Glendale City Manager: Sell GWP or keep it?
While the question has been brought up before — mostly rhetorically — Glendale’s city manager asked City Council members this week if they want the city to continue running its home-grown utility, an entity that has been struggling financially for years.
The challenge came amid nearly three hours of discussion during Tuesday’s council meeting regarding proposed rate increases during the next five years.
The day prior, the Glendale Water & Power Commission advised the council to approve significant rate hikes through 2018 and seriously consider selling the utility, among other caveats.
Under the plan, rates would increase by an average of 8%, followed by 7%, 5%, 2% and 2% through 2018, but that could change by next week’s meeting. Compounded, the rate changes amount to an overall increase of 29% in five years.
The council took the first step toward boosting rates Tuesday, but final approval is far from certain. Ochoa warned that if the council doesn’t approve an increase, council members must seriously consider dropping a utility company the city has owned for more than a century.
“It has to be a real discussion if they’re not willing to increase the rates,” Ochoa said after the meeting.
But City Councilman Frank Quintero, who opposes the rate increases, said Ochoa’s comments about selling the utility seemed overblown.
“I don’t think it’s scare tactics, but I think it’s totally ridiculous to talk about selling a utility that has performed better than others in the surrounding area and continues to support other departments,” Quintero said during a phone interview, adding that he believed selling the utility would be a huge mistake.
Councilman Zareh Sinanyan said he’d be open to having the discussion because he feels all options should be on the table.
“We should look into everything,” Sinanyan said during the rate discussions.
Glendale purchased the utility, which once was called Glendale Light & Power Company, in 1909 for $23,000. Now the utility has about 84,500 electric customers and its electricity revenue is expected to hit $158 million this year, a $30 million drop since 2008.
City officials have long pointed to the benefits of having a utility with its own energy-producing power plant. During past disasters, they’ve credited keeping the lights on — or getting them back on quickly — to owning Glendale Water & Power. On top of that, the city transfers about $20 million a year in electricity revenue to the General Fund, which pays for police, parks and other public services.
While the transfer has been a financial boon for city finances, it has also been a point of controversy with some residents who decry it as a hidden tax, saying it artificially inflates utility costs.
Despite the benefits, officials say the electric side of the utility is headed toward insolvency in 2017. That looming deadline and an unwillingness by many in the community to support significant rate increases prompted Ochoa to question Glendale Water & Power’s future.
He said if officials wanted to sell the utility, it could take three to five years to accomplish the task. He said the city could sell the utility outright or enter into leasing agreements with other utilities.
“We need to know sooner or later if we’re going to stay in the electric business or not,” Ochoa told the Glendale Water & Power Commission at a Monday meeting.
But Commissioner Matthew Hale said at the meeting that buyers won’t want to pay much for a utility in a precarious fiscal situation, which means the city wouldn’t likely get much value out of a sale if revenues don’t improve.
“It puts us in a damned-if-you-do, damned-if-you-don’t situation,” Hale said.
The council is set to take a final vote on the electric rate increases next Tuesday at a 6 p.m. City Hall meeting.
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Follow Brittany Levine on Google+ and on Twitter: @brittanylevine.
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