Issues surrounding the Minutes of Bristol Virginia Utilities

This was presented to the Bristol Virginia City Council March 8, 2005.

I stood alone before this city council December 2003 opposing the speculative $2.5 million Tim Carter's land deal. I knew it was a waste then, and in March 2005 we still have nothing to show for it. What the general public didn't know at the time was BVU was searching for a new wholesale power provider. The Council had to know then that the city and utility were heading for a fiscal train wreck.

Even then, local officials continued to plow millions into a new library despite the fact they have a nice library on Euclid Ave. The city squandered millions on risky real estate schemes, corporate welfare, etc.

The so-called "Cinergy profits" were used by the city as a backdoor tax to cover their out of control spending so they wouldn't answer to voters. BVU used it to mask a massive spending spree of their own including the cost of Optinet. Nothing was illegal, the information was there, but who would have thought to look for it? That is going to end.

Why was there never a discussion of this back then? I asked back then for details on the Nicewonder land deal. I was refused the information based on "executive session." It's time to end executive session and tell the truth.


BVU signed a contract with Cinergy from January 1, 1998 to December 29, 2004 which they claimed saved Bristol" $74 million. The problem is electric customers never saw two-thirds of those savings. "The city passed along a third of the savings from that contract to customers in the form of lower electric rates. The other two-thirds, about $4.5 million a year, was split evenly between Bristol Virginia Utilities and the city." (Bristol Herald Courier 2/16/05)

There is a clear discrepancy between the press reports and claims by Bristol Virginia Utilities. (BVU) That two-thirds being $4.5 million per year would add up to $31.5 million over seven years split evenly between the utility and city. (About $16 million each) But in the propaganda ad from BVU (Bristol Herald Courier March 6, 2005) claims the savings was $74 million, which two-thirds is almost $50 million or $25 million each leaving questions about what happened to about $18 million. Did they pocket $16 million each or $25 million each or neither? How much was it? This question needs to be answered.

According to Wes Rosenbalm, the utility is $65 million in debt, $50 million being external. My question is, how does this debt play into utility bills? Just what did all this debt go for? If they got as much as $25 million on the Cinergy profits plus $50 million in debt, what did they do with $75 million? Where did the money go? We need a full financial accounting and the correct figures.

Note that during the public hearing where I presented this, Wes Rosenbalm claimed the Electric Company debt was $18 million, mainly substations. What about the $17 million that the Electric Company loaned Optinet? What about the cost of their luxury building on Lee Highway?

What right did the City of Bristol, Virginia have to take funds from the city utility to begin with just to pad their tax coffers? This was in fact a backdoor tax on electric customers, many of them Washington County residents. Why should Washington County residents be forced to pay Bristol city taxes?

For example, the May 13, 2002 minutes reveals a discussion about the City's need to receive their share of the 2002-2003 Cinergy profits. Again in the October 28, 2002 minutes reveals an advance of the Cinergy profits ($1.5 million), which was supposed to be paid back by November 30. There is a pattern of this, where the City is using money generated by the utility it seems to cover budget shortfalls. The January 27, 2003 minutes reveals another loan to the City of $600,000. BVU owed the City $426,531 for the Cinergy profits while the remaining amount $173,469 is considered a loan.

More interesting is a resolution passed by the board that any BVU employee that got elected to either City Council or BVU Boards would be fired. This makes little sense because two members of the Board are Council member to begin with. And I quote the resolution, "BVU is a division of the City over which the (I assume City) Council has oversight responsibilities and authority..."

The June 17, 2002 minutes reveals the BVU Board appointed two members to the Virginia Economic Development Committee. There is no clear line of separation between the utility and other city departments. Don't stick this mess on Wes Rosenbalm, he works for the City and answers to the BVU Board.

Optinet

Minutes for July 25, 2002 reveals the utility hired the lobbying firm W. Thomas Hudson and Associates, Inc. to lobby the State of Virginia in behalf of Optinet. Did Optinet pay this for or was it a backdoor subsidy dumped onto utility customers? Annual cost, $60,000.

Also interesting is the September 23, 2002 minutes is the July 2002 financial reports were to quote "restated because $1 million was moved back to the Electric System to avoid any appearance of cross subsidization involving the previous loan to the fiber optic department..."

The March 24, 2003 minutes reveals a loan to the utility from First Vantage Bank for $1 million to cover costs for Optinet. The May 27, 2003 minutes reveals the approval of interdepartmental loans. The Electric System issued a credit line of $4.5 million to Optinet. They authorized two advances totaling about $2.9 million.

The December 15, 2003 minutes reveals another loan to Optinet from the power company stating it's a better deal than loaning the funds elsewhere. As of this time, Optinet seems to owe the electric company almost $17 million. Where did BVU Electric get the $17 million to loan to Optinet? The resolution on this was finalized during the January 26, 2004 Board meeting and to quote, "Bristol Virginia Utilities Board ("BVUB") is an operating division of the City of Bristol, Virginia...consisting of seven members appointed by the City Council..."

As I understand it, Optinet could be in debt for about $27 million. This needs to be clarified by BVU in detail. Who owes who what and where?

As a final note, I feel that we were lied to by BVU regarding fiber optic services. I was promised I'd be hooked up in January 2004. They didn't show up and I called. I was told June 2004. I was finally informed BVU was broke and it would be some future date. According to a statement I got from BVU, the only way we could get service is if it was paid for by government grants. Never mind the lines running down Gate City Highway near our homes and down to Mendota. There was never any intention to hook us up and I feel we are being forced to pay for Optinet through cost shifting and by the electric company bankrolling Optinet. I don't care if they get to pay the loans off at some future date; it's what we are paying now.

Waste, Conflict of Interest, and Corporate Welfare

It should be noted that the Bristol City Council often appoints Washington County supervisors/officials. As of November 2004, this includes James Rector (chairman) and Dulcie Mumpower.

The Wolf Hills Substation could be a good example of corporate welfare. As I understand it, this substation of for the use of a Washington County industrial park, corporate welfare in itself. It seems this cost is shifted onto all electric customers. So why should Bristol, Virginia residents (or residential users period) be forced to pay a type of backdoor tax for economic development? This needs to be addressed.

Worse for Washington County residents paying higher home electric bills for this $2.5 million handout, we will pay for the park itself plus an additional $30 million in taxes, etc. for a wastewater treatment plant to serve this industrial park and the multi-million dollar Mac Trammel corporate welfare package. That Trammell Package could cost over $40 million counting this wastewater plant. The same two people on the BVU board are also connected with this in Washington County. This seems to be a conflict of interest.

The September 29, 2003 minutes reveals another facet of corporate welfare in their Security Lighting Program. BVU will pay for all up front equipment and installation cost for you. BVU will finance the cost over a 10 year and one is protected from inflation. So if I signed up in for this in say October 2004, I'd get 10 years of electricity at the rate of that time, and it seems the inflation is cost-shifted onto the general public. BVU needs to clarify this.

The Controversial Red Lobster handout is another case in point. According to the May 17, 2004 minutes reveals this was hatched up at joint meeting between the Bristol Virginia Economic Development Committee (VEDC) and Industrial Development Authority. The money was to be channeled through the Industrial Authority. Whose idea was this? The BVU board appointed two members of the VEDC, so who gave the orders here? I was told these funds were to be given back to BVU by the industrial Authority, so why is BVU even involved in this? There seems to be too much conflict of interest and no clear lines of separation between city departments.

In the November 18, 2002 minutes Mr. Rosenbalm made the wise decision that because non-profits didn't get reduced rates for other BVU services, they won't get it with Telecom services. The September 29, 2003 minutes reveals what seem to be conflicting priorities.

Here the Trainstation renovation was running way over cost and the Foundation was looking for help. Mr. Rosenbalm noted the Trainstation request for funds was turned down earlier. Now they wanted a waiver for tap fees for water and sewer, Mr. Jarrad claim this was economic development now and they should get it. The BVU Board decided that request for giveaways would be handled on a case-by-case basis. The cost of this would be shifted again onto the public. (About $14,000?)

Worse, this creates a climate where any pet project or handout can be called economic development just by convincing board members. This should be barred.

Another case involves the new library. The February 23 2004 minutes reveals that over $37,000 in power line relocation fees and sewer tap fees was given away to the new library. The March 22, 2004 minutes reveals another $45,000 for Telecom wiring was given away to the library. As was explained to me, this is all part of the city Bristol and they can do it.

That is unacceptable.

All this is doing is cost-shifting city expenses onto the public in the form of higher utility bills. This is another backdoor tax and we need to look into how extensive this really is. How many free or discounted services is the city getting from the utility then cost-shifting onto residents in both the City and Washington County as a backdoor city tax?

In conclusion, there needs to be an independent audit of how the city does business. I don't think they are doing anything illegal as such, but the rampant conflicts of interest and unfair hidden taxation need to stop.

Now Bristol is in a budget crisis due to loss of the backdoor utility tax from the Cinergy deal, and loss of grants. Now they scream we will lay off teachers and police while waste continues unabated. Bristol residents need to put a stop to this and gain control of local government in Bristol and Abingdon.