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October 20, 2011

GOP Mayoral Candidate's Bold Plan for Burlington: Sell! Sell! Sell!

IMG_3021* Updated below: BED's true debt load, plus Kurt Wright responds to the claim his math is wrong. *

Republican mayoral candidate Kurt Wright promised he would unveil a "bold plan" with "bold solutions" to address the serious fiscal challenges facing the city of Burlington — and on Wednesday, he delivered.

At a city hall press conference, Wright revealed his bold plan to shore up the city's finances: Sell one its most prized assets, the Burlington Electric Department.

Wright claims the sale would bring a one-time windfall to the city of more than $100 million.

Aside from BED, Wright said he'd entertain the notion of selling off Burlington International Airport — or at least having its ownership regionalized, or getting the state to take some ownership — as well as Memorial Auditorium, which he claims loses money annually.

What other city departments and services could Burlington auction off? The bike path? City arts? Church Street? The Waterfront?

(Fire away down in the comments section.)

Wright, who has served on the city council in three different stints over the past 15 years, acknowledged his bold solution to sell BED is, actually, not new.

"People have talked about it in the past, but I don't think the climate was right for this in the past and I think it is now," Wright said. "Would I have proposed this 10 years ago? I wouldn't have and I don't think voters would have reacted to it favorably 10 or 15 years ago."

The difference today is the sheer amount of debt facing the city, thanks to Burlington Telecom, the Burlington airport and a flagging pension fund.

In sum, the debts caused by these three entities easily tops $100 million: BT is in debt more than $50 million ($17 million owed to taxpayers and another $33.5 million to CitiCapital); the pension fund is at least $50 million short; and the airport is nearly $10 million in the hole thanks to a parking garage that was built with no bonding.

Republican Mayor Peter Brownell floated the idea of selling Burlington Electric during his two-year stint in office (1993-1995), but voter and city council disapproval put the kibosh on his plans.

Brownell told Seven Days he talked up the idea during his time as mayor to "anyone who would listen." But not many people listened. Or at least, not many took the idea seriously.

For Brownell, the issue of selling BED was not financially driven but philosophically driven.

"It wasn't necessarily because we needed to make money on it," said Brownell, who was facing structural budget shortfalls of $700,000 to $900,000 during his time in office. "Philosophically, I don't think the city has a reason to own an electric utility or an airport for that matter. The liability to taxpayers is something that would keep me up at night."

Selling off an asset to meet ongoing budget shortfalls is not recommended, Brownell said. However, selling off an asset to pay off one-time liabilities "could make sense."

The question remains, however, whether selling of BED would even achieve the "nine figure" windfall that Wright predicts. BED General Manager Barbara Grimes told Seven Days that, in reality, BED's bonded debt is not the $65 million that Wright claims, but closer to $100 million. Under the best case scenario, BED would net the city roughly $50 million, Grime said. (See update below.)

A $50 million windfall would essentially either cover the pension shortfall or make BT whole. Take your pick.

Wright's proposal raises a host of other questions: Would BED's payments in lieu of taxes and other charges to city coffers be covered by ongoing, annual payments by a new owner? Would the new owners assume all of the pension liabilities owed to BED workers? Would the Vermont Public Service Board allow a windfall profit from a utility sale to be spent paying down non-utility costs?

The other question is: Who would buy it? The only power company buying up other Vermont utilities is Green Mountain Power, er, GazMetro out of Quebec. GMP is currently trying to purchase Central Vermont Public Service.

Three of the four Democratic candidates vying to challenge Wright in the general election completely dismissed Wright's plan outright. Only Miro Weinberger said it's an option to consider, but not one he would undertake lightly.

Here's each Democratic candidate's response, in full:

State Sen. Tim Ashe (D/P-Chittenden): "Usually people throw Hail Marys at the end of the game, not the beginning. This is an astonishing proposal. Burlington became a national leader in energy efficiency and broke it off with Vermont Yankee in favor of renewable power precisely because the people of Burlington own it and it reflects our values. Why would we throw away our say in power policy? Totally half baked, not to mention unfair to BED's employees and leadership. We should be commending them, not throwing them to the mercy of multinational power investors."

City Councilor Bram Kranichfeld (D-Ward 2), who previously served as chairman of the BED Board of Commissioners: "BED is a model for municipally owned utilities and has successfully promoted renewable energy, including creating an award winning energy efficiency program, while keeping our electric rates affordable. Leadership requires a steady hand and this is no time to make ill-informed proposals. While I will consider every option, my plan to put Burlington’s finances back in order will not include a fire sale of its assets. Selling BED is a short-sighted approach that could increase our electric rates in an already challenging economy, halt our progress towards renewable energy, and may not resolve any of our long term financial issues."

Rep. Jason Lorber (D-Burlington): “Kurt Wright is trying to sell out our city and Burlington values. Selling out Burlington Electric to private hands would be committing financial malpractice. Burlington Electric saves residents money, while reducing energy consumption. I believe that energy-independence and efficiency are paramount to sustainability. That's what Burlington Electric does, while saving money. Burlington Values our people, our environment, and workers far above a fast buck.”

Housing developer and Burlington Airport Commissioner Miro Weinberger: "The Burlington Electric Department has been a valuable city asset for over 100 years. Public ownership of our power company has allowed the city to invest in renewable energy sources and energy efficiency initiatives. Unlike Kurt Wright, I do not want to sell Burlington Electric and would not consider doing so without careful analysis of all options. The financial assumptions Wright has based his proposal on are contested by BED and may prove inaccurate. That said, the legacy of the Kiss administration is that we have no choice but to consider highly unpleasant options. It would be irresponsible for any mayoral candidate to take any serious option off the table at this point."

For nearly three decades, the ongoing mantra of Democrats, Progressives and like-minded independents has been that Burlington should be open for business, but not for sale.

Clearly, Wright is challenging that credo.

* update - posted 4 p.m., October 20 *

Turns out that neither BED General Manager Barbara Grimes (who spoke to Seven Days from her car) nor Kurt Wright had BED's debt exactly right.

According to BED's Chief Financial Officer, Daryl Santerre, the total indebtedness of the municipal utility as of October 17 was $84 million. That is almost $20 million higher than claimed by Wright. According to Santerre, the bond breakdown is as follows: $43 million in general obligation bonds and $41 million in revenue bonds.

Wright had claimed BED's debt was $65 million, while Grimes thought it hovered closer to $100 million. With that higher debt, Grimes argued that BED would net the city only about $50 million if sold, not $100 million.

Wright stands by his claim that the market valuation of BED would fetch a net of at least $100 million for the city taxpayers.

"I went back and spoke to the people who were crunching the numbers with me and they didn't flinch," said Wright.

Wright said BED's value in the marketplace is more than just the utility's balance sheet - but includes its assets, its cash flow and its location in the market.

"That said, if Barb Grimes is right and this sale would only net the city $50 to $55 million, then I wouldn't do it."

Also, our initial post neglected to include the statement issued by Burlington Mayor Bob Kiss — remember him?. Turns out the two-term Progressive mayor believes Wright's idea is just plain wrong. Go figure.

"Kurt Wright’s proposal to sell the Burlington Electric Department is short-sighted and irresponsible. BED is a tremendous asset of the city. As a municipally-owned utility, it reflects important values of local rate-payer control and public accountability. BED is widely-acknowledged as one of the nation’s leading utilities with respect to the use of renewable energy sources. Selling an asset like BED for a one-time benefit undercuts Burlington’s future. It’s a short-term gimmick that lacks prudence and vision," said Kiss. "The urgency suggested by this proposal is misplaced. The city is working towards constructive solutions for issues such as Burlington Telecom and the pension fund. Proposing to sell BED under these circumstances is an erratic solution to circumstances that require steadiness and careful consideration."

jcarter

Do you ever stop to think before writing these things?
Electric utilities (especially those that own generation facilities) are seriously capital intensive. Do you have ANY reason to think BED's debt load is inappropriate or out of whack? Do you know what the money is used for? Do you know anything about BED's finances?

Are you aware that this stuff requires approval by the PSB, the city council, and the voters.

You have insulted a group of excellent BED employees for no apparent reason. Feel better?

"And you first said $1.50 but you're now up to $10."

Don't you cringe at how disingenuous statements like this are when you read them back?

"I'm not the one who said the rates are lower; but my bills are."

Why are your bills lower? Are you saying you wouldn't have bought Energy Star appliances without a rebate, even though readily available statistics show that the difference in price is easily recouped in a very short time through energy savings? Were you not aware that GMP offers rebates that can easily top those offered by BED for the average household? I thought you thought you were a smart guy, Doug.

Anyway, since you used the present tense, the equation is pretty simple: if you switched today, your bills would be lower with GMP. That's an irrefutable fact.

Your lack of appreciation for the budget constraints of low- and moderate-income families is disappointing. The long-term payback is meaningless if you don't have the extra cash up front. You're not stupid so I have to assume you're just being ornery.

BTW - To my knowledge, GMP doesn't offer rebates. Because of BED's history, the PSB allowed it to continue offering direct efficiency services. Otherwise, everything shifted to Efficiency Vermont, which is funded by a lines charge paid by all customers (except IBM).

"the equation is pretty simple: if you switched today, your bills would be lower with GMP."

only because I would take my lower usage with me; we're really not getting anywhere so let's call it a day

"To my knowledge, GMP doesn't offer rebates."

Man, you just keep digging that hole deeper. If you don't know what GMP offers, how do you know that your bill is lower with BED? Try Googling "incentives for GMP customers" and look at the first result.

"Your lack of appreciation for the budget constraints of low- and moderate-income families is disappointing."

You do know that the Feds and some appliance dealers offer rebates that bring energy star appliance prices below those of comparable non-energy star equivalents, even without further BED rebates, right?

In any case, we're not talking about other families, we're talking about YOU. You said that your bills are lower because you're with BED, I'm asking why? Would you not have known to buy those appliances unless their literature told you that they existed? Which specific incentives have you taken advantage of that allowed you to buy equipment you otherwise couldn't have afforded? You made the statement, at least make some attempt to back it up.

Or just give up rather than admit that you're wrong, up to you.

Good work. Those incentives are from Efficiency Vermont, not GMP. The only hole is the one you cannot see out of.

And as I also noted, GMP did NOT get into efficiency investments sufficiently to satisfy the PSB or to save its customers anything near what BED did. That's one of the reasons BED customers use less power. Your denials cannot change the facts.

As for lower bills at BED, here is some (admittedly dated) information from the DPS. Pretty clear.
http://publicservice.vermont.gov/electric/electric-utilities.html

Your attempt to (once again) ignore those who can't afford the highest efficiency appliances is telling. You think making it about me somehow changes the fact that lots of ratepayers are economically challenged. I'm unclear why you think talking about one customer (me) is more appropriate than talking about a range of customers.

This is really quite tiresome and reminds me why I stopped posting on this site.

"1. Being the most polluting plant is true but hardly surprising since VT has so few smokestacks. Would you rather we have some of those natural gas or coal plants in other parts of New England? Right. But you sure don't mind getting power from them."

No, I DO get it. You are the one who is causing us to buy more dirty power from out of state, by insisting that we shut down VT Yankee. That's on your hands. So stuff it.

BTW, "so few smokestacks"? Well, there's one in Vernon and it emits . . . nothing.

"3. Re. HQ: It wasn't foolish for the first 10+ years when the power was expensive. And we didn't want to contribute to the destruction of Cree & Inuit land and the resulting pollution."

I just love the way you sidestep how HQ power was bad then, but is beautiful now.

"5. Re. franchise fee: Sorry. It is a big deal. It saves a typical homeowner $143 per year."

Someone is paying the difference. There's no free lunch. Well, I guess except for trustafarian Progs who inherited their lunch money.

"6. Re. local control: Not an exageration at all. Decisions are made by a citizen board and approved by an elected city council . . ."

The same city council that had no idea what was going on with BT's finances? Because the CEO of the public corporation (the city) hid the information from them? Doug, your public ownership model does not work any better than the corporate America you decry. Public officials behave exactly the same way as corporate officials -- or worse. And in this case, with the disastrous consequences of a $50 million obligation by the taxpayers. Please give me an example of where this managerial malfeasance has happened with GMP, CVPS, or any other privately-owned VT utility. I'm waiting.

"Public ownership does not cost more. Average bills are much lower in Burlington."

Uh, we've established that that's simply not true. So now you're down to wilfully repeating a known falsehood, eh? Knock yourself out.

The best part in all of this is Doug thinks he is making valid points.

"Are you aware that this stuff requires approval by the PSB, the city council, and the voters"

Yes, Doug I am aware as I voted for some of these and against many. It's not my fault the progs think that the City has this money tree hidden somewhere in City Park. I also realize the PSB gives utilities almost unlimited latitude. I also realize as does most of the City that the Council is pretty much useless.

Do I think the debt load unreasonable? You bet your sweet ass skippy. $84 Million for a small public utility? I bet you also think that $51 Million is small change for BTC due to the valuable service they provide.

We can't all be 1%ers Doug.

"Those incentives are from Efficiency Vermont, not GMP."

Try reading the actual page instead of just looking at the URL. Specifically the last link, and the columns that say "GMP Rebate: $500, Efficiency Vermont Rebate: N/A." Other incentives are offered by GMP through EV.

The point is that you had/have no idea what incentives are available to GMP customers, but declared BED's better anyway. Great job, detective.

"here is some (admittedly dated) information from the DPS."

Yes, it is dated. It's for 500 kwh, meaning it reflects rates, and it would be completely different today, so I have no idea what your point is.

"I'm unclear why you think talking about one customer (me) is more appropriate than talking about a range of customers."

Because YOU said that YOUR bills are lower because you're with BED. You have made no attempt whatsoever to back this up, probably because it simply isn't true.

"Your attempt to (once again) ignore those who can't afford the highest efficiency appliances is telling."

Au contraire, I specifically pointed out how non-BED rebates can make these appliances cost less for anyone. Now compare amortized energy savings to the difference in payments on a typical appliance bought on time, and you can see that Energy Star appliances should not be more expensive overall at any point in time for most people regardless of income. This has essentially become a moot point anyway - look at the dishwashers on bestbuy.com. Nine of the ten cheapest models they offer are energy star.

This is all fairly basic math, Doug. Didn't you actually run for State Auditor at one point?

jcarter

predictably, you avoided the question

you have no evidence that BED's debt load is inappropriate or that the utility is poorly managed; none

but that doesn't stop you from continuing your baseless screed

and I'm sure utility managers would be surprised to learn that "the PSB gives utilities almost unlimited latitude"

not content to trash BED employees, you are now trashing the board and its staff; like your other comments, this is an opinion, not a factual statement

Finn

"I just love the way you sidestep how HQ power was bad then, but is beautiful now."

that was the legislature, not me

Re. franchise fee: "Someone is paying the difference. There's no free lunch. Well, I guess except for trustafarian Progs who inherited their lunch money."

I guess you missed the earlier post. The difference is being paid primarily by those entities that don't pay property taxes, including Fletcher Allen Health Care and UVM

I said, "Public ownership does not cost more. Average bills are much lower in Burlington."

You said, "Uh, we've established that that's simply not true. So now you're down to wilfully repeating a known falsehood, eh? Knock yourself out."

Actually, it is true. Burlington residents use a lot less power than others. As a result, average bills are lower. That information comes from the Dept. of Public Service (as reported in BED's performance report).

I get that you're angry but you may want to step back a bit and be open to the facts.

"Average bills are much lower in Burlington"

What's an average bill? BED has used this sleight before, but we should compare the bills of customers who use the same amount of power each month, like, say, 500 KW or so. The main reason the "average" bill is lower here, is explained by the thousands of apartments and smaller household size in Burlington.

Doug,

Why do you have such a hard time with the written word? I don't get it, you say something and then when answered you are all "AHA!!!" Makes you look like a dumbass.

Here was your question:
"Do you have ANY reason to think BED's debt load is inappropriate or out of whack?"

I responded yes I thought it was out of whack for a small public utility. What did you not comprehend out of that? You didn't ask for evidence, and since it's subjective anyways there is no such thing. Jezuz Doug.

As for my statement from the PSB, how many times have you seen the PSB deny a rate increase. Almost never. Moreover just look at BTC, it should have been shut down a long time ago. But they keep giving BTC more time, another chance, more LATITUDE. GMP = rate increase. CVPS = rate increase. Year after year after year.

Doug says
"1. The people (through the city council, electric commission, and local ballot items) decided to build the McNeil Plant.
2. The people decided to raise their own rates to pay for an $11 million bond for efficiency investments.
3. The people decided not to participate in the first Hydro Quebec contract.
4. The people decided to get out of the contract with Vermont Yankee.
5. The people decided to adopt a franchise fee that reduces property taxes.
6. The people get to decide their own energy future.
7. BED is not required to pay dividends to shareholders which helps keep rates down."


Doug you forgot #8, The people would also decide whether or not to sell BED at the price negotiated. You rely heavily on the people deciding, why would you be against them making this decision?

"I guess you missed the earlier post. The difference is being paid primarily by those entities that don't pay property taxes, including Fletcher Allen Health Care and UVM."

Who will pass that cost on to their patients and the rest of the hospital users. The same patients who got a break on their property taxes. Electricity isn't free. WTF?

Oh my. Guys, this is getting way too personal, and that goes for all sides. Everyone take a step back, relax, and cut it out with the name-calling. Thanks.

I said "strange BEDfellows". C'mon that was comedy gold! You people have no appreciation of my genius.

I find it amazing that the GM of BED is so clueless that she doesn't even know what the debt load of the utility she runs is within 15million, wow!

I can understand the amateurs and Prog cronyism at Burlington Telecom not knowing which end is up or what the other hand is doing, but BED is literally "too big to fail" liability wise, and it scares me that the top dog appears so out of touch.

Is anybody minding the store in Burlington?

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