The city of Ames will spend $29 million in improvements on its electric utilities over the next two years with no change in utility rates for residents.

A new gas combustion turbine unit and an upgrade in the power transmission line between Ames and the Ankeny/Des Moines junction will be paid for in cash with reserve funds, according to the city’s 2004—05 program budget. These funds were saved up over several years with the intention of making these improvements.

“We knowingly banked this money and are knowingly drawing it down,” said City Manager Steve Schainker. “This is a prudent financial strategy that saves money.”

The money will be saved in two ways, Schainker said.

By using funds saved over a number of years, there is no increase in utility rates for residents. Also, by paying in cash, the city avoids paying interest on a loan or bond.

The city program budget calls for the purchase a gas combustion turbine. The turbine will be installed at the site of the city’s current combustion turbine, at the intersection of Dayton Avenue and Pullman Street, at a cost of $13.9 million, said Merlin Hove, director of Ames Municipal Electric Services.

The turbine will be used to supply peak and emergency power for the city, Hove said. The turbine will only be used during summer months when many residents use air conditioning and if the regular power plant malfunctions.

“The beauty of the turbine is that its installation cost is much less than a coal-burning plant,” he said.

“It’s just 20 percent of the cost of a coal plant that runs every day.”

In the 2005-06 fiscal year, the electric system will upgrade its power transmission line between Ames and the Ankeny/Des Moines junction at a cost of $14.6 million. The upgrade will replace the aging and undersized lines currently connecting Ames to the regional power grid, Hove said. The lines allow Ames to buy and sell power from other communities and to give and receive emergency power.

“These lines will be our doorway to the world to buy and sell power,” he said.

No other city utility rates will increase for the fiscal year 2004-05, according to the program budget. The city’s electric utility rates have not been raised since 1979, Schainker said.

Utility rates and fund surpluses that pay for capital improvements like the new turbine are different from property taxes, which pay for public safety, community services and city government. Ames property taxes will rise 3.28 percent, to $9.99 per $1,000 of taxable value in 2004-05 from $9.67, according to the program budget.

This is a small increase, given the restraints put on the city, Schainker said.

“That the increase is so small is amazing given the massive cutbacks in funding the city is getting from the state,” Schainker said.

The small increase in taxes without loss of city services was possible because of “belt tightening” by city departments, such as cutting back on training sessions and conferences, Schainker said. Such budget management is not sustainable and if state funding does not return to earlier levels in the next few years, changes will have to take place.

“We would either have to raise taxes or cut programs,” he said. “It’s a tough decision either way.”