Sen. Charles Schwertner, R-Georgetown holds a press conference to discuss recent energy bills in the works at the Texas State Capitol, Austin, TX Wednesday March 9, 2023.
San Antonio Express-News
Megan Rodriguez
Higher taxes and a massive reduction in municipal services could be around the corner for San Antonians if a bill making its way through the legislature becomes law, city officials told state lawmakers this week.
“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 Tuesday.
The powerful committee's chairman, Sen. Charles Schwertner (R-Georgetown), authored the bill.
CPS Energy is expected to hand over a total of $391.8 million to the city this fiscal year, which ends Sept. 30. The money will make up 26 percent of the city's $1.5 billion general fund, which pays for services such as police and fire protection, street repairs, sidewalks, libraries, senior centers and drainage projects.
The utility, acquired by San Antonio by 1942, transfers up to 14 percent of its revenue to the city annually.
Gorzell, who is also the city’s supervisor of public utilities, said that if Schwertner's bill passes, the city will have to significantly reduce services and potentially increase taxes to make up for the loss of CPS revenue.
At City Council committee meeting on March 8, Assistant City Manager Jeff Coyle called the bill "the biggest, potentially most damaging piece of legislation we've ever seen."
Austin would suffer a similar fate. Ed Van Eenoo, the city's chief financial officer, said Austin officials would have to increase property taxes or cut city services.
Van Eenoo said Austin Energy revenue represents an "important" share of the city's general fund, though Austin has leaned on it less over the years. Even so, he said the revenue transfers add stability to, and help diversify, the city’s sources of revenue. Taking away Austin Energy's revenue could result in credit-rating downgrades, which would make interest on the city's bonds more expensive.
“This proposal outlined in this bill would undermine our ability to prudently operate our electric utility and return that value to our community and customers as we have done for over 125 years,” said Mark Dombroski, Austin Energy's deputy general manager and chief financial and administrative officer.
Schwertner, however, said his bill would not ban all transfers.
The bill's two key provisions say: "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."
Electric utilities' rates are based on the cost of providing services to their customers. SB 1110 would bar CPS and other municipal utilities from including revenue transfers to the cities that own them in their cost analyses.
“It’s not a ban on transfers,” Schwertner said. “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.”
Thomas Gleeson, executive director of the Public Utility Commission of Texas, got down to basics at Tuesday's hearing, saying it's a long-standing tradition for a portion of the utility's profits to go to its owners, whether it's publicly or privately held.
The San Antonio Chamber of Commerce and Texas Public Power Association, which represents 72 of the state's municipally owned utilities, both oppose the bill.
Schwertner's bill wouldn't affect city-owned water utilities, such as San Antonio Water System. SAWS transfers 4 percent of its annual revenue to the city, which this year will total an estimated $31.4 million.
Megan.Rodriguez@express-news.net