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Council members debate Austin Energy’s economic development funding

Thursday, August 23, 2012 by Michael Kanin

Austin City Council members continued to push city staff and Austin Energy officials on the substantial size of the utility’s contribution to the budget of the city’s Economic Growth and Redevelopment Services Office (EGRSO).


The discussion reflected a bit of sturm und drang over how best to use the revenue streams  collected by Austin’s enterprise entities.


During the afternoon portion of Wednesday’s budget hearings, Council Members Chris Riley, Laura Morrison, and Kathie Tovo renewed concerns repeatedly expressed by Council members and the city’s Electric Utility Commission that Austin Energy’s contribution to funding EGRSO is outsized. In the city’s proposed fiscal year 2013 budget, Austin Energy is slated to take care of just over 98 percent of the office’s funding.


“Every time we’ve raised this issue for years, we’ve been told, ‘Oh we’ll work on that,’ and for years it was ‘Oh we’ll get to that during the rate case.’ So we raise it during the rate case and here we are after the rate case. And still, no change,” said Riley, referring to Austin Energy’s rate hike slated to go into effect in Oct. 1. “Can we just get a straight answer as to what we expect to be doing with EGRSO?”


Wednesday’s discussion comes in the wake of Monday’s Council debate over the shrinking of the city’s Sustainability Fund. That reserve account was originally intended to provide fiscal support for a host of city efforts. However, the city’s FY2013 budget begins to remove contributions from city departments previously committed to backing the Sustainability Fund.


On Monday, City Manager Marc Ott told Council members that changes in the Sustainability Fund were a reflection of the discussion they engaged in during Austin Energy’s rate increase hearings about the utility-supporting programs that might be better funded through the city’s General Fund. Tovo and Morrison worried that the fiscal shift might represent a policy decision made without Council input (see In Fact Daily, August 21, 2012). 


Council members also seemed unclear as to whether the issue of Austin Energy serving as EGRSO’s prime fiscal backer had been resolved. Those questions carried over into Wednesday’s hearing.


After implying that he’d have to turn the answer over to City management, Austin Energy General Manager Larry Weis offered Riley an indirect response. “It is very normal for a utility, particularly the size of Austin Energy, to work very closely with economic development organizations to help grow our business,” he said.


Riley noted that he was fine Austin Energy contributing to EGRSO’s budget, but he asked that the other city enterprise funds also kick in a proportionally fair amount.


After acknowledging Council members’ discussion of EGRSO funding during the rate case, Ott stepped in with a cryptic response to Riley’s question. “It’s not that it was not talked about in the course of the budget development process,” he said. “We did talk about it. In fact, we talked about various scenarios, some that were … substantial.”


Ott continued: “But it is, in our view, complicated by the prospect of the rate case – and it’s hard for me to really talk about it beyond that. But our decision in that regard was complicated by that issue. I’m feeling really compelled to stop there.”


Later, Mayor Lee Leffingwell took a stab at decoding Ott’s response. “I respect the city manager’s concerns that we are in a different circumstance right now given legal concerns with Austin Energy’s rates,” he said.


Ott and Leffingwell may be hinting at the substantial challenge Austin Energy faces in light of its recent rate increase at both the Texas Public Utility Commission and the state Legislature. Out-of-city ratepayers, who’ve complained they lack representation in Austin Energy’s governance structure, have submitted petitions that could pit them against the utility in front of the commission in an appeal of the rate hike.


Worse, storm clouds continue to gather at the Capitol over another potential attempt to deregulate Austin’s electric market.


For his part, the city’s Budget Director Ed Van Eenoo said he wants to explore the funding status of both EGRSO and the Sustainability Fund “holistically.” He echoed Ott’s statement that staff had begun to move a relatively small portion of money from the Sustainability Fund back to the General Fund as “really a first step at trying to take this broader look at what do enterprise operations fund and what makes sense.”

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