Selling the BWL study

Regional leaders differ on Bernero’s proposal

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Leaders in neighboring Lansing communities that rely on the Lansing Board of Water and Light for water and electric service had mixed reactions to Mayor Virg Bernero’s announcement in City Pulse last week that he was open to selling the city -owned utility.

“Privatizing a public asset should never be the first thing looked at,” said Ken Fletcher, supervisor of Delta Township. “I’m not sure it should ever be looked at.”

Fletcher clarified Monday in a follow-up interview that a review of such an option was acceptable, but at the end of the day to “tread lightly.”

“You can look at the history of privatization in Michigan,” he said. He highlighted the ongoing controversy over the privatization of prison food service. That program has resulted in significant problems in state prisons. He also mentioned the failed attempt to privatize highway snow plowing during the Engler administration. “Most of the time the savings that were promised were not delivered on with privatization.”

Last week, Benero confirmed that he is preparing to ask the city’s Financial Health Team to investigate the pros and cons of selling the BWL. Such a sale could net Lansing as much as $1 billion and wipe out an estimated $600 million structural deficit created by unfunded pension liabilities. Until last week, Bernero had publicly opposed such a study.

Fletcher also said he was uncertain the Financial Health Team was the right group to look at the sale of the BWL.

“I’m not sure the Financial Health Team has the right skill set to conduct this review,” he said.

Former Mayor David Hollister, who leads the Financial Health Team, said he agrees the group does not possess the skill set to do the “deep, technical study” for a sale, but that he believes the group can do a much broader review looking at valuing the utility, placing it in a larger picture of utilities in light of new federal coal regulations, the future of water services and engage input from customers and communities about it.

“After [Bernero] engages us, he might want to engage an outside consultant to do that deep, technical work,” Hollister said in a phone interview.

When is the question. Hollister said Monday that the team only has Bernero’s statement to City Pulse and is in the process of setting up a meeting with the mayor to define “parameters” for such a review. He said once that meeting has been had, and an agreement is made on what such a review would look like, the team would have to engage the City Council “to make sure they are on the same page.”

East Lansing Mayor Nathan Triplett was more cautious than Fletcher. “There’s certainly no harm in exploring every option,” he said. “It’s an asset of the city of Lansing, but also the entire region. It’s a critical part of the infrastructure.”

Triplett said he was mindful of the need for financially challenged communities to look at assets for possible “silver bullet” solutions to funding pension and other liabilities which threaten the swamp the financial boats of the units of government.

“Financial elements are certainly one part of this discussion,” Triplett said, “But it goes beyond that in relation to the customer communities.”

He noted that the BWL is an asset that has helped in landing employers in the region, as one example. And he wants to know what kind of impact privatizing the public utility would have on rates, and the reliability of the product delivery.

That regional nature, Triplett and Fletcher said, means regional representation should be at the table for the discussions. The Financial Health Team, however, is populated with Lansing residents and leaders.

Both men said 40 percent of the BWL ratepayers live outside the city. Ratepayers inside and outside of the city pay the same electric and water rates, which are lower than those offered by other utilities in the state. But Lansing residents benefit by annual payments in lieu of taxes made by BWL to the city. Those payments have been used to help the city weather the financial downturn resulting from the 2008 Great Recession and prevented much deeper budget cuts. East Lansing and Delta and Lansing townships, plus parts of Meridian Township, have access to BWL services, but the utility does not pay those governments as it does Lansing.

Fletcher said he wasn’t sure his residents would be willing to spend more dollars on the BWL, such as by purchasing a percentage of the utility.

“All ratepayers are the ones who pay for the infrastructure and the board,” Fletcher said. “If we’re asking to contribute a second time, I don’t that will sit well.”

For Triplett and Fletcher, any conversation has to recognize that the ratepayers outside of the city have also invested in the BWL. Voters last November recognized the key role of regional customers when it approved an amendment to the city’s charter to allow three non-voting members from those outlying communities to have seats at the BWL table. Those representatives have not yet even taken their seats on the board.

Fletcher said he´s unhappy with Bernero’s finger pointing on the problems of the BWL at the board.

“The board has done exactly what the mayor asked them to do,” Fletcher noted. “When he stood by Peter Lark, the board did too. They gave him a glowing review. When he opposed Lark, the board did too. So to say the board isn’t working isn’t accurate. It is doing exactly what Bernero wants.”

That, he said, means the board should be turned into a true “regional authority,” meaning with full voting membership by all the regional partners currently using the BWL services.

“You depoliticize the whole board in that process,” Fletcher said.

Contrary to Bernero’s claim that qualified candidates for the board are largely unavailable in the region, Fletcher said he is convinced the right people can be found and brought on board from throughout the region. Triplett has echoed that sentiment in the past as well.

Two City Council members, Carol Wood and Jody Washington, declared themselves opposed to a sale, while Judy Brown Clarke took a wait-and-see approach. Other Council members did not respond to an email survey.

Brown Clarke, an at-large member, said she has confidence the Financial Health Team will “conduct a thoughtful and thorough review.” She declined to say whether she supported selling the BWL.

“I believe the BWL is a positive asset and sustainable revenue source for this region,” She wrote in an email. “I will continue to ask and listen to the citizens/ratepayers to ensure I am representing their voice.”

Washington, who is seeking re-election this year in the 1st Ward, countered, “I question the real motive of selling the BWL.”

“There are better ways to dealing with the issues than selling one of our largest assets. We have seen the selling off of our buildings, parks, land, etc., maybe it’s time to rethink our approach.”

Washington said she, like Fletcher, opposed using the Financial Health Team to even review the issue. She said she is uncomfortable with the team’s leading the review because she perceives former Mayor David Hollister as an outspoken supporter of selling the asset, even though he has been cautious in even calling for a study.

She also took a swing at Bernero’s reasoning for the investigation — the unfunded liabilities, including pensions.

“We have never had real numbers or real evidence given to us from the unfunded liabilities. I have asked that the retirement boards and anyone else give us documentation, data, presentations, etc., for us to consider,” she wrote in an email. “Unsupported scare tactics will not sway my opinion one way or another concerning this issue. We are looking at the same situation as many other municipalities. We have taken appropriate steps in our retirement pensions and health care legacies to address the issues. We have just emerged from a deep recession, and we will take time to recover.”

Wood went a step further by opposing even studying the idea of selling the utility.

“Lately there has been a great deal of rhetoric that selling the BWL would save Lansing from all its woes,” Wood wrote in an email to City Pulse. “This theory is based on incomplete and misleading information. Our, yes our, public utility is the reason Lansing was able to weather the economic downturn and has been able to rebound. Businesses see this utility a reason to expand and relocate here. Businesses attract employees who are locating here; our population has increased so why would we risk Lansing’s new growth by considering such flawed concept?”

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