SOMERSET, Ky. (AP) — Somerset's city
hall ventured into the retail gas business Saturday, opening a
municipal-run filling station that supporters call a benefit for
motorists and critics denounce as a taxpayer-supported swipe at the free
market.
The Somerset Fuel Center opened to the public selling regular unleaded
gas for $3.36 a gallon, a bit lower than some nearby competitors. In the
first three hours, about 75 customers fueled up at the no-frills
stations, where there are no snacks, no repairs and only regular
unleaded gas.
The mayor says the station was created in response to years of grumbling
by townspeople about stubbornly high gas prices in Somerset, a city of
about 11,000 near Lake Cumberland, a popular fishing and boating haven.
The venture got a thumbs-up from customers who let their vehicles reach
near-empty in anticipation of the city-run station's opening.
"I'm tickled to death that they're trying to do something," Ed Bullock
said as he filled up his car. "I'm glad they made the investment."
The venture unnerved local filling station and convenience store
operators suddenly competing with the city in this Republican
stronghold. Critics said the government has no business imposing itself
into the private sector, and one store owner branded it as socialism.
Mayor Eddie Girdler, however, is standing firm behind the idea of the
city-run station. The canopied station on the outskirts of this southern
Kentucky town was converted from use by government vehicles into one
that can also cater to anyone looking to fill their tanks.
"We are one community that decided we've got backbone and we're not
going to allow the oil companies to dictate to us what we can and cannot
do," Girdler said. "We're going to start out small. Where it goes from
here we really don't know."
The amount charged motorists will be based on an average regional price
for gas, and will include a small markup to cover costs, the mayor said.
The city isn't out to make a profit, he said. Instead, the goal is to
lower gas prices and lure more lake visitors into Somerset, he said.
Four nearby stations in Somerset were selling regular unleaded for $3.39
a gallon Saturday. The prevailing price in town had been in the
mid-$3.40s per gallon late in the week, said Melody Price, office
manager at Somerset Fuel Center.
Duane Adams, a convenience store owner in Somerset, sees the city's station as a slap in the face that could hurt his business.
"They've used the taxpayer money that I have paid them over these years
to do this, to be against us," he said. "I do not see how they can't see
that as socialism."
Other retail groups, including the Kentucky Petroleum Marketers
Association, urged other municipalities not to follow suit. "If milk got
too high, are you going to build a dairy?" said Ted Mason, executive
director of the Kentucky Grocers Association and Kentucky Association of
Convenience Stores.
Girdler, a Republican in his second term, said the city isn't looking to put anyone out of business.
"We don't care if we don't sell a drop of gasoline," he said. "Our objective is to lower the price."
George Wilson, the town's economic development business coordinator,
said gas prices in Somerset are often 20 to 30 cents a gallon higher
than in neighboring towns. Many lake visitors fuel up elsewhere, costing
Somerset millions of dollars in retail sales, Girdler said.
Several customers at the city's station said they had no objections to
the city's investment as long as it moderates gas prices in town.
"I'm glad somebody finally got some sense and lowered the prices," said Patty Gossett.
Another customer, Samir Cook, said he hopes the city-run station drives down prices.
"As long as I can get gas cheaper, that's really what I care about," he said.
Adams, the convenience store owner, disputes the city's claim that
Somerset gas prices trend well above the regional average. The Kentucky
Petroleum Marketers Association said there have been many times in
recent months when Somerset's gas prices dipped below the surrounding
area.
Dan Gilligan, president of the Petroleum Marketers Association of
America, said a staff attorney involved in the industry since 1973 could
not recall another city getting into the retail gas business. The
National League of Cities said it was unaware of another U.S. city with
such a venture.
Somerset had several built-in advantages in starting the venture, the mayor said.
The city is purchasing gas from a hometown supplier, Continental
Refining Co. The city purchased a fuel storage facility for $200,000 a
few years ago. Now, up to 60,000 gallons of regular unleaded gas can be
stored there for the retail business.
The city spent less than $75,000 to convert the fueling center into a
retail operation, the mayor said. Much of the investment went to upgrade
pumps and add computer software to handle credit card purchases.
He doesn't expect the venture to cause a drain on the city's $64 million budget, and said the intent is to have it break even.
The station features 10 nozzles for public use and is open for credit card purchases nearly around the clock.
"It's been carefully thought out," the mayor said.