The Austin Chronicle

The EUD's Last Good Years

We're Gonna Party Like It's 1997...

By Louisa C. Brinsmade, February 23, 1996, News

If you watched last Thursday's council meeting, you might think Austin was just a quiet little Texas town, its city council concerned with pedestrian topics such as liability for the city's housing corporation, and its citizens fighting the traditional zoning battles. But a piece of the real meat happened the day before at the Wednesday work session, where the council prefers to fight its most serious battles. Case in point: the electric utility question. The debate over whether to sell the utility, as was the debate over whether to give up on the public hospital, is taking place behind the scenes, and on Wednesday work sessions. Mayor Bruce Todd's latest pet project (by the way, all of them seem to include privatizing public institutions, and this one is no exception), took one step closer to reality Wednesday with a presentation by Price Waterhouse consultants on the competitive position and value of the city's electric utility. The consultants "reiterated" their recommendation that the city solicit offers to buy the utility and compare the offers to the "risks and benefits of continuing to operate its electric utility in a deregulated market."

Conventional wisdom goes like this: Deregulation could bring on "retail wheeling," meaning you could choose your electric supplier as you can choose your long-distance telephone company. "Wholesale wheeling," or the ability of the large utilities to purchase power in a competitive market, is already happening. The big utilities were able to prevent retail wheeling from passing last session, since it means they have to fight harder to keep their customer base. But the bets are even for this coming session. Proponents like the mayor, and eager potential buyers like TU Electric, say we should be ahead of the market. TU Electric consultant and expert in the field Dennis Thomas is cautious about this coming session -- he projects that retail wheeling is probably 6-10 years away. But Thomas, as a representative of TU Electric, advocates moving now to get the best deal -- theirs.

Maybe selling is a good deal -- if retail wheeling does pass next year, independent companies could draw away the EUD's customer base, leaving a bare bones utility with only its $1.6 billion in debt, and a 16% share in the costly South Texas (Nuclear) Project (STP) to keep it company. Nobody will want it then. But let's wait and see what city staff comes up with once it compares the offers. That is, if there'll be any. A draft RFP (request for proposals) has been drawn up as of last month, but without a majority on the council to send it out, Todd's plan may be stalled. The mayor has some major opposition on the council -- so far, Brigid Shea, Max Nofziger, Ronney Reynolds, and Eric Mitchell are all balking on seeking bids at this juncture. Jackie Goodman and Gus Garcia remain undecided.

Meanwhile, Price Waterhouse suggests that the city do the following: delegate responsibility for governing the utility to an independent board; reduce the annual transfer from the utility to the city's general fund from $60 million to $33 million, reduce utility costs by $25.7 million; reduce utility staff by 6% the first year (fiscal year 1996-97), and an additional 6% the following year; and keep bringing in new customers.

The biggest questions for Austin's power consumers are: what will happen to rates if the city sells, or enters into a public/private partnership; what happens to the city's share of the STP; and will property tax rates go up once the annual transfer from the utility is taken away from the city's general fund? Those questions have yet to be answered, and so we wait... for the wisdom gleaned from city staff analyses to come some time in the future. Meanwhile, the mayor's pet project takes on life, despite council and public opposition. The single drummer drums on.


In regular business at the Thursday council meeting, House The Homeless showed a video of the efforts by the City of Orlando, Florida, and the Coalition for the Homeless to provide drug treatment programs, education, and transitional housing for their homeless population. The council watched the video uneasily from behind the dais, since it was obvious they are unwilling to commit to the millions in city funds required to carry out such a comprehensive plan, or even spearhead efforts to obtain private funding.

In fact, about an hour later, Nofziger's drainage fee abatement ordinance for religious organizations that provide shelter for Austin's homeless narrowly passed on third and final reading as part of the consent agenda. His is the only effort by a councilmember to go beyond the punitive camping ban toward a positive approach. The city will sacrifice $290,000 in annual fees, but according to city budget officers, increased drainage fee revenues last year will cover the reduction. Jean Flavelle, executive vice president of Florida's Coalition, led a rally the next day to promote Orlando's program. The camping ban passed last month will likely mean a weekly display by local homeless advocates of alternatives to Todd's ordinance, described as "unenforceable" by the APD's officer in charge of its implementation.

The liability question of the Austin Housing Finance Corporation (AFHC) board was brought up again, after a three-year hiatus. Mitchell, in a good 30 minutes of supreme clarity, dredged up an old question brought by Shea in 1993: shouldn't the city council, as board members of the non-profit AHFC, be certain to indemnify themselves if the AHFC is going to act as general contractors on housing projects? The corporation was created as a tool through which the city council can fund housing programs, purchase property, and build homes with federal funds. Last Thursday, the city's Neighborhood Housing and Conservation division (NHC) put an item on the agenda to transfer $3.5 million in Community Development Block Grant (CDBG) funds to the AHFC for the Welcome Home and HOME programs, which help city-approved, low-income first-time homebuyers with down payments and necessary house repairs.

Since the transfer of these funds would increase AHFC's total assets, Mitchell took the opportunity to discuss the insurance question. NHC director Bill Cook told the council that the corporation has in many other cases acted as general contractor for homebuilding. The AHFC is covered up to its total assets, currently $9.6 million, he said. That coverage is for general "errors and omissions" on the part of the corporation. There is no AHFC coverage for bodily injury and property damage; the corporation depends on the subcontractors it hires to carry a minimum of $500,000 in insurance for those risks. Mitchell pointed out that any lawsuit, for any reason, could be in the tens of millions, surpassing the AHFC's coverage limits, and that the councilmembers, as AHFC board members, could be personally liable for the excess. He then warned that he may resign from the board if the issue is not resolved. Shea interjected that she, too, had threatened to resign in 1993 over the liability issue, and that she had been reassured by city staff that a solution would be found. Such was obviously not the case, as staff confirmed that no excess coverage had been purchased. The council then agreed unanimously to postpone the transfers until the liability question could be discussed more fully, and staff had prepared an analysis of AHFC's insurance needs.


Finally, the council considered a request by developer Vaughn Brock, represented by attorney Richard Suttle, to change the zoning on two tracts off E. Oltorf from single-family to light industrial. The tracts lie within the Riverside Farms, The Crossing Garden-homes, and Sun-ridge Park neighborhoods, and the residents are not happy about the request -- they want single-family homes. The neighborhoods are being squeezed by the many businesses and manufacturing plants that surround them, including Sematech, AMD's FAB 25 plant, a health department rehab center, and various supportive businesses. And there's more to come: Tokyo Electron and Photonics factories are also moving into the area.

The Planning Commission recommended a compromise -- change it from single-family to rural residential around a designated wetlands area on the tract, general office for the portion fronting Oltorf, and general retail for a small corner of the tract also fronting Oltorf. Neither side wanted this compromise -- or any other, it seemed -- at least until that morning. According to Riverside Farms resident Linda Watkins, Suttle had called mere hours before the meeting to say that he would go along with the Planning Commission's compromise. Nofziger suggested a delay so that the parties could continue negotiations, even as he added that he didn't think that was going to happen. The council voted unanimously to grant a 30-day delay.


There is no council meeting this week. They will return February 29. n

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