City of Albany preparing for end of MEAG credits

ALBANY — High-ranking officials in the Albany government do not exactly agree on the effectiveness of the use of some $53.3 million and counting in credits returned to the city’s Water, Gas & Light Commission over the past six-plus years, but all are of the same accord when it comes to one issue: the urgency in preparing for the end of the windfall.

Since January of 2009, the Municipal Electric Authority of Georgia — a collective of some 48 municipal and one county utilities distribution systems in Georgia that supply wholesale electric power to more than 600,000 consumers — has been returning millions of dollars in credits to Albany’s WG&L. That money was collected by MEAG years before as a hedge against federal deregulation of electrical power, action that was never taken.

Each MEAG member — Albany is the second-largest user among the 49 — started receiving in 2009 prorated shares of the funds it paid in to stem the expected deregulation costs in the form of credits on its regular payments for electricity. WG&L received $4,397,742 in credits over the firsts six months of 2009 (through the end of the utility’s fiscal year) and has since, according to city Chief Financial Officer JoEllen Brophy, received payments totalling $8,585,646 in FY 2010, $9,234,789 in FY 2011, $7,703,070 in FY 2012, $7,726,368 in FY 2013, $10,363,566 in FY 2014, and $5,293,374 in the first six months of FY 2015.

The credits, which currently total $53,304,564, have been divided into thirds by city and utility officials, with one-third going into the city’s general fund, one-third going into WG&L’s general fund and the final third going into a job-creation fund that is overseen by the joint city/WG&L Long-Term Financial Planning Committee.

Existence of the funds has generated a great deal of debate communitywide, as most anyone with an opinion has weighed in on best-use of the millions. Some have argued that the entire bundle should go into city coffers, others have argued that the funds should go into the WG&L general fund, while still others say the money should somehow be issued as rebates to ratepayers.

The ongoing argument has even entered the political arena as presumed mayoral candidate Henry Mathis has proposed using a portion of the funds to purchase and distribute high-efficiency light bulbs and appliances for certain among the city’s poorer ratepayers.

Interim City Manager Tom Berry, widely acknowledged as one of the state’s most knowledgeable managers on utilities matters, has had the opportunity in his year-plus in Albany, first as interim WG&L general manager and, for the past six months, as city manager, to go over the MEAG distribution in the city carefully. And he makes no bones that the influx of cash has not always been used wisely.

“Absolutely not,” Berry says when asked that very question. “Until this (city) commission took office, there was no long-term future planning for utility needs. That’s something that needs to be looked at 50 years out, but there was no plan beyond the short-term here.

“Just consider what might happen if EPA kills coal as an energy source in this country, and we’re definitely heading that way. Albany’s energy portfolio is more than 30 percent coal. If the coal plants in the state close, the fixed costs remain, no matter what. We’ll have to pay those costs plus find a source to replace the energy. If Albany grows — and it will have to do that or die — it’s going to have to find a new energy source that’s going to be more expensive, while still paying those fixed costs. And no money — not one penny — has been set aside for such a scenario.”

Berry says past officials lacked vision to look far beyond the present.

“This place should never be as fat as it is (with employee numbers), even in the best of times,” he said. “I think it was simply a lack of planning by some of the people who were in power before. I honestly believe if this commission was in place (when the MEAG credits were announced), somebody would have stepped back and put a new structure in place, not let all that funding be absorbed into the city and utility general funds.

“The city should be thankful that it has a commission in place now that has the will to correct that. It’s a little late in the game, but I think they’ll pull it off in a way that will benefit the community.”

Current Albany Mayor Dorothy Hubbard, who previously served on the City Commission, said city officials came up with a good plan when they voted to divide the MEAG credits into thirds, with one-third going into a savings account to promote future job growth.

“I really don’t know if we could have done any better,” she said. “There was so much discussion about the credits and how they should be used. A lot of people wanted the money to go back directly to ratepayers, but I don’t know how we could have done that. We had to come up with a way to best use that money, and I think we did it.

“People often ask us why we don’t just lower the rates for electricity at WG&L. They don’t understand that we buy electricity from MEAG, and we have to charge based on what we’re paying. We can’t set rates so that we’re paying more for electricity than we’re collecting. This is a business.”

Ward V City Commissioner Bob Langstaff, who was instrumental in coming up with the plan to divide the MEAG credits into thirds and keep one-third available for job growth, agrees that trying to come up with a reimbursement plan for ratepayers would have been impossible.

“The administrative cost alone would have made that a sheer nightmare,” Langstaff said. “How could you have done it fairly? How could you have taken into account the ratepayers and businesses that had been here before but moved? The logistics of such a plan would have been a sheer nightmare.”

Langstaff, along with then-Albany-Dougherty Economic Development Commission President Ted Clem and Vice President Justin Strickland, came up with the proposal that would become the city’s so-called Deal-Closing Fund, a job-creation initiative that would set the city apart when it comes to future economic development.

“There was a struggle between the city and Water, Gas & Light; some said the city should have control over what to do with the credits, and some said WG&L should,” Langstaff said. “And when the credits started coming in, the funding was raided early on … by the city for the Gang Task Froce and by WG&L for repairs on their offices and to buy equipment.

“Our Long-Term Financial Planning Committee finally looked around and said, ‘There’s got to be a better way to do this. We’ve got to find better things to do with this money than buy cars and fix buildings.’”

Langstaff approached Clem with his concerns.

“I told him we were looking for an equitable way to use the money to best serve everyone in the community,” Langstaff said. “I told him, ‘The only thing everyone can agree on is that we need more jobs.’ Ted suggested I talk with Justin, and he came up with creating a ‘deal-closing fund’ similar to the state of Georgia’s ‘Edge Fund,’ which offers business incentives.

“The Long-Term Financial Planning Committee worked with the EDC to draw up a plan, and that plan was eventually approved by the City Commission. It’s something that’s set us apart from other cities in the state when it comes to economic development. Where we’d never even had a chance before, suddenly we were on everyone’s radar. Now it may have only increased our chances (of landing new industry) by 10 percent, 30 percent or 50 percent, that’s still pretty significant when you consider that in the past we’d had 0 percent.”

Ward VI Commissioner Tommie Postell, who also serves on the LTFP Committee, says the wisdom of the job-creation fund is obvious.

“There was this mad rush at first to try and spend the money,” Postell said. “We knew we had to do something. No matter which side you were on, everyone agreed that bringing jobs to the community should be a priority. So we came up with a plan that will help with that.

“It took us a little while to get going, but we made the first allocation from that fund to (Albany-based aviation aircraft manufacturer) Thrush Aircraft this year. When you look at a $200,000 (incentive payout) that will help create 100 good-paying jobs, I think that’s money well-spent.”

Stephen Collier, who serves as the city’s assistant city manager in charge of utilities, said he too has heard the complaints from ratepayers who claim they should be receiving some kind of rebate from the millions in MEAG credits that have poured in. He points out, though, that while they may not have directly received rebate checks or tangible benefits, WG&L customers had indeed been the beneficiaries of the MEAG credits.

“It’s hard for some people to grasp, but our ratepayers did benefit directly from those credits,” Collier said. “What everyone needs to understand is that when there is an increase in the costs of buying electricity, it’s going to be paid for in one of two ways. You either raise the rates, or if you use general fund money to cover the additional costs, you raise taxes.

“I would have loved for us to have been in a position that we could have invested all of the money we received from these credits. Given our circumstances, there were specific needs that had to be met. Was our plan the best solution available? Probably not. But given our needs and circumstances, I’m OK with the solution that was found.”

Despite differing views on use of the MEAG credits, officials all agree that there is an urgency now to make sure city finances are in shape to continue efficiently when the credits stop rolling in at the end of December in 2018. Berry has initiated a commission-passed incentive proposal that will allow eligible employees to accept an early-retirement package that will help trim the bloated personnel budget.

Other efficiencies, such as combining separate city/WG&L human resources and finance departments and extending utilities services beyond the city and county limits, offer opportunities for additional savings.

“As that 2018 date has gotten closer, more (commissioners) are starting to realize the urgency,” Langstaff said. “There are two ways we can address this: increase revenues or cut expenses. Tom’s presented ways to do both, and the commission has taken action to make them happen.

“This is something we’ve all known was coming. (Berry’s predecessor as city manager) Jim Taylor constantly talked about it. It’s just taken some out-of-the-box thinking.”

Hubbard, too, lauds her colleagues for their post-MEAG credit planning.

“We’re preparing for what’s on the horizon,” she said. “Personnel costs are always the highest, and our early-retirement incentive package will help us make cuts that will position us for a brighter future. Without those kinds of programs, it could be catastrophic.”

Berry said the current commission’s actions are even bolder given the political atmosphere in the city.

“This is the most politically-charged city I’ve ever seen,” he said. “A lot of times, politics get in the way of good business decisions. That makes some of the decisions our leaders must make even tougher. I’m proud of the way they’ve responded. They’ve done a lot of things — a little here, a little there — but they all add up. I think we have a commission that’s now considering every dollar they spend an investment in our community’s future.”

As Collier points out, city leaders really have no choice.

“The commission has seen what could happen, and I think it’s starting to sink in with our employees and even some of our ratepayers,” the assistant city manager said. “We’re facing our own fiscal cliff, and it’s very real.”