TheGridNet
The San Antonio Grid San Antonio

Garcia: Senate bill would blow a $400 million hole into San Antonio’s budget

SB1110 would prevent cities such as San Antonio and Austin from continuing to receive... A Texas Senate bill would require $400 million in cuts to the city of San Antonio's budget due to the $1.5 billion in utility revenue. The bill would prevent a municipally owned electric utility from transferring revenue to a city “if the transfer would result in a rate increase or financial deficit for the municipal utility. The Texas bill would also require that all electric utilities share some portion of their revenue with their owners, but this is not what Charles Schwertner wants. The issue of this poorly conceived bill is highlighted by the fact that the utility transfers a percentage of its gross revenues every year to Austin, Texas, and other large cities in this category.

Garcia: Senate bill would blow a $400 million hole into San Antonio’s budget

发表 : 12 个月前 经过 Gilbert Garcia, Metro ColumnistPolitics

This is a carousel. Use Next and Previous buttons to navigate

Charles Schwertner has some strange ideas about how municipally owned utilities function.

The Republican state senator (and orthopedic surgeon) from Georgetown seems to believe that city governments use electric utilities as piggy banks that they raid to finance their big-spending ways. In his eyes, these utility funds are a shady means for council members to get around state property-tax revenue caps.

When Schwertner looks at Austin Energy’s 2022 rate increases — the first base-rate hikes in nine years from that municipally owned utility — he pins the blame on the fact that the utility transfers a percentage of its gross revenues every year to the city of Austin. In his eyes, Austin council members are siphoning utility revenue and forcing Austin Energy into such dire fiscal straits that they have to hike the rates on customers.

READ MORE: ‘Catastrophic’: Texas bill would decimate San Antonio’s budget. Here’s how.

With that in mind, Schwertner authored Senate Bill 1110, a perfect example of how reasonably good intentions can lead to legislative disaster when the person who crafts the bill lacks a firm understanding of the system he’s addressing.

SB1110 would prevent a municipally owned electric utility from transferring revenue to a city “if the transfer would result in a rate increase or financial deficit for the municipal utility.”

How would that play out in the real world?

It’s fair question, and one that state Sen. Nathan Johnson, D-Dallas, raised with Schwertner during a Tuesday hearing of the Senate Committee on Business & Commerce.

“Help me understand what that means, because I guess by definition, any time they (the utilities) are transferring money to the general fund, theoretically they could have lowered their rates by that amount,” Johnson said.

“So is it a ban on all transfers or is it a conditional ban that I’m not understanding from that language?”

Johnson’s question got to the core of what makes Schwertner’s bill such a mess. During the hearing, Schwertner pushed back on suggestions that SB1110 would ban all revenue transfers from city-owned electric utilities. He explained that he simply wanted to curtail “inappropriate transfers” that cause rate hikes.

But by Schwertner’s own logic, any rate hike by a municipally owned electric utility could be prevented or reduced if the utility didn’t have to transfer part of its revenues to its governing city.

As Ben Gorzell, San Antonio’s chief financial officer, explained during the hearing, SB1110 would slash this city’s general-fund revenues by more than 25 percent, or nearly $400 million, causing extreme and painful cuts in basic city services.

That’s not what Schwertner wants. But that’s the problem his poorly conceived bill creates.

All electric utilities share some portion of their revenue with their owners. It’s standard practice. Mark Dombroski, the chief financial and administrative officer for Austin Energy, pointed out to the committee that co-ops pay capital credits to their members and investor-owned utilities pay dividends to their shareholders.

READ MORE: San Antonio officials are losing sleep over a threat to CPS Energy finances. What to know

In the case of municipally owned utilities, they don’t have to pay property taxes or fees for the use of public right-of-way. In lieu of those costs, they share a portion of their revenues with their governing cities.

In San Antonio, CPS Energy shares up to 14 percent of its gross revenues with the city. Those costs are baked into the utility’s business model. No one is raiding anybody’s piggy bank.

“Our payment, from the city’s perspective, is an outcome after that rate case is defined,” Gorzell told the committee.

There are currently 72 municipally owned utilities in Texas, but San Antonio and Austin are the only two large cities in this category.

Schwertner seems to believe that council members in these cities drive utility rate increases as a way to boost their own funding base. But rate-increase requests in San Antonio and Austin come from the utilities, not the city council. In fact, council members tend to shave those requests down by the time they’re approved.

It's telling that Austin and San Antonio residents pay considerably lower electricity rates than residents of Dallas, Houston, El Paso and Corpus Christi — cities that don’t have municipally owned utilities.

With SB1110, Schwertner foolishly hopped on a bandwagon led by the political action committee Save Austin Now, which has depicted the revenue transfers as ploys for council members to “fund their pet projects” instead of allowing Austin Energy to invest in infrastructure or reduce customer rates.

It shouldn’t be hard to understand that sharing a piece of their revenues with city governments is actually a way for municipally owned utilities to give back to residents, by helping to fund public safety, libraries, parks, and street and sidewalk upgrades.

Hopefully, Schwertner will come to his senses before he risks doing serious damage to our city.


话题: Texas, San Antonio

Read at original source