State of the City

Last week, in the wake of the dismissal of J. Peter Lark as general manager, Bernero was all over the news declaring the current governance of the utility wasn’t working. He has stopped short of providing details on how he plans to address the problems he’s identified — and bridled at what his top aide, Randy Hannan, called “wildly premature criticism of his BWL reforms.” But he dropped plenty of hints that he wants to dismantle the independent Board of Commissioners that oversees the state’s largest public utility and fold the board under mayoral control as a city department.

That runs counter to the way most public utilities with more than 50,000 customers are operated. The American Public Power Association, which is a trade group for public utilities, says 66 percent of those large utilities rely on independent boards to run them. “That’s because their operations tend to get a little more complicated,” said Ursula Schyver, an association vice president.

About half of the nearly 2,000 public utilities in the U.S. are controlled by independent boards, the other half by a city council, mayor or city manager.

Bernero and his team point to Marshall, Mich., as an example of folding its utility service under the control of its city manager. But that happened 25 years ago in a city with a customer base of just 4,500, compared to BWL’s over 95,000 residential and commercial electric customers. BWL also provides over 55,000 customers with water, and 162 customers with steam. The utility had over $1 billion in assets in 2014, and recorded over $41 million in income after operating expenses.

A better comparison might be Colorado Springs, Colo., says the association’s Schyver. That utility offers water, electric and other utility services to about 100,000 customers, said Christian Nelson, a spokesman for Colorado Springs Utilities. CSU serves a population based of about 400,000, Nelson said, BWL serves a similar population base.

As Colorado Springs has grown, city leaders have struggled with how to govern its public utility, which the City Council oversees. But since 2007 the city has commissioned two different studies on changing governance. In both instances the independent groups came back with recommendations to transition away from City Council control to an independent board. The next step is a series of public forums, which kicks off today.

“We’re not focused on any specific governance model at this time,” Nelson said. Instead, the process aims to identify what the community believes is the best model.

While Bernero has not laid out a timeline for his plans, he has acknowledged that some of them might require City Charter amendments, which City Council and Lansing voters must approve. Gutting the current board governance would require such a move. By law, ballot language has to be approved and filed with the city clerk by Feb. 10 — and Council’s next meeting after the speech won’t be until Feb. 9.

Regional leaders impacted by such changes, such as East Lansing Mayor Nathan Triplett and Delta Township Supervisor Ken Fletcher, cautioned against rushing into anything. (See their opinion piece in today’s City Pulse on Page 4.)

So did former Mayor David Hollister.

“We need to slow down and begin a rigid, thoughtful process,” warned Hollister. As mayor, he said, he “noodled” the idea of changing BWL’s governance, but ultimately determined “it was not prudent.”

BWL “should not be politicized,” Hollister warned.

Politicizing the utility is also a concern for the International Brotherhood of Electrical Workers, the local union representing many of the BWL’s employees.

“It lends itself to city politics being directly involved in the functions of the utility operations,” said Ron Byrnes, business 6 manager for IBEW.

Also of concern is what will happen to BWL’s revenues — it brought in just over $348 million in 2014, with operating expenses of nearly $307 million — if they come under direct city control. The BWL provides the city with an annual payment of about $20 million.

Triplett says he doesn’t “begrudge” the city’s payments from the BWL, nor is he opposed to them. But he does worry that a check and balance will be lost if the utility oversight is folded under the administration.

“Their (the Board of Commissioners) duty is to the utility and the rate payers. They can make such decisions independently based on balancing both the city needs and the utility needs,” he says.

Last week, Councilmember A’Lynne Boles introduced a resolution at the intergovernmental committee to create more stringent oversight of the BWL board by the Council. That proposal would likely result in a city charter revision as well. IBEW officials say they are working with Boles on the resolution.

As head of Bernero’s financial review team, Hollister urged considering selling BWL. And last week, the board chairman of the Lansing Regional Chamber of Commerce, John Brown, declared, “The City of Lansing is faced with financial challenges including more than 600 million dollars in unfunded liabilities. Everything should be on the table.”

On the record, Bernero has stood firmly against such a sale. But sources say he is less adamant behind closed doors.