"Municipal ownership of public utilities is simply the people reclaiming what they have given away to a favored few individuals and corporations…There is no reason why a favored few should make money out of them, at the expense of the real owners." -- former Detroit Mayor Hazen S. Pingree, in an address to the Marquette Club of Chicago, Jan. 27, 1900.
Last week, the chairperson of the newly created Detroit Public Lighting Authority responded to my concerns about the PLA and its sweetheart deal with DTE by contending that I lacked "understanding" about her authority's aim and operations.
Maureen Stapleton — a former state representative who co-authored the bill that created the lighting authority and then, after losing her re-election bid to Rashida Talib last year, was named chair of the very same lighting authority she created — insists that there's absolutely nothing inappropriate, seamy or suspect about the city's new lighting arrangement. (Presumably, this includes her new job.)
Sorry to say, I remain skeptical.
From the outset of her piece, Stapleton leaves me wondering just how closely she actually read the bill that she supposedly wrote and shepherded into law.
In the first portion of her response, for instance, she insists that the PLA is "an independent authority completely separate from city government and with its own independent revenue stream."
Really? Because according to the law that Stapleton sponsored, the Detroit City Council authorizes its creation and incorporates it. The Mayor and Council appoint the board members and approve its operating plan.
Compare this to authorities such as the Detroit/Wayne County Port Authority or the Regional Transit Authority and you see that "independence" for the PLA is not at all the same thing.
And then there's this stuff about the PLA's "independent revenue stream."
The Revenue Stream?
Where is this revenue stream? According to the law, the PLA will rely on $12.5 million annually from the Utility Users Tax -- money that, as I mention in my earlier piece, used to go to the police department -- to cover operating costs and to pay any future bondholders. There's nothing "independent" about this. Nor is there anything "independent" about the money Kevyn Orr pledged last May. And with the Detroit Public Lighting Department set to pass all of its customers to DTE, the PLA won't even have a customer base.
The PLA isn't empowered to levy taxes. And with millions in utility tax money, the authority won't be self-financing its bonds. In short, despite what Stapleton contends, the PLA's revenue stream is about as "independent" as my 12-year-old son's.
Stapleton claims that the "police budget is being kept intact through the earmarking of a portion of the city income tax," but city income tax receipts have been in decline. In fiscal year 1996, revenue accounted for $335 million. In 2012, that figure was $233 million. If tax receipts drop further, the city could be trying to make up millions more in addition to the $12.5 million it's giving up to the PLA.
As for the tax that she trumpets as being "the most stable and steady source of revenue that the city of Detroit has," those revenues have dropped as well. According to CAFR reports from the city, revenues from the Utility Users Tax have dropped from a 17-year trend average of $54 million to $39.8 million in FY 2012 and have dropped by 12 percent in both the 2010 and 2012 fiscal years.
Analysis from independent consultants such as those at Foster, McCollum, White and Associates have projected a continual decline in Utility Users Tax revenue of about 9.5 percent in FY 2013 and 9.78 percent for FY 2014.
No Bottomless Gold Mine
Nobody is claiming, as Stapleton suggests, that this revenue stream would "dry up overnight" -- but I am contending that it's not nearly the bottomless gold mine that Stapleton and others who are gambling with the DPD's budgetary future make it out to be.
In addition, Stapleton says I'm wrong when I contend that the City of Detroit could be held responsible for the bonds that the authority issues. Again, I go to PA 392 itself, this time Section 25, paragraph 1. It allows the authority and city to enter into a contract wherein the city -- as the municipal "parent" of the lighting authority -- is permitted to pledge its full faith and credit to repayment of the obligations.
Nowhere in Stapleton's legislation is the PLA obligated to take on these debts on its own. Detroit, by law the key source of the PLA's so-called "independent" revenue stream, is in no way shielded from legal responsibility for any future debt that its municipal "child" incurs.
Even if you're all for these authorities, how can you be on board with this screwed up model? In New York City, for instance, when the Metropolitan Transit Authority issues bonds to purchase, say, new subway cars, it is the transit authority -- not the City of New York -- that assumes the financial liability. New York doesn't need to levy taxes for the MTA, and New York is protected from having to assume its debt. Not so for Detroit.
Stapleton goes on to say I'm wrong about the arrangement being a sweetheart deal for DTE. But truth is, DTE might as well have written the damn law for how well it stands to make out.
What City Pays for Electricity
First off, city agencies currently pay $8.4 million for electricity from the Public Lighting Department under wholesale rates. But the city will soon being paying market rate under this new deal with the PLA and DTE, meaning a projected minimum annual payment of $10.8 million -- a $2.4 million increase.
Also, with Detroit's more than 1440 energy customers now going to DTE, the energy giant will reap tens of millions more in additional revenue. (In fiscal year 2012, for instance, the City of Detroit saw about $44 million in revenue from lighting.) Charging the city and its soon-to-be-former customers the higher retail rate will also allow DTE to recoup the projected $250 million it's expected to pay to expand the current power infrastructure.
And then there's the transference of the city's streetlights. Although the city will technically still "own" the streetlights and the PLA will "independently oversee" them, according to the city's transition document, "DTE will operate and maintain" the system. This will allow the company access to tens of millions of dollars more from any bonds issued to cover the transition, which will include the decommissioning of as many as 15,000 fixtures that DTE would otherwise have to "operate and maintain."
Fewer city lights to keep up; more customers to bill; deeper cash streams to dip into -- and yet we're supposed to think that DTE isn't getting over here?
Legislation is a Bad Deal
I'm not accusing Stapleton, who by all accounts served diligently in Lansing, of personally orchestrating any handovers to DTE or of intentionally involving the city in a bad deal (although I don't hesitate to say that I find it ethically problematic that an ex-legislator is allowed to leave Lansing and immediately take over an authority she basically wrote a law to create). My point is just that the PLA's creation certainly makes such a change possible -- and that the driving legislation is, on its own merits, a bad deal.
When Detroit mayor Hazen Pingree created the city lightning department in the late 1800s, he did so precisely because he wanted to protect the city from being gouged by the corrupt corporate profiteers that dominated the landscape.
Two centuries later, we're now being told that energy profiteers are our last and best hope, that a strapped city with so many non-working street lights would be better off handing over its municipal customers and essentially paying private corporations to expand their business.
Stapleton concludes her response to me by saying that Detroit's problems didn't pop up overnight. On this point, she's absolutely right. Still my concerns remain: Other than creating positions, unpaid, for her, some shark consultants and a few other compliant bureaucrats — and other than structuring sweetheart deals for DTE — how beneficial can Detroiters expect this new lighting plan to be in the long run?
Can we really expect to realize decades worth of cost savings by relying on a hamstrung "authority" and an energy company whose sole aim has always been to make as much money selling electricity as it can?
Even with the intervention of more than a century of history, is Hazen Pingree's point really that far off today? Does our last and best hope really lie in turning back to the energy monopolies who created the need for municipal lighting in the first place?
