The city of Lansing’s demands for payments from the Board of Water and Light contributed to the utility’s poor response to the region’s ice storm power outages, according to BWL’s vice chairman.

“Overall, there are things probably we would have moved more quickly on if we didn’t have (that) money taken out of our budget,” BWL Vice Chairman Dennis Louney said Monday.

Case in point: The BWL’s outage-management and customer-service systems, which struggled to work together for at least a week during the outage. “That is one thing we probably would have moved quicker to move to fix,” Louney said. “It’s one example. I’m sure there are others, too.”

BWL Chairwoman Sandra Zerkle offered a more nuanced view of the payments to the city, but she didn’t disagree with Louney’s assessment. “We are very crucial to the operation of the city,” Zerkle said. “Obviously, when you take that much money out of our budget every year, it does put a crimp on what you can do and improvements you can make.”

Lansing’s relationship with the BWL is such that, as the city has had to scale back the size of its operation, it has also leaned on the BWL for higher annual payments.

Lansing’s planning to get $17 million in lieu of taxes from BWL this fiscal year, which makes up 15 percent of the city budget. In FY12, the BWL contributed nearly $12.2 million to the city’s General Fund, according to budget documents. It’s a fraction of BWL’s projected $345 million in operating revenue this year. The BWL projects a net income of $2.7 million this year after expenses.

“You can’t keep coming back to that,” Louney said of increasing the annual payments. “What happens is we can’t do as much infrastructure improvement as we want.

It’s a fine balance there.”

BWL General Manager J. Peter Lark disagrees with his board members. “The additional PILOT (payment in lieu of taxes) has no effect on this restoration,” he said Tuesday night.

In the past two budget cycles, Mayor Virg Bernero and his opponents on City Council debated proposals that would have funneled more money from the BWL to the city. Facing years of deficits, some on the Council were calling for higher payments in lieu of taxes from the BWL to help patch the gap.

Those seeking lower limits on what the BWL should pay, including Bernero and his allies on Council, warned that going too far would inevitably lead to rate increases on customers to offset the hit on BWL’s budget. Which is exactly what’s happening, though in light of the storm, there’s hesitation about a planned rate increase.

City Councilwoman Carol Wood, who wants higher payments to the city and is calling for Lark’s resignation, dismissed the idea as “ludicrous.”

Ongoing funding for capital improvements — not the least of which are modern communication systems and preparing for major outages — is just one of the challenges facing Lark in the days, weeks, months and perhaps years ahead.

What about a rate increase?

Ultimately, Louney said, the city’s position is a result of declining state revenue sharing. “It goes back to the state not fulfilling its obligations. They’ve strapped our cities with services.

“For us to continue to upgrade infrastructure, we’ve got to increase our rates.”

In November, the BWL placed proposed electric, water, steam and chilled water rate changes on file with the City Clerk’s Office, to be effective March 1. The increases, which vary by customer, are expected to generate over $18 million in billings. For example, residential electric customers could see a monthly increase from $2.45 to $4.80, based on usage. A public hearing is scheduled for Jan. 23 on the rate increases. (See public notice on page 6.)

BWL spokesman Steve Serkaian said while the hearing is scheduled, it is “yet to be determined” whether management will recommend the rate increase to the board.

Based on the recent situation, Louney said, “I am not in favor. I can’t speak for the entire board, but I’m not in favor of moving on a rate increase until we have our house in order. I think it would be a slap in the face of consumers when we failed in some ways to properly communicate with them. And then to go to them for a rate increase — I think that’s wrong.”

Wood, though, is not buying the suggestion that higher annual payments could impede the BWL’s infrastructure investments without a rate increase.

“To say that because the payment that is coming to the city has an impact on them having an emergency management plan and them having appropriate infrastructure they need to handle emergencies is ludicrous,” she said.

“When you look at what they’re paying for PR, Peter Lark’s salary ($258,502 a year) — it’s pittance compared to the millions coming into the city. But again, the taxpayers and residents own the Board of Water and Light … I think the correlation, again, just doesn’t make any sense.”

Critics also question the need for spending $2.8 million to restore the Grand Trunk Western Railroad depot as part of its new cogeneration power plant and headquarters. Or how about $10 million to renovate the John F. Dye Conditioning Plant on South Cedar Street? Overall, the BWL plans nearly $84 million in capital projects in 2014 and $384 million over the next six years, according to the budget ending June 30.