The mayor thinks he’s on a roll. Two weeks ago he pulled off what many say
is the most monumental deal in city history, the privatization of Brackenridge
Hospital. Then five days later, Bruce Todd announced that the city’s top
breadwinner, the electric utility, may have to undergo a similar fate for many
of the same reasons. Since a utility sale requires voter approval, Todd
promised to get a referendum on the ballot as early as this coming
January.
The argument goes that the city government, hindered by a slow
decision-making process, can’t manage the utility competitively, a necessity
now that the Legislature seems intent on opening up monopolized service areas,
like the city’s, to competition.
This past session, legislators passed a bill allowing companies with their
own electric plants to sell excess electricity to other utilities via the
city’s lines. But the real blow may occur in the next
legislative session, when lawmakers are expected to allow retail wheeling.
This would allow private utility providers, like Texas Utilities (TU), to offer
cheaper power to both large and small users in the city’s service area, similar
to the way that long distance companies compete for consumers.
While councilmembers acknowledge the impending threat of competition from
other utility providers, they say they are awaiting the results of a $666,000
study by Price Waterhouse, due in mid- to late July, to determine the best
option for a management transfer. Councilmember Brigid Shea has mentioned the
possibility of joint management between the city and the Lower Colorado River
Authority (LCRA).
Much is at stake. The utility provides between 25-30% of the city’s general
fund, about $61 mil-lion in 1994, according to the Electric Utility Department
(EUD). “We would not have many of the parks and other amenities that we have if
it weren’t for that transfer,” says commission member Shudde Fath. She says the
city’s utility will always have one advantage over the competition: its sales
tax exemption.
The utility’s revenue has steadily
increased over the years, and was at
$509 million in 1994. Rates have increased only once in the past six years,
and the Austin market is rapidly growing. Needless to say, numerous companies
are vying for a shot at purchasing the utility. Already, the deal smacks of
financial opportunism and potential conflicts of interest.
Don Martin, personal friend of the
mayor and his campaign consultant
for the past two elections, is helping TU, the largest utility in the state,
come up with a winning proposal. The ubiquitous Martin has already seen success
on the Seton Medical Center/Brack merger, and on council approval of $10
million in public funds for a new minor league baseball stadium for the Phoenix
Firebirds. (Total costs for the stadium come to $22 million; the Firebirds are
responsible for the balance.)
Martin says he’s been advising TU on city matters for the past “couple of
months.” He says that
TU’s still-formative proposal includes
purchasing the city’s 16% share of the costly South Texas Nuclear
Project, the utility’s main hindrance
to competitive efficiency. TU might also pay a franchise fee to help replace
the loss of the utility’s income to the general fund. Moreover, says Martin, TU
wants to continue the city’s provision of rebates to efficient users.
Then there’s Alan Erwin, former
Public Utilities Commission (PUC) commissioner, who was quoted
in the local daily as favoring a utility sale. What the newspaper failed to
mention is that Erwin, of the Erwin and Associates public relations firm,
shares the same business address with Martin. The two often collaborate on
projects. Recently, they won approval from the City of Georgetown to build
12,000 homes on endangered species habitat.
Erwin frequently provides advice to Austin’s Electric Utility Depart-ment
on “utility matters.” When asked last Thursday if he had offered his advice for
use in the consulting study, Erwin said “not really.” He added that the
EUD had asked him to provide input in the
future, possibly for a fee. To prevent
a “conflict of clients” that could arise from his association with Martin,
Erwin said, “As of today, I’m moving out of my office.”
Another company, Southern Electric International (SEI), has hired council
favorite and frequent city lobbyist Rafael Quintanilla to persuade the city
council to sell the utility. The council just finished awarding a $20,000
contract (or $125 per hour) to Quintanilla, who helped negotiate the
Brackenridge lease. Even former city officials are getting in on the deal.
Former City Attorney Diana Granger works for the law firm that represents SEI.
Granger says she may lobby for the corporation if she’s asked to, and if ethics
rules allow her to do so.
Even the mayor’s own family is part of the equation. George Christian,
Todd’s father-in-law and the most highly paid lobbyist at the Legislature this
year, is a TU state lobbyist. n Councilmember Eric Mitchell’s $9.6 million project to provide low-dollar,
Eastside entertainment with funds normally reserved for the provision of
low-income housing is sailing ahead as planned, with no resistance from other
councilmembers. The council is scheduled to decide on June 22 whether to accept
an $8.8 million loan from the U.S. Department of Housing and Urban Development.
The loan could help turn a defunct, city-owned building, located at the 2300
block of Rosewood, into a gleaming entertainment venue, complete with a roller
skating rink, a 16-lane bowling alley, two movie screens, and other amenities.
Staff forecast completion of the facility for the summer of 1996.
At the work session Wednesday, the council was presented with the results
of a $54,000 study by M. Crane & Associates of Austin. The study found that
the entertainment center could annually lose up to $35,000 during the first two
years of operation. Under the best-case scenario, the project could bring in as
much as $147,000 in the fourth year. According to the report’s finding, called
conservative by city staff, that’s the most the center would ever make in one
year.
The costs do not even include debt service or capital improvements, which
together are expected to reach $1.1 million a year for 20 years, according to
staff from the city’s housing department. Most of that annual payment could
come from the city’s yearly allocation of Community Development Block Grants,
money normally used to provide housing for low-income families. n Citing a philanthropic desire to share the reins of power with “a good
councilmember,” Max Nofziger announced Wednesday that he would offer the mostly
ceremonial post of Mayor Pro Tem to Gus Garcia. The pro tem, a position
bestowed on the most tenured councilmember, runs the meetings when the Mayor is
absent from the dais.
The move, as well as the fact that Nofziger left the council quorum-less on
May 26 after forgetting about a public hearing, fueled speculation that
Nofziger is losing interest in his job and may not run for reelection next
spring.
In an interview Thursday, how-ever, Nofziger said he is guarding against
the possibility that he may not win his reelection bid next year. “If… I
don’t win reelection, I wanted to have the opportunity to serve with Gus as pro
tem.”
Nofziger said he is offering the position to Garcia instead of to Reynolds
(both of them have served four years) in case developer-types dominate the
council after next year’s elections.
Garcia, reelected last spring along with Reynolds, would serve the next two
years as pro tem. The council is expected to approve the appointment today. n This week in council: Councilmembers will vote on the location of a new
City Hall, which will likely go in either East Austin or downtown. Also on the
agenda are proposals to restructure the com-position of the Community Action
Network, and to approve more than 60 appointments to various boards and
commissions. n
This article appears in June 9 • 1995 and June 9 • 1995 (Cover).