”
During the conference Thomas circulated copies of a letter from GRDA Chief Executive Officer Daniel Sullivan that says “GRDA has verified that, at least since 2012, the city has not missed, nor been delinquent, in any of it’s payments to GRDA.”
Flanagan said that the other petition items: to review possible misappropriation of utility revenue, examine purported excessive residential rates and the appropriateness of using utility revenue as collateral for millions of dollars in loans; possible delinquency in payment of $9.86 million contract for smart electric and water meters paid by residential customers; possible misuse, mismanagement and/or waste of grant funds and other funds in constructing a new water treatment plants; and to review of city manager’s contract, compensation and benefits to verify appropriate use as a legitimate city expenditure, would also be found to have no problems.
“So we are requesting the audit today and if it is passed by the city council tonight we will execute the paperwork tomorrow morning,” Flanagan said.
Additional Electricity Related Issues
“Another issue that continues to come up is smart meters,” Thomas said. “The city has 12,000 smart meters in our operations. The State of Oklahoma has 1.4 million smart meters. In the U.S. there are about 55 million smart meters in place. If we have a problem with smart meters not calculating electric rates in Claremore, Oklahoma, we have a problem in the State of Oklahoma and we have a problem in the United States of America.”
Thomas said that citizens can come forward if they have issues with their bills and sit down with the electricity department for a detailed review of the costs on their bills.
“We can always do a better job in services. There is not an entity on this earth that’s perfect. But we do our best and we try the hardest we can,” Flanagan said. “We do take the time, if they’ll take the time with us, to go through their electric bill in detail.”
The resolution considered by the city council asked the state auditor to review the allegations as outlined in the petition. The city council approved that resolution.
“We recognize as a city that it’s going to cost us money to go through this audit, but it is our feeling that the city council, the administration, is tired of the negative publicity that is coming from these petitions,” Thomas said. “They are allegations that are without merit, that are unfounded and there is no truth to them whatsoever.”
Thomas also presented a graph of the cost of electricity per kilowatt hour paid by Claremore compared to PSO and the electricity rates in surrounding communities.
The graph, pictured, shows Claremore residents pay $0.122 as compared to AEP-PSO recipients that pay $0.114 and comparable to Miami residents who pay $0.125.
“The City of Claremore has been very transparent throughout this whole process. We have sat on the sidelines and taken a beating in the public’s eye. That’s the purpose of this press conference today is to set the record straight,” Thomas said.
City Council Discussion
“I’ve been a CPA in the public accounting business for 20 years and there is not any issue here,” Flanagan said while introducing the resolution to the city council.
The resolution, which was unanimously approved, called for Oklahoma State Auditor and Inspector Gary Jones to conduct an audit of certain records of the City of Claremore.
“It’s going to cost our tax payers, it’s going to cost our utility customers, but if the petition that they were circulating went through it would still cost them that or more,” Flanagan said.
The estimated cost of the audit as listed in the petition was $40,000 to $80,000.
Ward 1 Councilor Scott Savage asked “When we’re requesting for the state auditor to come in and audit the items that were in the petition, one of the things the petition said was ‘at a minimum.’ What does that entail?”
“In order for the state auditor to come in, you have to specify the specific items you want them to look at. If you throw that in and along the way he can find something else than he looks into that,” responded City Attorney Bryan Drummond.
“How many voters are required to sign the petition?”, asked Ward 4 Councilor Herb McSpadden.
“It’s 900 and something,” Flanagan said.
“Here’s my frustration with this. We are going to spend $40,000 to $80,000, and they couldn’t even get 1,000 people to sign it,” McSpadden said. “Less than 900 people in our community are going to cost us $40,000 to $80,000.”
Numbers from the Rogers County Election Board show that of the 986 required signatures, the first two attempts garnered 835 and 834 verified signatures respectfully.
Thomas expressed frustration that the city would have to spend tax dollars on this considering that a third party does already audits the city each year.
Flanagan added optimistically that the quoted cost was likely higher than the actual cost would be.
“There is a conversation that this has created and it’s a negative conversation towards our community,” Savage said. “I have had major supporters of the city of Claremore that have asked me about it. I’ve told them that I’ve come real close to going down and signing the petition. I want an audit. I want this cleaned up.”
Savage elaborated on his history as a member of the finance committee, and how he reviews the city revenue and expenses on a weekly basis.
“This is a very clean city. I’m just as proud as I can be sitting up here,” Savage said.
“We need to get beyond this,” Thomas said. “Claremore is a great city. We are financially sound. Our audits reflect that. Unfortunately there has been a lot of misinformation that is not correct and not accurate, and this is going to set the record straight once and for all.”
“I don’t expect that everybody will be fully convinced. There are going to be people who still think that we are doing things crooked, that we’re robbing them somehow, but if this will help with a percent of the citizens of Claremore then I’m for that,” McSpadden said.