Last Modified: Wednesday, July 03, 2013 11:15 AM
The Beauregard Electric Co-Op board of directors voted at its monthly meeting Tuesday to borrow $5 million to make a prepayment on employee pensions, a move that is expected to save money down the road.
BECi’s worker retirement plan is through the National Rural Electric Cooperative Association. The $5 million prepayment will result in a 25 percent reduction in premiums for about 15 years, said Ashley Mazilly, finance manager.
Factoring in the $800,000 BECi will pay in 3 percent interest over 10.6 years, the savings will amount to about $2.2 million over 15 years, she said.
The decision to make the prepayment rather than continue making regular payments came down to a 4-4 split vote, with board president Dale Peterson having to break the tie.
Board members J.R. Hickman, Doug Sonnier, Donald Bush and Teddy Welch voted for the prepayment, while Peto Sellers, Terry Backhaus, Dan O’Dell and Alan Dane Slaydon voted against it. The board will not see the savings until the loan is paid off in 10.6 years, Mazilly said.
At year 11, BECi would begin to see savings of $550,000 to $600,000, said Kevin Turner, BECi general manager.
Mazilly said that in addition to the benefit of having lower premiums, the payment would reduce the amount of any deficit reduction contributions that might become necessary.
Backhaus and O’Dell were the most vocal against the prepayment.
“I just can’t justify the increase for this when we’ve got much more worthy increases that we need to spend money for,” Backhaus said.
“I think we need to improve our poor financial health, and I think borrowing $5 million that you don’t have to pay for something that you don’t need is not necessary,” O’Dell told his fellow board members. “Y’all can do what you want, but I’m just telling you, it’s not a good use of our money. I’d rather put money in more capital projects.”
Backhaus said among his concerns were that BECi’s debt liabilities, including capital improvements, have increased about $14 million over the past 16 months and that the increased costs over the next 10.6 years would mean higher rates for BECi customers.
Turner said that increases in rates would be minimal.
Backhaus agreed, but said, “For the first 10 years my members that I represent will see a higher electric bill because of this. How much? It’s small, but the principle is a higher electric bill.”
Hickman said he voted for the prepayment because “this time we’ve borrowed money for the very people that’s out there during a storm, whatever, to turn that switch on and have electricity.
“We’ve borrowed money for everything else; this time we borrow money for the employees.”
BECi is $1 million ahead of budget for the current year, said Ron Marshall, vice president of finance and corporate services.