Tough Competition

Griffith and Slusher Say EUD Plan Is Too Taxing


illustration by Jason Stout
Today, the council is expected to make the biggest decision of the city's life: How to prepare the Electric Utility Department (EUD) for competition in the event that the Lege deregulates the electric utility industry. The council's decision -- on whether to approve a multi-pronged, five-year plan from city staff on getting the EUD shipshape -- has to be made today, because next week, councilmembers will visit the bond houses in New York to prove to them how well we here in Austin are handling this whole utility deregulation thing, and how raring to go we are to compete once the legislature fires the pistol. Based on the plan we show them, the bond houses will issue a rating to determine how much it will cost for Austin to borrow money in the future.

Cutting the utility's profits from $57 million to $42 million over the next five years in order to reduce the EUD's debt is foremost in the plan on the table. The EUD is the linchpin of the city machine; its $57 million annual transfer to the general fund is the engine that drives such basic city services as police, fire, and parks. Decreasing the general fund transfer and increasing annual payments into the city's debt reduction fund is something everyone wants (or should want). No one can deny the city needs to kick the EUD transfer habit in favor of reducing its $1.8 billion debt service, but going cold turkey is out of the question: The result would be drastic cuts in city services, or back-breaking tax increases. The debate becomes, then: How fast can we taper off our reliance on the transfer without suffering debilitating withdrawal symptoms?

Under the EUD staff's proposal to be voted on today, the transfer would be cut by $2 million next year. Another $8 million would be cut over the next two years, and the last $5 million the year after that. By the year 2001, expenses and revenue remaining equal, the homeowner of an $80,000 home could be in for a $49 property tax increase to make up the difference.

Councilmembers Beverly Griffith and Daryl Slusher are saying not so fast, at least not as fast as the EUD's plan demands. The two freshmen, in an effort to avoid what they say will be an unnecessary jump in our taxes, have banded together to offer a kinder and gentler timetable to making the EUD leaner and meaner. They suggest decreasing the transfer gradually over the next five years to around 9.4% (from the current 10.6%), rather than the EUD's proposal of 6.6%. The beauty of their plan, according to Griffith and Slusher, is that while the percent of the revenues transferred would decrease, the projected growth in the EUD's overall revenues would mean that the actual dollars transferred -- $57 million -- would remain the same.

The EUD could still become fit and trim, assure Griffith and Slusher, by reducing the utility's Operations and Maintenance (O&M) costs at a slightly faster rate than the current EUD plan requires. Their plan calls for reducing O&M costs by 20% in five years rather than in the EUD's proposed six years. With that single change, Griffith and Slusher say in a Dec. 10 press release, "The EUD could save enough money that it could afford to cut the transfer to the General Fund much more gradually and thus avert automatic tax increases."

In addition to cutting profit to retire debt, the EUD plan calls for the following:

* Use the cuts in profits to help build up a stockpile of $257 million by 2001, in order to pay debt or to reduce rates when the utility enters into a competitive, deregulated world. Under the Griffith/Slusher plan, the proposed stash would decrease only slightly, to $254 million.

* Save money by cutting the EUD's energy conservation program from $13.3 million a year to $5.5 million, eliminating rebates for energy-saving air conditioners and other energy-saving installations in the home or office. Ronney Reynolds, Bruce Todd, and Eric Mitchell favor the cut. Goodman and Garcia like the rebate budget where it is. Slusher and Griffith are willing to negotiate, but not as low as $5.5 million. Don't expect much of a cut here. The city's conservation programs are credited for giving EUD customers the lowest average electric bills of any big-city utilities. And with the Environmental Protection Agency expected to tighten its limits on excess air pollution (see "Naked City": "Austin's Bad Air"), it seems like a bad time to cut a program which does so much for local air quality. Peter Altman, state executive director of SEED (Sustainable Energy and Economic Development), warns that, "If we didn't have the conservation programs, it's a good bet we would have already reached nonattainment" of minimum air-quality standards.

*Pay $2.2 million to Chicago-based consultant Metzler & Associates to help guide the utility into the mysterious currents of a deregulated ocean. The council already has paid consultants $2 million to offer recommendations on preparing for deregulation. The proposed contract would supposedly go further, and Metzler would appoint 11 employees over a nine-month period to help the EUD implement the various recommendations. The city would pay for the employees to fly back and forth between Chicago, and for their living quarters here in Austin. (This could become a battleground at council: Not everyone is completely enamored with the idea of out-of-town consultants telling Austin how to run its business.)

*Spend $440,000 to perform a deliberative poll to educate the votership on the proposed changes to the electric utility industry.

*Bestow a 9-12% rate break on the EUD's six largest industrial customers, cutting $4.2 million a year in revenues for the EUD. Attorney W. Scott McCollough, a solo practitioner hired by the city to represent residential and small customers, says the rate break for the big corporations will shift rate increases onto the backs of the Little Guy. It's unnecessary, he adds, because the most optimistic estimates on deregulation predict it won't happen until at least 2000. "Don't be giving rate breaks to companies who can't even leave yet," he implores.

While the Griffith/Slusher alternative plan has, according to Slusher, sent "staff howling," still more councilmembers may come up with their own versions of utility plans today. The middle ground is wide and soft, and the council is hoping to firm up the boundaries early by meeting at 9am rather than the usual 1pm, so that by the time public comment is taken in the evening, the citizenry should have a somewhat solidified package to speak on.

Today's decision could necessitate a drastic increase in property taxes. It could affect the size of your electric bill. It could affect the air quality. In short, it will have a significant impact on our quality of life. Public discussion on the city's future will begin at council chambers at 6:30pm today, so be there.


Pass the Waffles

One of Ronney Reynolds' campaign themes is his hardiness: "I believe that you put the rudder in the water and stay the course." But he pulled a rare waffle maneuver at last week's meeting when he provided the crucial vote against putting the petition for campaign finance reform, called "A Little Less Corruption," on the May ballot.

You may recall that in October, the City Clerk's office ruled that the petition -- to limit contributions to council candidates to $100 and to PACs to $25 -- lacked enough valid signatures for an election. But the petitioners, led by Priorities First!, hired statistician Jeff Smith of Opinion Analysts. Smith reviewed a sample of the invalidated signatures, and after extrapolating the findings, sent a memo to Slusher claiming that the petition was actually valid. Three weeks ago, Reynolds hearkened to the evidence and joined Jackie Goodman, Slusher, and Griffith in voting on first reading to put the item on the ballot.

But last week, during second reading, Reynolds was charmed into an about-face by the man he hopes to replace. Todd's first point: The evidence was presented in third-hand fashion by a pollster the council didn't hire. Point two: If the petitioners have differences, then they can take them to court. "What if we had a petition request calling for the removal of councilmembers?" he asked. "Would we make a judgment call on whether we liked that councilmember or not?"

That clinched it for Reynolds, who had been thoughtfully pulling on his chin-wattle and staring into space until he joined the majority against the petition. He reasoned: "It's never fun to vote against letting the people vote, but the mayor made some good points."

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