Saturday, February 05, 2005

Chevak village skips payments; several residents lose power

PARTIAL OUTAGE: More than $100,000 in electric bills prompts utility to pull plug on several homes.
By JOEL GAYAnchorage Daily News
Published: February 4th, 2005 Last Modified: February 4th, 2005 at 06:57 AM
Detailing a long record of inept management, state officials say the Western Alaska village of Chevak has tumbled deep into debt, including spiraling electric bills that total more than $100,000.
The electric utility responded to the rising unpaid bill Wednesday by shutting off power to a dozen homes.
Though most of the village of 900 still has electricity, Mayor William Vaudrin and other city officials elected last fall are scrambling to find a way out of Chevak's financial hole. State officials say the village owes $500,000 or more in back taxes and bills.
"We're trying to do what we can," Vaudrin said. "But with no administrator and no one to guide us, we don't know who to turn to. We're calling all our creditors and apologizing, trying to get things straightened out."
It's not uncommon for small rural communities to fall behind on their financial obligations, though rarely do they fall as quickly or as far as Chevak has, said Scott Ruby of the state Division of Community Advocacy.
But Chevak's situation offers insight into the challenges of governing a village where costs are high, revenues are low, state and federal oversight is minimal, and a few families can dominate decision-making, Ruby said.
"I'd say most rural communities are struggling with a lot of these same issues," he said.
Chevak is a Cup'ik Eskimo subsistence hunting and fishing community about 17 miles inland from the Bering Sea coast, one of the largest villages on the Yukon-Kuskokwim Delta.
The city employs about 20 people. Two years ago its budget was about $280,000 a year, Ruby said.
His agency offers financial and management advice to villages like Chevak, with expensive new water and sewer systems that require steady tending to ensure longevity. Installation of the village's $26 million sanitation system was completed about two years ago.
Chevak had struggled financially in the late 1990s, then got its act together, said Mike Black, head of the division. Four or five years ago, it was a model of financial health, he said.
Then things started going downhill. Reports stopped coming. Requests for budgets and audits were ignored. When the division sent specialists to the village, they found certain Chevak residents didn't have to pay their bills, he said.
"For a long time we've been advising the city it needed to be doing things differently regarding finances," Black said. "That advice fell on deaf ears, for various reasons. They told us to take a hike."
Ruby watched the situation deteriorate as the administration changed hands in 2002, he said. A Chevak resident was hired as city administrator, but the mayor wanted to replace him within a year, Ruby said.
When the city council refused to hire a replacement, the mayor quit. He was replaced by the vice mayor -- who was the administrator's brother, Ruby said.
"We see that quite often," he said. "In small communities it's very easy for one family to take over and control things." It can work out well or poorly, and sometimes the family will include both excellent employees and slackers, he said.
During that period, Chevak's finances started slipping. It stopped paying IRS payroll taxes in 2002, Ruby said. Between back taxes, penalties and interest, the city now owes $200,000 or more, he said.
The village also owes the state Department of Labor $15,000 or more, Ruby said, and is having a hard time paying its employees on time.
City officials applied for a low-interest state loan to purchase $145,000 worth of fuel this summer. The fuel was delivered. But when the city couldn't pay 10 percent of the cost, the state refused to complete the loan, leaving the fuel company unpaid.
The city fell behind in its electric bills more than a year ago, said Meera Kohler of the Alaska Village Electric Cooperative. The co-op, which includes more than 50 villages, carried Chevak's share as it swelled to more than $100,000.
Half the overdue bill came from a single meter at Chevak's old school. After a new $29 million school was completed two years ago, the city inherited the old facility, plus all the teachers' housing, which it began renting out.
Joe Symbol was among the tenants, moving into a two-bedroom apartment in the complex with his wife and three children. At $550 a month, including heat, electric, water and sewer, it seemed like a good deal, he said.
But a year ago, the oil heat went out, and tenants had to provide their own small oil heaters or electric space heaters, Symbol said. Last fall, the water and sewer service was shut off because pipes started freezing.
"Each time there was a drop in the service, they dropped the rent," Symbol said. In December, he and the remaining tenants started getting notices from AVEC that the power would be shut off because the bills weren't paid.
Rather than disconnect the whole city, AVEC chose to shut down only the service to the old school, which cost the city $5,000 a month.
AVEC issued a series of shut-off warnings starting at 30 days.
"Disconnection is always a last resort," Kohler said, "but in a situation like this, you've got to do something."
Wednesday, a lineman flipped the switch. While most of the city still has power, the outage was a double whammy for Symbol. With no other place to go, he moved his family into his business, the Hillside Grill. Now it's too crowded to cook in, he said.
"In one day I lost my home and my business," Symbol said.
He's not happy that AVEC shut off the power, but he's furious with the city. Rental money that should have paid the electric bill was spent elsewhere, he said. The city also failed to make good on its promise to buy stove oil after soliciting money from the tenants, Symbol said.
Throughout the last year, "The city would tell us not to worry, we've got this under control," he said. "We've been lied to constantly, over and over."
Ruby agreed the city has been mismanaged. "Whether it gets into the realm of malfeasance or criminality is a question the current city council is looking into. They told us if they find enough evidence for criminal charges, they'll file them."
One explanation for the city's out-of-balance books may be that Chevak's income has tumbled in the last few years. About 20 percent of its revenue once came from pull-tabs and bingo receipts. The city lost its gaming license after failing to send in the proper reports, Ruby said.
And like all other Alaska municipalities, Chevak lost tens of thousand of dollars in revenue sharing as the state eliminated those programs.

"Where did all this money go," Ruby asked. "That's the big question."
Contrary to rumors floating around Chevak, the Alaska State Troopers are not investigating the former administration, spokesman Greg Wilkinson said.
City voters cleaned house in the October elections. Vaudrin was part of a new slate and in mid-January was selected mayor by the council.
"We had heard horror stories" about the city's finances, he said. "We wanted to get things straightened out and see what we could do."
Vaudrin was reluctant to detail the problems uncovered so far, in part because he and other council members are still exploring financial records that had been denied them. The former administrator has been suspended, he said.
Climbing out of debt will be a challenge, Ruby said. It may require the city to cut back on services such as police and to lay off employees. User fees may have to rise, and the city may have to shut down the old school and its expensive electric service.
City officials have considered asking the Chevak tribal council to take over the water and sewer system. Resuming bingo and pull-tabs could be an important source of revenue, he said.
"I think they might be able to do it," Ruby said. "It's a little bigger debt load than other communities have faced, but I don't think it's insurmountable."
Daily News reporter Joel Gay can be reached at jgay@adn.com or at 257-4310.
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