My View: Council Caves to Public Pressure on POU

public-powerThe truth is there is plenty of blame to go around for the failure of the city’s proposed Publicly Owned Utility. I may be the only one left who thinks it was a mistake to pull back at this time on the POU, but with the legions of local experts willing to put forth time on this, I think it could have gone forward with a minimal use of funding in the near future.

There were four votes to pull back on the POU and the truth is that there may have been four reasons for the votes. Councilmember Brett Lee was clearly frustrated at the lack of answers he got. Back in March he made it clear, “I think before we agree to spend, or authorize to spend this fairly large amount of money we should at least be able to talk confidently about some actual real numbers. I’d like to talk to somebody about when they made the effort to go to a POU. We will likely end up in court and there will be legal cost involved.  I don’t know whether this will be millions of dollars in legal fees or whether it will be 10s of millions in legal fees. I don’t know whether the journey is a 1 year journey or a 10 year journey.”

This time he pounded on city’s Utility Manager Herb Niederberger, but never got the answers he wanted. So he asked for various community groups who support this effort to step forward and do some of the early, ground laying work. He stated, “I’m not supportive of spending this money, I’m supportive of asking people to help volunteer to provide this information.”

Lucas Frerichs, who may be leaning more towards reexamining the Community Choice Aggregation (CCA) option, was clearly concerned about the perception that the city would be spending money during times of budget crisis.

I look at this differently. Last June, then-City Manager Steve Pinkerton laid out the plan to me in its conception stage. The failure here has been the failure of the city in the last six months to clearly articulate its vision here. And it’s a sound vision.

But it is a vision that is different to get above the din. It’s easy to pound the city for spending $1 million even if the city came up with creative ways to keep the costs to the general plan to a minimum annual impact. It is easy to cast stones at the city and ask if the city cannot maintain its roads, how are they going to run a power company. Finally, it’s easy to see this as a move for green energy, when it perhaps first and foremost is a way to balance the budget in the coming years.

As we have argued, in a city that is looking at tens of millions of unfunded liabilities on pensions and retiree health care, hundreds of millions in infrastructure costs, and tens of millions in water rates, spending $600,000, over ten years at $66,000 increments, is not going to break the budget.

Put it this way – if the city can save $600,000 to $1.2 million on energy for running the water projects, then the expenditure is worth it. And if your argument is really the uncertainty of the savings, then the question is not one of budget, but rather one of operations.

The root of the plan comes out of the failure of the SMUD initiatives in 2006. What we saw was PG&E pump in $11 million to defeat three measures, two in Yolo County and one in Sacramento County. In order to get to SMUD, Yolo County had to agree to two measures and Sacramento County had to agree to let us.

Davis voted overwhelmingly to support the measures, but Yolo County other than Davis opposed the measures and Sacramento County overwhelming voted it down in the face of PG&E’s scare tactics and the lack of upside for Sacramento County.

So, building on a public power ideal, one strategy was to separate the questions. If Davis – where SMUD passed overwhelmingly – could muster the will to move towards public power, they would set the process in motion. Just as Davis’ city officials will not run the water project, it is a myth that Davis’ city officials would run the electrical utility – and yet, people bought into that idea.

The easiest thing for Davis to do would be to separate from PG&E and then put out an RFQ (request for quotation) for a private company to run its utility. One possibility would be SMUD and, separated from the vested stake of PG&E, it would be easier to convince SMUD customers to let Davis onto their grid.

There is no doubt that Davis would like to use the $4.3 million for Public Purpose Programs (PPP) to stay local and generate green energy assets locally. But that move was distorted into an assumption that the POU was primarily about green energy rather than cost savings.

Here’s the problem that the city faces. Right now we have a $5.1 million deficit. We are looking at a sales tax and parcel tax as ways to deal with it. But the deficit in 2018 actually goes up higher – much higher, perhaps up to $7 or $8 million.

Why? Water rate increases. And the last chart only went out to 2017-18, so we don’t know what happens with the deficit after that.

How do we cut costs? Well one plan is to look into less water intensive greenbelts, but the city is smart enough to know that this might not go over well. The city will also look to shift water usage on the parks and greenbelts in some areas (not all) to wells which will allow for a cheaper source of water.

But that only takes savings so far. One clear area of savings is the $6 million the city spends a year on electricity to run the surface water and waste water plants, if they can save 10 to 20 percent, that could be $1 million in savings.

The question of course is whether the plan will succeed in saving money. And that’s where the first $85,000 that was going to be allocated on Tuesday would have gone.

Maybe the group of experts can keep this going long enough to see the program revived.

On Wednesday, John Munn was arguing that this was just a bait and switch. He stated, “This is once again something where I think there’s a game being played, where Measure O is perceived to be in trouble, the public utility has gotten unpopular. Believe me, it’s coming back after the election.”

I don’t agree. PG&E has raised the stakes here. We saw what happened in San Francisco and Marin County. I don’t think, despite the intentions of council, this is coming back.

It’s too bad because PG&E is a huge company, it practices poor service and uses an outmoded electrical distribution model. But they have the resources to overwhelm the local stakeholders’ ability to get a message above the din.

Sadly, in Davis, they didn’t have to try very hard.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

Related posts

17 Comments

  1. Don Shor

    The impact of the expense on the likely success of the sales tax measure should have been part of this analysis.
    When public officials are responsive to public input — that’s kind of part of their job description. When you disagree, they’re “caving.” When you agree, I’m sure you’d use some other verb.
    The city doesn’t have the money or the staff to do the analysis for this complicated proposal right now. If a citizens’ group wishes to lay the groundwork, fine. Clearly staff is overextended. When staff couldn’t answer the basic questions put forth by the council members, it’s clear this is an initiative that isn’t timely. There’s no hurry.
    The focus of this council and the next one needs to be fiscal matters above all else.

    1. David Greenwald

      That’s correct, so they were going to use $35,000 or so to hire someone to the do the analysis plus you had the group of experts willing to help. We could have done something like the WAC over the next year for comparatively little money.

      1. Don Shor

        so they were going to use $35,000 or so to hire someone

        So how much has staff been reduced over the last couple of years? Actual people who were maintaining parks, pruning trees, all that sort of thing? We really need another staff person at the level of ‘doing the analysis’ in the face of those reductions?

  2. DT Businessman

    ” And if your argument is really the uncertainty of the savings, then the question is not one of budget, but rather one of operations.”

    You have it completely wrong, David. Brett has consistently had his finger on the pertinent question these past many weeks. The question is ability to acquire the assets, not the operation of the assets. We’re essentially talking about a hostile takeover the success of which is fraught with uncertainty. How many years, how much money and how much staff, council and community time will it take to get from a point of high uncertainty to no uncertainty? That is the question that you continue to gloss over.

    -Michael Bisch

  3. DT Businessman

    “…spending $600,000, over ten years at $66,000 increments, is not going to break the budget.”

    Another issue you continue to gloss over is opportunity cost. Investment is all about comparison between alternatives (e.g. stocks versus bonds or real estate). Leaving aside for a moment restrictions from the source of funds, what is the risk/reward of a $600k investment in the acquisition of PGE’s assets versus investing these same funds in a Shop Davis program, I80 community identity program, further support of Davis Roots, further support for the YCVB, hiring of additional economic development staff, removal/reduction of city constraints on commercial activity, etc.?

    Where is this analysis happening?

    -Michael Bisch

  4. Tia Will

    DT

    “nvestment is all about comparison between alternatives ”

    On this we are in complete agreement. And if staff is overburdened, then why are we not expecting private citizens or groups to step up independently to flesh out the options favored by the business community ? On numerous threads Frankly and Mark West( singled out only because they have been two of the most vocal on this issue) have repeatedly responded to questions about the specific risks and benefits of either a “business park ” or “innovation parti” with a dismissive attitude implying that these questions are silly and not worth considering or that this is the responsibility of the city manager and staff . I see a lack of consistency in saying essentially that the city should not invest in research on a POU but should rely on citizens, but then maintain that it is the responsibility of the city to invest time and energy in their favored option.

    1. Don Shor

      Not answering for Frankly and Mark here, but I think there are some clear differences.
      The only real ‘risk’ regarding a business park is how quickly it would build out and fill up. The economic yield is predictable within a range, and Rob White can provide examples of similar-size parks around the country. In fact, I recall he did so on a Vanguard article some time ago.
      The risks involved with a POU are very hard to quantify, because they almost entirely derive from what PG&E would do. Until they are at the table and their intentions are known, there is little point in going forward with any part of this. If PG&E doesn’t want to cooperate, the cost of obtaining their assets would be extremely high.

      1. Tia Will

        Don

        There will always be risks. Frankly has pointed out on a number of occasions that risk is just part of the business cycle. He has even lauded what he sees as the upside of “creative destruction” usually not bothering to mention the effects of the “destruction ” side on the “losers” of this cycle and what happens to their communities when there is a major economic shift. This is, in effect, picking “winners and losers” with PB&E being a big winner if this lapses.

        Even if Rob’s examples have been successful, this does not mean that we will see similar gains here in Davis. Using the Target for example ( and yes, I know we voted for that, albeit very narrowly) it has not,according to information provided on the Vanguard, had the projected returns. My point is not that we should not proceed with an Innovation Park, but rather we should not be putting all of our “investment eggs” in one basket just because some members of the community like that particular basket. I guess that you might say that I saw proceeding with both the Innovation Park and exploring the possibilities of the CCA/POU as diversifying both our risks and potential benefits.

        1. Mark West

          Tia Will: “Using the Target for example ( and yes, I know we voted for that, albeit very narrowly) it has not,according to information provided on the Vanguard, had the projected returns”

          Since the sales tax returns for the store are confidential, the only thing you have to base this claim on is David’s (and other’s) speculation. So what if Target brings in somewhat less than was claimed in the campaign literature, it is still a positive addition to the City’s fiscal situation, especially when you add in the property tax revenues being generated, and the draw to the other businesses in the immediate area (increasing the economic activity of the town). Using Target as an example to justify your continuing ‘concerns’ with economic development projects is just silly.

          We currently have no way of judging the risks involved with going forward with the POU. The claims of savings are just that, claims, with no basis in fact, just an expensive consultant’s speculations. Brett Lee asked for the answers to some very straight forward questions to help judge the upfront risks and the Staff were unable, or unwilling to provide those answers.

          The risks involved with a business park are well known, and the potential benefits can be assessed based on similar operations located at a variety of places around the country. Unlike the POU, there is no paucity of comparable operations to use as a guide so the risks involved are readily knowable, and the projected revenues may be determined with a reasonable level of assurance.

          If we acknowledge that we do not have the resources in money, staff, or ‘bandwidth’ to do both projects at the same time, then the one that should be pursued immediately is the one that has the greatest possibility of success within the constraints that we now face.

          The City Council made the right decision. It is time to stop wringing our hands and move forward with an aggressive economic development program that will generate the funds necessary to help solve our fiscal crisis and at the same time generate the resources and public demand for your favored POU sometime down the road.

          1. Tia Will

            Mark

            “So what if Target brings in somewhat less than was claimed in the campaign literature, it is still a positive addition to the City’s fiscal situation, especially when you add in the property tax revenues being generated, and the draw to the other businesses in the immediate area (increasing the economic activity of the town). Using Target as an example to justify your continuing ‘concerns’ with economic development projects is just silly.”

            The “so what” is dependent upon whether or not other alternatives to the Target might not have been better options. Once an asset whether that is land,or money, or time spent is locked into one option, what is precluded is the pursuit of other options that might be either more financially advantageous, or a better fit for the community. For example, the Target did not “draw in other businesses” in the anticipated time frame. We only just got the TJ Max.

            Also, you are not only trivializing ( use of the word “silly”) but also misrepresenting my position. I am not expressing “concerns” about the
            innovation park which I have stated repeatedly that I favor. I am expressing concerns about focusing on that exclusively. I do not believe that moving forward on the innovation park should preclude us moving forward on other projects that have the potential for benefiting the city.

            To me, this is similar to saying, as past city council’s did, “well the roads aren’t impassable yet, so we are just going to ignore them and focus on what we consider higher priority items.” It is my feeling that focusing exclusively on one project to the neglect of other potentially advantageous projects is always a mistake. While it is fine to have variable time lines, emphasizing what is considered the most imminently critical, I do not think it is fine to drop all the others into the “maybe we will get around to it sometime bucket”. Have we not seen how detrimental this approach has been to our city in the recent past ?
            This is my basis for my disappointment in the city council’s action.

          2. Davis Progressive

            “The City Council made the right decision. It is time to stop wringing our hands and move forward with an aggressive economic development program that will generate the funds necessary to help solve our fiscal crisis and at the same time generate the resources and public demand for your favored POU sometime down the road.”

            i’m less likely to support such a move now. if economic development because the mau-mau that shuts down all other discussions, people like me are not going to be on board.

  5. Topcat

    I think the council did the right thing. To paint it as “Caving to public pressure” shows a lack of understanding of how democracy works. It is the job of our elected representatives to listen to citizen’s concerns and respond appropriately. In this case, there was no certainty that the proposed savings would occur. In addition, it is most likely that there would be significant legal costs and a major legal battle to fight. Rather than savings, perusing a POU would most likely have been a costly and distracting boondoggle that would have cost the taxpayers dearly.

  6. David Greenwald

    “I think the council did the right thing. To paint it as “Caving to public pressure” shows a lack of understanding of how democracy works.”

    Sorry but I disagree with you here. The term “caving” refers to the fact that every member of the council supports the initiative, however, believes that there would be consequences for going through.

    “there was no certainty that the proposed savings would occur.”

    There never is. The question is whether the risks are worth the rewards. In March the council believed they were, now they don’t.

    ” In addition, it is most likely that there would be significant legal costs and a major legal battle to fight. Rather than savings, perusing a POU would most likely have been a costly and distracting boondoggle that would have cost the taxpayers dearly.”

    While there are some legal costs, if the city goes through the process correctly, most of those can be mitigated. The biggest variable would have been the cost of the infrastructure, there are two ways around that, one would have gone the CCA route which would allow PG&E to maintain their ownership of the infrastructure. The other would have gone the CPUC route which would have determined fair market value.

Leave a Reply

X Close

Newsletter Sign-Up

X Close

Monthly Subscriber Sign-Up

Enter the maximum amount you want to pay each month
$ USD
Sign up for