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Wednesday, March 13,2013

Kids in the Hall

An amended contract involving BWL’s annual payments to the city falls flat; deficit reduction plan and parking lot sale approved

by Andy Balaskovitz

Correction: Councilwoman Jody Washington's proposed amendment to the BWL contract was voted on and failed by a 4-3 vote. Council President Brian Jeffries did not offer a formal amendment.

Monday, June 25 — Three Lansing City Council members expressed opposition tonight to the Bernero administration’s agreement with the Lansing Board of Water & Light on annual payments, but the timing of the opposition prevented any changes to it.

By a 5-2 vote, the Council approved a five-year Return on Equity payment plan with the public utility as proposed by the administration and approved by the BWL Board of Commissioners. The agreement is for annual payments to the city BWL pays instead of property taxes. Council President Brian Jeffries and 1st Ward Councilwoman Jody Washington opposed. At-Large Councilwoman Kathie Dunbar was absent.

But Jeffries, Washington and 3rd Ward Councilwoman A’Lynne Robinson voiced concerns about the length of the agreement and whether the Council would be able to negotiate a higher rate of return. The new agreement stipulates 5 percent “return on equity” payments in lieu of taxes for the next five years. The current agreement, which expires Sunday, is 4 percent. The Council's budget adopted in May included a 5.5 percent payment, but was vetoed by Bernero.

Some Council members have advocated a higher rate to help the city’s budget. Others, and the administration, have said a higher rate could mean higher utility rates.

Washington proposed entering into the 5 percent contract for one year and negotiating with BWL in the interim on a potentially higher rate. However, City Attorney Brig Smith said that the change would need approval from BWL’s Board of Commissioners, and there could be a timing issue in getting it approved by both voting bodies by Sunday.

The board approved the 5 percent payments in May, just before the Council passed the next fiscal year’s budget. Apparently, two to three days after that commissioners’ meeting, Council members received a letter that said, “Go pound sand, take it or leave it,” Jeffries said, referring to the 5 percent agreement.

Jeffries followed with his own suggestions that would have increased the payments by .25 percent each year over five years until it reached 6 percent, a rate he’s supported for months because it’s on par with similarly sized public utilities. He also suggested that be tie-barred in future city budgets with the millage rate being lowered at the same time, making it revenue neutral. Jeffries added, with annual city deficits, that the burden should be shifted away from Lansing taxpayers to BWL ratepayers, some of whom live outside the city.

“We have to be adamant about this, particularly in light of budget deficits,” Jeffries said. “Anything less than that is taxpayers of the city of Lansing subsidizing lower rates of all rate payers in the service district, which include people outside the city of Lansing.”

So, the amendment and suggestions were out there, and it’s possible they could have been worked out before June 30, when the current contract expires. That would have meant the Council and the Board of Commissioners hold special meetings to approve the Council’s ideas.

Bernero’s chief of staff, Randy Hannan, said the “risks are enormous” by approving an amended contract, given the unlikelihood of the two voting bodies meeting by July 1. Without a contract after June 30, “we’re talking about a $17 million risk,” Hannan said, referring to the payments the BWL wouldn’t be obligated to make.

Following Hannan’s comments, Washington’s amendment failed 4-3, with Robinson, Tina Houghton and Jessica Yorko opposing. The overall contract then passed 5-2, with Jeffries and Washington opposing.

In other budget business, the Council unanimously approved selling Lot #2 to Lansing Community College for $1.2 million, which will help patch a $1.8 million budget deficit for the current fiscal year that ends June 30. Before that, the Council passed a deficit elimination plan, which included the Lot #2 sale and using $600,000 in reserves, which the administration hopes to replenish with the sale of property to potential casino developers.

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