Council OKs gas franchise fee despite protests

Despite opposition from large natural gas customers, the Austin City Council made changes to the franchise agreement with Texas Gas Service on second reading Thursday, phasing in a controversial franchise fee to companies that were previously exempt

Some of the city’s largest industrial customers do not buy their natural gas from Texas Gas Service. Instead, they contract with other companies and secure lower rates based on their high volume purchases. Since they are not Texas Gas Service customers, they do not pay the 5 percent franchise fee the company charges as allowed by city regulations. The ordinance passed on first reading would have begun applying that 5 percent fee to those businesses that purchase their gas from third-party companies.

However, the outside counsel retained by the city for the negotiations with Texas Gas Service recommended phasing that fee in over the next four years. The fee for those third-party customers would go to 2.5 percent in 2008, then up to 5 percent in 2010. In addition, large public institutions such as the University of Texas, AISD, and hospitals such as Seton, Brackenridge and Children’s Hospital that provide charity care would continue to be exempt.

While some large private customers told the Council that phasing in the fee would be preferable to an immediate 5 percent increase, they disputed the need to apply the fee at all. “I hope the fact that you have not seen 3M before this body before should give you some kind of idea as to the gravity this particular policy change has to my company,” said Russell Bridges with 3M in Austin. “We are generally opposed to the expansion of the franchise fee to transportation customers of Texas Gas Service. At a time when communities, including our own, are competing to attract new major employers…it makes little sense to implement this new fee.”

Bridges also said the company objected to the fact that the fee would likely be calculated on the price of natural gas sold at the Houston Ship Channel, not the price actually paid by 3M or other large industrial customers in the Austin area. Those customers negotiate lower rates with their independent providers, he said, and those rates are considered confidential. While the provision passed by the Council on second reading does allow companies to pay the 5percent on the rate they actually pay, Bridges said disclosing those rates would put the company at a major disadvantage.

“Our 3M Austin employees work hard daily to make our businesses profitable, and this fee works against their efforts,” he concluded. “It sends a message that current employers can be tapped with new fee schemes that have no clear relevance to the cost of providing any new city services.”

Along with 3M, other large employers that could be affected include Freescale, AMD, Coca Cola of Austin, the downtown Hilton hotel at the Austin Convention Center, and several of the city’s largest apartment complexes. “We are puzzled that you would extend this new fee even as you offer incentives to other employers to come to our city,” Bridges said. “3M is a significant contributor to our local economy. The company looks at recent actions by government when considering expansion opportunities.”

But Council Member Jennifer Kim countered that 3M could easily afford to pay the fee, considering that the company posted $21 billion in global sales last year. “What we’re trying to send is a message that everyone needs to pay their fair share,” she said. “It’s also sending a signal to our small businesses if we don’t charge companies like yours…that they should pay it and you shouldn’t. I think it’s only fair that people who use transported gas through the Texas Gas Service lines pay their fair share.”

Council Member Lee Leffingwell agreed. He told In Fact Daily that the city would earn only an additional $600,000 by adding the fee but that the city needs to protect itself from future changes in gas purchasing patterns. “The important thing for me was to make sure that this isn't a constantly eroding process in our franchise fee as more and more people decide to exercise that option,” to purchase from a different gas company. He added, “It’s basically unfair,” because home users and small businesses have to pay the fee but large businesses have been exempt.

The Council unanimously approved the franchise agreement on second reading, including the provision to phase in the 5 percent franchise fee for those third-party “transport” customers. The agreement will be up for third reading at the Council’s next meeting on Thursday.

©2006 In Fact News, Inc. All rights reserved.

Never mind . . . AFSCME (the American Federation of State, County and Municipal Employees) has been trying for years to get some kind of consultation rights with city management but the City Attorney has declined on the grounds that such an arrangement would not be legal in Texas. So, the Council asked for an Attorney General opinion. However, last week the City Council directed City Manager Toby Futrell to withdraw the request. Council Members Lee Leffingwell and Brewster McCracken sponsored the resolution. Leffingwell said, "The teachers union people (Education Austin) decided they didn't want to hear the answer to that-that it might adversely affect them. Their status might be at risk if the Attorney General gave an opinion in a certain way. So they pressed AFSCME," which asked the Council to withdraw the request . . . Council names new judges . . . Council voted last Thursday to appoint four new judges to the Austin Municipal Court, including one associate judge and three substitute judges. Yvonne Williams was appointed as an associate judge for overnight assignment at the Central Booking Facility. Williams most recently served as a team leader in the Texas Department of Insurance's Enforcement Division. Council Members also appointed three substitute judges: Gaye Brewer, who is a former Assistant City Attorney with the City of Austin, where she worked for more than 16 years; Ryan Runkle, who has been a supervising attorney with the law firm of Hissey Kientz, L.L.P. for the last three years; and Sherry Statman, who has been a litigation attorney with the Texas State Board of Medical Examiners. Williams, Brewer, Runkle and Statman were all appointed to the term ending Dec. 31, 2009. The Council also changed the expiration date of the term to which the current municipal judges are appointed to Dec. 31, 2009, to implement the recent City Charter amendment that authorized a four-year term . . . Meetings . . . The Council Land Use and Transportation Subcommittee meets at 3pm in the Boards and Commissions room at City Hall . . The Saltillo District Redevelopment Project Community Advisory Group meets at 9:30am at the Guadalupe Neighborhood Development Corp., 1000 Lydia St . . . Appointments . . . The City Council appointed Louis Barciasse (Martinez) and Marcia Johnson (consensus) to the Ethics Review Commission; Danette Chimenti (Leffingwell) to the Parks and Recreation Board; and Ed Easton (consensus) to the Urban Transportation Commission. Council Member Jennifer Kim appointed Chien Ying Lee to the Water and Wastewater Commission. Council Member Mike Martinez reappointed Theresa Rabago to the Zoning and Platting Commission . . . GHACC names new Presiden t . . . .The Greater Austin Hispanic Chamber of Commerce has named Andrew "Andy" Martinez as president of the Hispanic Chamber of Commerce by the Board of Directors. "Mr. Martinez comes to us with extensive leadership experience in the corporate, small business and community service fields. We are very pleased that Mr. Martinez with his expertise will be leading the GAHCC," said Board Chair Rosie Mendoza. Martinez has more than 25 years of Client Services Management, Business Development and operations management experience in the Information Technology field with international corporations such as IBM, Lexmark International, NCR and Permond Solutions. He also served as the CEO of the Round Rock Health Clinic, a non-profit organization. In October 2005, Martinez launched the first-ever, countywide, bilingual newspaper, El Puente News, in Williamson County . . . LCRA seeks advisors . . . The Lower Colorado River Authority is seeking volunteers to join its nine advisory panels for the Highland Lakes and major tributary rivers. The panels meet regularly and provide input to LCRA on issues affecting the lakes and rivers, including water supply, water quality, safety, law enforcement, recreation, marine and dock construction and flood communications. There are six advisory panels for the Highland Lakes (Buchanan, Inks, LBJ, Marble Falls, Travis and Austin) and three river panels (San Saba, Llano and Pedernales). LCRA lake and river advisory panel members represent the social, economic and environmental concerns of the lakes, tributary rivers and surrounding areas. Panel members serve three-year terms. Each panel meets at least six times a year. LCRA will take nominations between Oct. 9 and Oct. 23 and is seeking a diverse group of individuals. A person may nominate himself or herself or someone else. Anyone interested in serving on a panel can access information on LCRA's Web site.