Cherryland Electric Cooperative is making a bid to purchase Traverse City Light & Power, and the mayor of Traverse City believes combining the two power providers would "make a good fit."

Cherryland, which serves 5,000 mostly rural customers in Leelanau County, has submitted a prospectus to the City of Traverse City that stops short of placing a pricetag for the purchase of TCL&P but touts the advantages of joining the utilities.

However, given the value of similar purchases made across the county, the lump sum payment to city coffers likely would be more than $20 million, according to Cherryland officials.

Traverse City Mayor Michael Estes said the deal could be worth $25 million or more — enough to slash property taxes for city residents for many years, help pay for road repairs and make other capital improvements.

Estes, who was elected to a two-year term that began in November, said the $1.5 million received annually by Traverse City from Traverse City Light & Power receipts that helps fund the city’s $14 million annual budget would be somewhat overcome by having all of the city-owned utility’s power lines and properties placed on property tax rolls.

Cherryland’s board of directors, now laden with Leelanau County residents, could grow in size to accommodate Traverse City representation, according to the utility’s general manager Tony Anderson.

Presently serving on the 7-member Cherryland board are Melinda Lautner, a county commissioner residing in Solon Township; Terry Lautner, an Elmwood Township trustee; and Tom VanPelt from Leelanau Township. Cherryland directors are elected by cooperative members — essentially, anyone who is served by the utility.

Anderson said Cherryland’s bylaws would allow its board of directors to enlarge to 9 members. Theoretically, the two extra members could be selected by Traverse City — a change that would help allay fears of a loss of representation in electrical service.

The effect on users would likely not be lower bills as electrical power generation is failing to keep up with demand across the nation, causing rates to rise, Anderson said. But he said combining the utilities would create efficiencies to help offset market trends.

The utilities make a “good fit,” as described by Estes, largely because of the needs of their users. TCL&P serves most of the City of Traverse City, while Cherryland covers a large area in rural northwest Michigan.

TCL&P and Cherrland both draw about 50 megawatts to serve customers, although the city with its industrial and commercial base hits peak power during the day. Cherryland users create peak power times in mornings and evenings, when they are home.

“Would rate increases be less if the utilities were together?” asked Anderson. “Yes. This has to be a win-win for both utilities.”

Presently Cherryland customers pay more for power than city users because of the higher costs of transmitting electricity to rural areas. Anderson said a merger could result in a two-tier pricing system to represent the inherent difference in cost to provide power.

Both utilities have partial ownerships in power generating plants and purchase additional electricity from market sources.

Anderson said Cherryland made its proposal after learning that the city was considering selling TCL&P, with Consumers Energy mentioned as one likely purchaser.

Estes said he began talking about selling TCL&P before its top two administrators were asked to resign within the last month because of separate misconduct incidents. However, he acknowledged that the shake-up in administration offers a window to examine the future of TCL&P.

He understands that a sale would take time.

Rather than take up the sale of TCL&P immediately, the Traverse City Commission referred the issue to a committee of citizens with more than 40 members that is researching a host of issues. Estes is hopeful a recommendation will be before the City Commission this summer.

Estes sees the sale as a massive economic stimulus package with tax savings for all city property owners. He believes as much as $5 million would be available annually to prop up the city budget over several years, representing about one-half of the property tax revenue the city takes in today.

The result could be halving the city’s property tax rate, which is 13.1765 mills.

“What’s the biggest (development) incentive? Cut taxes. I’d like to cut taxes for downtown businesses, and my next door neighbor, too,” he said.