Fiber Optic at Bristol Virginia Utilities in 2007
by Lewis Loflin
The ongoing saga of Bristol Virginia Utilities (BVU) and their entry into the speculative TV cable and telecom markets is under fire again in February 2004. Plagued by legal challenges, huge legal fees, delays, and claims of cross-subsidizing creating more uncertainty and finger pointing, the controversy never seems to end. All have been proven wrong in 2009. What is left below is for historical reference.
In one of the four reports below, I presented last September 2003 information based on BVU's quarterly report of $4-$7 million in real and projected losses in 2003-4 in the editorial pages. Nobody disputed me. Now it comes out from the Progress and Freedom Foundation (PFF) that BVU is losing millions and is cross-subsidizing their losses with water and power customers. BVU claims the study is flawed and paid for by competitors such as Sprint and that they are following the law. It seems there is a dispute over the definition of "cross-subsidizing."
Even worse is the questionable use of state and federal grants. They used $2,030,00.00 of Virginia Tobacco funds that are supposed to go towards job creation for who knows what. I asked in the local press for a list of those "new jobs" we have been promised, they refuse to answer. They also got $1,600,000 in EDA grants that were to be used for "infrastructure buildout" to unserved areas. Instead they go after areas already served by private firms and ignore many areas unserved at all. Mr. Rosenbalm, CEO of Bristol Virginia Utilities claims this was not the intention, it just worked out that way.
We must also be careful of claims of "3500 people have signed up." Many of these such as myself will never get the service at all. I got this impression when I called them up and asked. They informed me they didn't know and it wasn't scheduled. They changed their story three times. In December 2004 the BVU Board voted to reduce credit requirements to boost the customer base.
To make this mess even more fun, Virginia State Senator William Wampler (R. Bristol) was trying to pass legislation (SB 280, 282) to enable BVU to operate in secret and avoid public scrutiny. The Kingsport Times-News put it in perspective: "If Bristol Virginia Utilities cannot compete fairly and in the full light of day with its private competitors, taxpayers should ask why." This website has asked why all along.
Update for January 2005. The Senate Bills 280 and 282 have failed to pass, according to Senator Wampler. Instead, he introduces a new secrecy bill. I've also been invited by the mayor to sit in on BVU board meetings. It's interesting the board voted for Mr. Rosenbalm (the CEO) to spend any amount he wants (up to $50,000) without board approval. (Ibelieve as of 2007 it's upto $2 million.) This keeps many of their activities from being discussed at the board meetings I'm supposed to monitor.
Updates for October 1, 2004. News of the 40% electric rate hike for January 1 comes on the heels of an announcement in August that water rate increase of 22.4 percent. Sewer rates increased by 4 percent on July 1, and municipal cable television rates rose 12 percent to 15 percent in May to cover mounting losses. They are still locked in legal disputes with Sprint over cross-subsidizing and have failed to create a single new private sector job or serve under-served areas as promised, according to officials I talked to. They claim their business plan is "on track" and these massive losses were planed for. Then they claimed their massive losses in 2003 were the result of legal battles. Which is it?
Drop in net income anticipated, utility says Some extracts from the Bristol Herald Courier:
BVU saw a drop in net income for the 2003 fiscal, a negative $850,249.In 2002, net income was more than $3 million. To quote, "Although BVU's overall net income for the fiscal year 2003 was negative, it was expected,budgeted and planned for...BVU's fiscal year 2003 business plan for OptiNet counted on an additional seven months of revenue from cable television services, which was delayed, due to legal battles waged by incumbent operators. Those legal battles also created extraordinary legal expenses." BVU CEO Rosenbalm claimed.
To quote a report from http://www.pff.org/news/news/2004/021104govtowned.html "Despite government subsidies of up to $1000-plus per customer, numerous tax-exemptions, low-cost borrowing, easy access to public rights-of-way and other preferences, government-run ventures - usually offshoots of electric companies, with access to ratepayers' funds - are producing "large negative returns" and "will be an indefinite drain on taxpayers."
BVU CEO Rosenbalm exploded over this. To quote,
BVU president: Telecommunications study is flawed BRISTOL HERALD COURIER Feb 17, 2004, "Bristol Virginia Utilities President Wes Rosenbalm says a private foundation study (above) questioning the utility's venture into telecommunications is itself questionable...."
I believe the report is correct. They bled the rest of the Utility dry with inter company loans to Optinet, thus forcing the electric and water divisions to borrow outside funds for needed capital projects and corporate welfare for economic development, and shifting that cost onto everyone. As of September 2007, I've put in four requests for the quarterly reports and have been stonewalled. But now something new is happening. Their debt stands officially at over $50 million, I believe the real number is much higher. They claimed in 2003 to break even in four years, that's 2007. What is really going on?
View the report at http://www.pff.org/news/news/2004/021104govtowned.html
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Hemorrhage of Public Funds
Printed 9/8/03 Bristol Herald Courier
This is in regards to the hemorrhage of public funds at Bristol Virginia Utilities and why citizens should be alarmed. Their financial statements are a nightmare.
Total assets: $21,626,853. Total liabilities: $27,144,061. Equity loss: $5,517, 263. For individual services, combined operating loses and non-operating loses (bonds, etc) for 2003 and projected loses in 2004 are unbelievable. Loses for telephone: $2,366,099. Loses for data: $1,958,628. Loses for CATV: $2,619,442. They claim to break even in four years but at this rate BVUB won't last four years. They also propose to float another $7 million in bonds for 2004. They borrowed over $30 million already.
Where are all those new jobs we were promised besides the outside consultants, contractors and their friends? I want to see a list of those "new jobs." Why are we using Tobacco Funds that are supposed to go for job creation to subsidize loses in cable television?
I've been more or less informed that many rural BVUB customers such as myself won't be getting these new services. Sorry Mendota residents, we aren't getting government-sponsored cable TV, nor can we get our roads fixed, but we do get the Mendota Trail for our amusement while perhaps paying higher electric bills for socialized CATV.
According to the Bristol Herald Courier (January 10) state budget problems mean many libraries can't even put books on the shelves. Yet Bristol squanders $10 million on a new library with uncertain funding just to keep up with Johnson City. With almost 50 percent of Bristol children in poverty and no jobs, why are we doing this?
While we can't recall public officials in Virginia, perhaps we should consider direct legal action against them if this falls through. Let's hope it doesn't come to that. Put them on $6 an hour and no benefits.
BVU shouldn't be left to operate in the dark
Why would a public utility, originally chartered to bring light to its customers, want to keep them in the dark?
That's a question taxpayers may well want to ask Bristol Virginia Utilities. But if two bills introduced by Senator. William Wampler Jr., R-Bristol, make it into law this session, they may not get the chance.
Senate Bill 280 seeks to ensure that any audit of BVU's cable and television operations be exempted from public scrutiny. A related piece of legislation, SB 282, would allow Bristol to substitute a one-time cost allocation manual to the State Corporation Commission attesting that BVU's cable and television operations are not being cross-subsidized.
According to the proposed law, the mere existence of the manual would be submitted as "sufficient indication of the lack of cross-subsidization so as not to require any further cost study to be maintained by such locality."
The practical effect of both bills is to allow BVU to hide pertinent information about its telecommunications operations from competitors - but also from Bristol taxpayers.
Senator. Wampler maintains that the legislation ensures that BVU would be able to compete on an even footing with private companies such as Sprint. He argues that BVU's inability to keep its business and marketing plans private has the effect of providing proprietary information to other companies, placing BVU at a competitive disadvantage.
But private business is and has been at a competitive disadvantage to a business run by government. Tom Matthews, a spokesman for Sprint, maintains that the city of Bristol and BVU already have an ample safety net in the law allowing a taxpayer-supported entity to compete in the marketplace against a regulated entity.
When any government entity provides more than one service - electricity, water, sewerage, trash disposal, cable TV - there is always the potential for cross-subsidization, that is, using proceeds from one revenue stream to prop up another, failing service, even when that failing service is available commercially.
Obviously, if the public does not have unimpeded access to BVU's operations, there is no sure way to demonstrate that such cross-subsidization is not taking place.
Especially unwise is SB 282, which essentially describes a pro forma declaration that is little more than a public pledge not to commingle funds. The problem is, if such commingling occurs, SB 282 makes it well nigh impossible for the public to ever learn of it.
The public deserves the maximum in transparency in all functions of government. As Matthews points out, under provisions of SB 282, "there is just no real testing, analysis or meaningful review. Allowing BVUB to prove it is meeting a statutory mandate that there is no subsidy merely by filing a cost manual is like an average taxpayer being able to respond to an IRS audit simply by giving them a blank form 1040 or one containing only the most basic information."
If Bristol Virginia Utilities cannot compete fairly and in the full light of day with its private competitors, taxpayers should ask why. After all, they're paying for it.
Copyright January 29, 2004 Kingsport Times-News.
Update for October 2004. The Senate Bills 280 and 282 have failed to pass.
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