Fat cat subsidies decried 

Relationship between city-owned utility and big business dubbed unhealthy

click to enlarge This chart, provided by the growth-control group - SaveTheSprings, depicts escalating utility construction - costs while contributions from new businesses and - developers remain flat. Colorado Springs Utilities says - the numbers are accurate, but that the   pattern doesnt - amount to a growth subsidy.
  • This chart, provided by the growth-control group SaveTheSprings, depicts escalating utility construction costs while contributions from new businesses and developers remain flat. Colorado Springs Utilities says the numbers are accurate, but that the pattern doesnt amount to a growth subsidy.

W ith Colorado Springs' publicly owned utility poised to spend $3 billion over the next 10 years on pipe and infrastructure projects to fuel a sprawling city, voices of dissent grew louder this week.

After taking a close look at the proposed 2006 Colorado Springs Utilities budget, activists from the local growth-control group SaveTheSprings are crying foul.

"It is time to get our utility out of the economic development business," says the group's founder, Dave Gardner.

Gardner points to an almost threefold increase in utility system construction costs by 2010, while 'tap fees,' or revenues collected from new businesses and developments connecting to the city's utility systems, remain largely flat.

The result, he says, is that residents and businesses already in Colorado Springs will see bill increases to subsidize growth.

On Nov. 16, Gardner plans to present a recently completed report to the city's Utilities Board, comprised of City Council members, asking that new businesses and developers pay a higher share of growth costs. He and other members of SaveTheSprings also hope that the utility, city government and Memorial Hospital will withhold a proposed $340,000 in 2006 funds earmarked for the Greater Colorado Springs Economic Development Corporation. The EDC, a private corporation with a $1.5 million annual budget, lobbies to lower costs for expanding business and employment in the city.

Gardner calls the EDC's leaders "self-serving developers" and maintains that providing tax- and rate-paid funding to the EDC is a conflict of interest.

The EDC's president, Michael Kazmierski, disagrees, saying an economic crack-up could occur if the city becomes unattractive to business.

"We're in a global economy competing against other communities," Kazmierski says, adding that today's infrastructure was paid for by the past generation.

The Utilities Board has increased tap fees by 50 percent over the last two years. According to CSU's official Web site, the 2006 budget recommends wastewater and water connection fee increases of up to 29 percent and 20 percent, respectively.

Increasing these tap fees further would "make it harder for us" to attract and retain businesses that provide jobs, Kazmierski says. This year, CSU spent $35,000 to fund a study in conjunction with the EDC that recommended lower tap fees.

In denial'

Some observers say it's good to question a relationship between City Hall, the utility and the EDC that can lead to poorly planned growth.

"I think we're in denial about it," says Daphne Greenwood, an economics professor at the University of Colorado at Colorado Springs. A former Democrat state lawmaker and director of the school's Center for Colorado Policy Studies, Greenwood calls the relationship between the EDC and CSU "unhealthy," and says both basically are in the growth business. "A utility makes more money when there's growth."

But growth in Colorado Springs, a city that lacks a natural river-fed water supply, becomes increasingly expensive due to water scarcity. Greenwood says it's only a matter of time before ratepayers begin to reject big growth plans. "There's going to be a big revolt about it because of having to pay a lot for water."

The biggest capital cost on the horizon is the Southern Delivery System, a massive and controversial pipe project that would send water north from the Arkansas River near Pueblo to meet the Springs' water needs until 2046. Utility officials maintain the project will cost at least $1 billion, but Gardner and other critics put its cost at $2 billion, minimum, when including finance charges.

Borrowing to the hilt'

The utility also faces at least $40 million in state-mandated repairs to its aging sewage system. That system is the focus of a lawsuit filed by the district attorney in Pueblo, which, 40 miles downstream from the Springs, has been impacted by several recent sewage spills into Fountain Creek.

Over the next 20 years, the utility expects to spend at least $250 million in improvements.

Using capital cost estimates and subtracting tap fee revenue, Gardner concludes that by 2010, each household will be paying $1,553 annually, and each existing business $16,375 a year, to subsidize growth.

Though utility rates have increased dramatically over the past few years, additional costs won't hit ratepayer pocketbooks immediately. The utility plans to increase rates by around 3 percent over the next five years, while more than doubling its current debt load over the next 10 years, says Edward Easterlin, the utility's chief planning and finance officer. Of $3 billion in new capital costs, $1.8 billion will be financed.

"We have an obligation to serve our customers," he says, rejecting the idea that the utility has a self-serving interest in growth to expand its customer base. "We're not seeking to take in additional revenues to make profits."

Easterlin maintains that Gardner's analysis, while using accurate numbers, distorts reality. Many of the capital costs that Gardner cites, he says, will go to serving existing customers. But he does admit that in 10 years, "we're going to be a much larger company."

"It's really bad news if they are borrowing to the hilt," Gardner says, adding that sooner or later, ratepayers will cover the huge costs of growth. "I think that's really scary."

-- Dan Wilcock


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