"...the controversy also raises questions of judgment regarding Austin Energy’s rollout of a project of such scale, size and cost without adequate input from the council, the city manager or the public."
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Austin Energy needs council oversight
Austin Energy’s proposal to construct a new $67 million office building — which took even the Austin City Council by surprise — underscores the importance of preserving the current governance structure of the city’s public utility.
It’s very possible that Austin Energy’s decision to build what is being cast by many as a vanity project would have flown under the public radar and perhaps been a done deal if the utility were governed by an appointed board instead of the elected City Council. Bringing it to the council ensured that the decision would be heavily scrutinized, and rightly so. As a publicly owned utility, Austin Energy ultimately must answer to its shareholders — Austin residents.
That kind of transparency and meaningful accountability already has made a difference: Austin Energy has dropped the cost of its building proposal to $59 million since the issue surfaced less than two weeks ago. But more importantly, the Austin City Council has temporarily put the brakes on approving the proposal until the utility makes a valid case that the investment is financially sound and not another expensive blunder that undermines the utility’s credibility. Those are valid demands that the council is requiring Austin Energy to answer by June 26 before moving forward. The council rightly postponed action last week after Austin Energy failed to justify the proposal’s cost in a market that offers other suitable properties at a fraction of the price.
But the controversy also raises questions of judgment regarding Austin Energy’s rollout of a project of such scale, size and cost without adequate input from the council, the city manager or the public. And the timing, coming about two years after the utility hiked base rates an average of 7 percent to pull itself out of dire financial straits, could not be worse. Those dynamics clearly have put the proposal in jeopardy. And Austin Energy has no one to blame but itself.
The mayor and council members acknowledged they were generally aware of the utility’s master plan that calls for upgrading facilities to resolve leaky roofs, substandard employee workspaces and other issues in existing facilities, as well as consolidating certain operations in a larger space. But they said they were not informed — until recently — of the specifics, including the cost. And that was a huge misstep.
“A lot of people, including myself, expressed serious reservations about the cost of this facility and whether there is too much luxury involved or if there is another more appropriate building and facility” at a lower cost, Austin Mayor Lee Leffingwell told us.
At issue is Austin Energy’s proposed 180,000-square-foot building and accompanying parking areas that are being planned for 18 acres the utility owns at East Riverside Drive and Grove Boulevard, near the Montopolis neighborhood. It would house 600 employees, primarily in its call center and customer service operations. The utility wants to fast-track the process to start construction next year and finish in 2017. Its original cost was $67 million, which has dropped to $59 million, officials told us, because the utility now intends to use the city’s in-house purchasing system for furnishings and technology equipment.
In explaining its decision, Austin Energy spokesman Robert Cul-lick said, after comparing purchasing and leasing options, it made sense to build on property Austin Energy owns. Purchasing a building that likely would be 15 to 30 years old now would mean it would be 45 to 60 years old, and outmoded, by the time Austin Energy paid off its debt. And any older building as well as newer ones would have to be renovated to fit the utility’s needs. By contrast, a new facility constructed on Austin Energy’s land could accommodate the utility’s growth and be built to green building standards and include bike trails, solar panels and public art. That facility would fit with the city’s East Riverside Corridor plan and serve as an appealing anchor in a neighborhood that is lacking such amenities.
“This will be a pretty important office building for East Austin, which typically gets landfills and dumps,” Cullick told us. “This is a pretty standard building. It’s not gold-plated .”
We get that. But the cost still is too high, even if the utility now can afford it. The question is whether that is the best use of Austin Energy profits that city officials estimate will total about $60 million this year. It is possible that Austin Energy customers could be hit with another rate increase in just a few years. There should be a debate about whether profits are used for an expansive facility or offsetting rates and how competing needs are prioritized.
With tax, utility and water bills going nowhere but up, that is a conversation that must happen before any dirt is turned.
It is the City Council, with its eye on Austin’s broader affordability concerns, that is best situated to broker that debate. An appointed board with no direct accountability to Austin Energy owners would be inclined to make such decisions in a vacuum, based on the utility’s interests. The council rejected that option in 2012.
Certainly, no utility governing system is without its problems. But that is all the more reason to err on the side of transparency.
Mayor Lee Leffingwell (right) has expressed“serious reservations about the cost”of Austin Energy’s planned new office building.
~RALPH BARRERA / AMERICAN-STATESMAN
see also: www.statesman.com/news/news/local/concerns-mount-over-proposed-67-million-austin-ene/ngFMp/