DEAR MR. UTILITY REGULATOR: You should know about CoMo's missing 'Depreciation Fund'

Could City Hall's violation of two city laws make our power grid unstable?

COLUMBIA, Mo 03/25/15 (Op Ed) -- Dear Mr. or Ms. Utility Regulator: 

Our city-owned utility, Columbia Water and Light, is using regulators as "bad cops" in its latest effort to raise utility rates.   The SERC Reliability Corporation, for instance, is badgering city officials -- they say -- to assure our power transmission network won't fail.   

For that reason, voters must approve Proposition 1 in April to provide $63 million in bond debt and a big rate hike to pay the money back.

If utility regulators are this concerned with Columbia's power grid, they may want to know about the missing "Depreciation Fund" a city commission -- the Downtown Columbia Leadership Council (DCLC) -- discovered last year.  

This missing fund violates two city laws -- the City Charter and a city ordinance.  If the city had established the fund -- which pays to replace aging water and electric infrastructure -- we wouldn't need more bonds and higher rates every year.   

Citing the Federal Energy Regulatory Commission's (FERC) recent ruling on information exchange and transparency between customers and utilities (ER13-2379-002, 003), I'm writing to complain about this missing Depreciation Fund.

Columbia's utility rate hike would be roughly 6% over three years if voters approve the bond issue or, city officials threaten, a 25% rate hike if the bond fails. 

But the DCLC -- appointed by our Mayor and City Council -- argues instead that City Hall should establish this Depreciation Fund.   

"The City Council shall provide and maintain an adequate Depreciation Fund for the purpose of making renewals and replacements," Section 102 of the City Charter -- Columbia's guiding constitution -- mandates for water and electric infrastructure.   "Payments from the revenues of said water and electric light works shall be made into the depreciation fund monthly....Said depreciation fund shall be expended only for making renewals and replacements...or unusual and extraordinary repairs." 

Titled "The Water and Electric Depreciation Fund," Columbia city ordinance 27-44 reiterates the requirement.

"There is hereby created a fund known as the 'water and electric Depreciation Fund....Sums deposited into such fund shall be expended only for unusual and extraordinary repairs and replacements of the water and electric light works."

Despite the legal mandates, City Hall has never established a Depreciation Fund, DCLC members discovered.  Instead, surplus city utility monies are made available for pet admin projects, such as buying "shovel ready" land for favored developers.  

On May 7, 2014, the DCLC heard what group members called "conflicting testimony" about the missing Depreciation Fund. 

"The City Charter and Code of Ordinances specify a Depreciation Fund," DCLC member Brent Gardner told Columbia city manager Mike Matthes.  "Does the City have a depreciation fund?" 

"Yes," Matthes replied.

But when group members asked "how much money is in it," Matthes hedged.  "There’s two meanings to the word 'depreciation' in city government," Matthes told the DCLC.  "One is defined by the Government Accounting Standards Board (GASB).  And one is defined by our Charter.  They’re not the same.  And so I want to first stress that. They’re not the same thing."

City Hall "accounts for depreciation," Matthes continued, but "does not have" the required Depreciation Fund. "When I used the term 'depreciation' earlier, I was talking about more of the GASB approach to it.  We do do that.  We account for depreciation."

But DCLC members, led by local architect Nick Peckham, persisted. "In fact, Columbia’s City Charter requires the creation of 'an adequate depreciation fund for the purpose of making renewal and replacements,'" he said.

"The laws are too old to be obeyed," was the upshot of Columbia finance director John Blattel's testimony.  "Chapter 27-44...was passed at least 50 years ago," Blattel told the DCLC.  "To our knowledge, there has not been a 'Depreciation Fund' for at least 30 years.  Sections 27-42 and 27-43 are also outdated." 

I may be wrong, but any regulatory agency overseeing Columbia's Water and Light Department should have an interest in this missing Depreciation Fund.   The DCLC has made it a cornerstone of a 15-part Infrastructure Report prepared at the request of Mayor Bob McDavid and the City Council.   And without regular replacement of aging infrastructure, Columbia's power grid could fail.  

Signed, 


Michael Martin
Utility Customer