A bill to limit fund transfers from city-owned utilities would decimate municipal budgets and degrade core services. Maybe that’s the point.
San Antonio Express News
Express-News Editorial Board
One front-runner in the long list of the 88th Texas Legislature’s bad ideas is a proposal that would decimate San Antonio’s budget.
Senate Bill 1110 would limit municipal utilities in Texas — like CPS Energy — from transferring revenue to the cities that own them. The potential result for residents? Higher taxes, cuts in municipal services, a hit to the city’s credit rating. It is yet another example of the state infringing on local affairs.
For more than 70 years CPS Energy has transferred up to 14 percent of its revenue to the city annually. In fiscal 2023, that’s expected to add up to $391.8 million or 26 percent of the city’s $1.5 billion general fund, which supports city services, including police and fire protection, street repairs, sidewalks, libraries, senior centers and drainage projects.
If this bill were to pass, and we are skeptical it will, the city would have to significantly cut basic services.
“SB 1110 would cause a catastrophic loss in revenue that would negatively impact services to our community, the city’s bond credit ratings and capital programs,” Ben Gorzell, the city’s chief financial officer, said during a Senate Committee on Business and Commerce hearing on March 21.
At a City Council committee meeting March 8, Assistant City Manager Jeff Coyle called the proposal “the biggest, potentially most damaging piece of legislation we’ve ever seen.”
The bill’s author, Sen. Charles Schwertner, R-Georgetown, said, “It’s not a ban on transfers. This is certainly an area that a lot of municipalities get great benefit from. I just don’t want excessive transfers. That’s the genesis of this bill — an inappropriate transfer that overly burdens utility ratepayers, by enterprising city councils that want to utilize the utility as, basically, a piggy bank to fund whatever they want in their general fund as a city.”
Who is Schwertner to define how cities use revenues from city-owned utilities? He doesn’t represent San Antonio. There is already a mechanism to hold municipal governments accountable for their policies and decisions. It is called an election.
Despite Schwertner’s sentiment, the filed bill states: “Notwithstanding any other law, a municipality may not transfer revenue from a municipal utility to the general fund of the municipality if the transfer would result in a rate increase or financial deficit for the municipal utility.”
And: “A municipal utility may not include transfers of revenue from a municipal utility to the general fund of the municipality in the municipal utility’s cost of service study.”
Schwertner, an orthopedic surgeon, tried to make the case that some city councils are using utility transfers to boost city coffers, but he offered little evidence, and no witnesses testified to such problems at a March 21 hearing.
Utilities can request rate increases and city councils can deliberate and vote on them. San Antonio’s City Council last approved a 3.85 percent rate increase in January 2022.
And CPS Energy has returned millions back to taxpayers. In September, San Antonio City Council approved a plan to return a surplus of $42.5 million to CPS ratepayers. Critics, and we were one of them, argued the money could have been better spent on weatherization and other projects to bolster energy efficiency and renewable energy sources. But the point is, here is an example of elected leaders returning surplus funds to ratepayers.
Not surprisingly, the Texas Public Power Association, which represents the state’s 72 municipally owned utilities, opposes the bill. The two largest cities on the list, San Antonio and Austin, have lower energy costs than El Paso, Corpus Christi, Houston and Dallas, where power companies aren’t municipally owned.
The bill remains stuck in committee, and that’s where it should stay. Such a proposal is neither grounded nor sensible. It’s just another asinine attempt from a lawmaker looking to create a problem where none exists. One day, Texans will tire of this.