BVU Board Members Seek Break From City

BRISTOL, Va. – The board of Bristol Virginia Utilities wants to break away from the city and establish a separate governmental authority.
On Monday, BVU’s board of directors unanimously recommended that the City Council approve its request and ask the Virginia General Assembly to create a Bristol Virginia Utilities Authority. The authority would function as a subdivision of the commonwealth, much like other utility authorities.
The ordinance will appear on the agenda of the council’s Oct. 13 meeting for the first of two readings.
“This would allow us to run BVU as a business and shields us from the political process coming into decisions,” BVU President and CEO Wes Rosenbalm said after the meeting.
BVU is currently a division of the city, which means publicly elected City Council members have some oversight – particularly when it comes to the purse strings. BVU can’t borrow money or raise rates beyond a certain point.
Under the proposed change, the council would still appoint a majority of the BVU board members, but a BVU authority could borrow money, file lawsuits and impose rate increases greater than the 4 percent currently allowed without City Council approval.
Rosenbalm said the change would allow BVU to borrow money to make repairs or improvements to its infrastructure without the political implications of a council vote – especially in the current tight economic climate.
But BVU is in no hurry to tack on additional debt, Rosenbalm said.
“We could have an impeccable business plan and know we couldn’t execute it, because we didn’t have the dollars to do it with,” BVU Chief Financial Officer Stacey Bright said.
Under the plan, the responsibility for paying off BVU’s $49 million in revenue bond debt would shift solely to the new authority. While BVU is currently responsible for paying off that debt through customer revenues, the money was borrowed by the city.
“The debt has been incurred by the city, because they had to go to the market to borrow the money,” BVU attorney Walt Bressler said. “We think we can get transfer of that debt once the authority is in place. It will take some approval from the bond-holders to do that. If we can’t do that, we will simply go to the market, borrow the $49 million, transfer it to the city and they can use it to pay those debts as they come due,” Bressler said. “But we expect the transfer to take place.”
Mayor Jim Rector, a BVU board member, supports the proposal.
“This takes away a layer of bureaucracy that affords the administration and utility board a chance to function in a businesslike manner,” Rector said. “In order to keep up with the competition, you need the revenue to make the purchases you need to remain competitive.”
The authority concept has been discussed for years, but shifted into higher gear earlier this year, board Chairman Paul Hurley said. Monday marked the first time it was presented in a public session.
“BVU has been looking at converting to an authority for several years,” Hurley said. “We started back on the process a few months ago. We’ve talked to individual City Council members one or two times, BVU board members, business, industry, ratepayers and got input from them.”
If approved, the plan would also help improve the city’s financial situation beyond its indebtedness, Hurley said.
The authority act includes written assurances that BVU would continue making its annual $350,000 payment in lieu of taxes to the city for its electric system property. BVU would also continue funding $500,000 each year for the city’s economic development efforts, Bressler said.
In addition, BVU would begin paying the city $100,000 per year – for 10 years – in lieu of taxes for assets of its water and wastewater divisions.
BVU also would begin paying the city an estimated $100,000 a year – beginning in 2013 – for payments in lieu of taxes for the assets of its OptiNet division, under the plan. That amount could increase if OptiNet continues expanding its customer base, Hurley said.
“The purpose of the last two is to try to do, from here, what we can to add some revenue to the city revenue stream, which is shrinking rapidly due to state budget reductions,” Bressler said.
Board members discussed the proposal for almost an hour Monday before voting. “I see this as a natural progression and the next step,” board member Faith Esposito said in making a motion to approve the plan. “I can’t think of any negatives.”
Customers should experience little difference, Bressler said.
“What they don’t see is the business decisions we make that have produced the growing curve of revenue that has kept the rates low,” Bressler said.
In the past 10 years, BVU customers have seen four water rate increases and two for sewer service. In seven years of operation, OptiNet cable customers have had two price hikes, while telephone and Internet rates have not changed.
The greatest rate fluctuation of the past decade has been for electric customers, influenced both by changes in the market and BVU’s move through different power providers.
While BVU would control the rates for its OptiNet, water and sewer services, the Tennessee Valley Authority would maintain control of electric rates. The State Corporation Commission would oversee telephone rates.
Customers shouldn’t assume those rates will rise, Rosenbalm said.
“We’ve not abused that power. Our history shows that the things we could have done [rate hikes], we have not done. We’re prudent at what we’re trying to do here,” Rosenbalm said.
The act would also continue prohibitions on mixing money from the various BVU divisions.
“The divisions will be the same divisions we had before. We will be limited, in terms of cable [TV] service to the same territory we’re limited now – which is a pretty severe limitation – but we’re not trying to expand those powers in any way,” Bressler said. “BVU would also be protected in its electric system footprint, meaning nobody could come in here on us.”
BVU currently provides power to the city, a portion of Washington County, Va., a small, contiguous section of Scott County and a handful of Bristol, Tenn., residents who live on the state line.
If the act is ultimately approved, an eight-member board would oversee the authority – compared to the current seven-member board. Its would include four current citizen board members whose terms would be extended for at least four years, Bressler said.
The new board would also include one City Council member and one additional Bristol, Va., resident, appointed by the council. The BVU board would also appoint a citizen member and the Washington County Board of Supervisors would select a member of its board to continue serving.
“We are proposing to expand the powers of that [county] appointee to vote on everything that comes before the board,” Bressler said.
Currently, Dulcie Mumpower, a county supervisor and BVU board member, can only vote on matters affecting the electric system. However, BVU now offers telecommunications, water and sewer services to many county residents.
Mumpower said she supports the authority plan.
Once the terms of current members expire, the board would be comprised of one member of City Council, one Washington County supervisor, three city residents chosen by the council and three more city residents chosen by the BVU authority board.
The Oct. 13 council meeting is scheduled to begin at 7 p.m. at City Hall. A public comment period isn’t required, but will be scheduled, City Manager Bill Dennison said.

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