Utilities: jewel or millstone? 

City Sage

Nowadays, city budgets make dismal reading. They chronicle jobs lost, projects deferred, potholes unfilled, parks unwatered, hope extinguished.

In the near-decade since 2002, the city's population has increased by 60,000 souls, from 370,000 to 430,000. In the same period, the city's general fund budget has barely increased, going from $217.4 million to $224.6 million. The "All Funds" budget, which includes enterprises and special funds, looks a little better at $379.9 million — but that's mainly due to a bookkeeping change, which now includes an appropriation for "expected grant funds" of $57 million. Remove that item (which, as the budgeteers sourly note, "may or may not be received") and the All Funds number is at $322.9 million, not far from the $311.4 million of 2002.

That's not even keeping up with inflation. And given that the city's population has increased by 16 percent in that time, it's easy to see why Mayor Steve Bach and his team spend so much time talking about structural deficits and budget shortfalls.

As they plan for the future, they might consider the recent history of our city's most powerful business, the fairy godfather that hands over $30 million annually to help balance the budget, the largely unaccountable billion-dollar enterprise run by well-compensated executives comfortably ensconced in their Tejon Street aerie.

Colorado Springs Utilities.

A couple decades ago, the benefits of a municipal utility seemed clear. Utilities delivered water, wastewater, gas and electric services at competitive rates, and we controlled our own destiny. Our rates were set by our own elected officials, not by the state Public Utilities Commission.

Governed (if that's the word!) by City Council, the enterprise is self-directed and self-regulated. Like a feudal kingdom, it has its own culture, its own arcane language, its own well-defended space. Budget approval and rate-setting hearings are ritual performances, where executives feign respect for their nominal superiors, and Councilors pretend to understand.

It has always been thus, but the ground is shifting. Rather than being the community's crown jewel, Utilities may now be a millstone around our necks, a permanent obstacle to reform and redevelopment, and a mechanism for draining cash from our pockets with few corresponding benefits.

Its 2012 budget could not contrast more sharply with that of the city. The city is eliminating 37.5 positions, holding the line on expenditures, and projecting no revenue increases. Largely because of costs associated with Southern Delivery System, Utilities will increase spending by $87 million. The project will be supported by massive water rate increases, projected at 12 percent annually for at least the next four years.

SDS was conceived in an era of rapid economic growth. Its rationale: Most urban-density growth would take place within city limits, particularly in Banning Lewis Ranch. That's no longer in the cards, so utility managers now prattle on about "system redundancy" and "planning for the extended future."

Doesn't matter — SDS is under way and likely unstoppable. In a once-unimaginable scenario, ratepayers could be stuck paying for a project that may not be needed for decades. If so, Council will be forced to offer cut-rate water supply deals to high-density development in the county, thereby accelerating the flight of city sales and property taxes to neighboring jurisdictions. Meanwhile, soaring water rates may make our green lawns, like our green parks, artifacts of a kinder and gentler time.

And what about the ancient, coal-fired Martin Drake Power Plant? At a time when natural gas is half as expensive as three years ago, why not tear it down and build another gas-fired unit at the Ray Nixon plant? Doing so would remove one of the largest impediments to downtown redevelopment. It'd also make our air cleaner and our carbon footprint much lower.

Well, it's cheaper to keep the smoke-spewing old wheezer in commission, even with millions going to better emissions control. If Xcel owned the plant, the PUC could force the company to shut it down and spread the cost of a new plant over a much larger rate base.

Dream on ...

So we're stuck with the bill, victims of the foolishly optimistic elected officials who, 20 years ago, set SDS in motion. I was one of those officials — and it seems sadly ironic that yesterday's well-intentioned attempt to provide for the city's future may instead be tomorrow's bitter burden.


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