A Cincinnati official who supports a deal negotiated by the city manager to accept a Duke Energy rate hike in exchange for getting $7 million from the company for a proposed streetcar system says it would have been “fiscally moronic” for the city not to accept it.—-
This week’s issue of CityBeat features an article about the deal and how some Cincinnati City Council members say they should’ve been allowed to vote on whether to approve the pact with Duke.
City Councilman Chris Bortz, who supports both the deal and the streetcar project, didn’t reply in time to be included in the print edition. But Bortz defends the deal and the action by City Manager Milton Dohoney Jr. to accept it before council could weigh in on the matter in an e-mail sent to CityBeat today.
Dohoney presented the deal to city council for the first time at its Oct. 29 meeting, and wanted the group to decide then. Some members, however, pressed to delay any decision so they could hold a public hearing on the topic.
Before that occurred, Dohoney accepted the deal Nov. 7 and told the Public Utilities Commission of Ohio (PUCO) that Cincinnati wouldn’t oppose Duke’s rate hike request, as the city had done with past requests.
The deal’s critics shouldn’t be surprised that Dohoney acted before council voted, Bortz said.
“The deadline for signing the agreement was last Friday (Nov. 7), and that was common knowledge,” Bortz wrote in his e-mail. “PUCO’s evidentiary hearing was Monday, Nov. 10. The manager, as chief executive of the city, has broad discretion to enter into such agreements if no specific legislation or policy directive has been approved by a vote of Council advising the manager not to do so. No such vote was taken last week.”
Some streetcar opponents question Bortz’s involvement in making the decisions about the project. His family owns Towne Properties, which has parcels along the proposed streetcar route that potentially could increase in value.
The Duke deal was in Cincinnati’s best interests, Bortz said.
“As for the agreement itself, it is clear that the rate increase would’ve gone forward with or without the city’s approval,” he wrote. “The agreement was blessed by a number of organizations including the Ohio Consumer’s Council, Legal Aid, CUFA, Sierra Club, low income advocates, and many more.”
Bortz concluded, “I find it hard to envision a scenario where the city would be forced to accept the rate increase while turning down $7 million and incurring an additional $1.3 million in operating expenses. That’s not fiscally irresponsible, it’s fiscally moronic.”
Critics — who include Councilmembers John Cranley and Leslie Ghiz — say it’s inappropriate to accept money for the streetcar project in exchange for the rate increase because it gives the appearance of impropriety. Further, the city traditionally has opposed all rate increases sought by the utility, in hopes of striking a compromise more favorable to customers.
Under the deal, Duke will give the city an economic development grant of $2 million in 2010 and $1 million in 2011 to help develop a streetcar system. If for some reason the city doesn’t move forward with the streetcar project, it can still use the $3 million for any economic development project as long as it creates a minimum of 25 new jobs in a three-year period at an hourly rate that exceeds 150 percent of the federal minimum wage.
In return, Duke will be allowed to raise rates for residential energy customers a total of 4 percent over two years: a 2 percent hike effective Jan. 1, 2009, and another 2 percent hike effective Jan. 1, 2010. Industrial customers will face a 6 percent hike phased in over three years.
The residential rate hike is less than the 5.7 percent increase that Duke sought from the Public Utilities Commission of Ohio (PUCO), which it wanted to take effect all at once on Jan. 1, 2009.
Also, the deal calls for Duke to pay the city $4 million to buy more than 20,000 existing streetlights. Currently the city owns the lights but Duke is responsible for maintenance. If Duke owns them, the logistics of making repairs will be easier, supporters say.