Solid reasons for separation of BVU from city

Next week, the Bristol Virginia Utilities Board, created as a division of the city, will make the second of two requests to reinvent itself as a separate authority. The plan has the unanimous support of the BVU board and three members of the City Council.

On Tuesday, proponents hope to get unanimous support from the council members.

Two weeks ago, this newspaper urged clarity and explanation on how and why this move would be an improvement for existing ratepayers and the city taxpayers, who deserve to benefit from any change. In an editorial board meeting with this newspaper Wednesday, we got the answers we sought.

BVU CEO Wes Rosenbalm and a team of board members and utility officers made their case that a separation from the city is in the best interest of ratepayers – and taxpayers.

Some of the reasons are financial.

BVU has multiple audiences because it provides multiple services – water, sewer, electricity, cable television, telephone and Internet. But for each, the fundamental mission is the same: To provide quality, reliable, low-cost service to customers.

In the case of water and sewer, BVU is the only likely provider to ever bring service to Bristol, Va., residents. The cost is too great and the lines are already laid. Plus, Bristol’s system is leaking water to the tune of about $275,000 a year. To repair the leaks, the system needs a $30 million upgrade. That’s an investment that could prove burdensome for a cash-strapped city, but could be covered more easily using revenue bonds issued by a separate authority.

Some of the reasons for the spinoff are for proper service to customers.

Rosenbalm pointed out that some service measures would not increase revenue, but still are important for customers. Among them are so-called “smart meters” that would allow customers to regulate their water and electricity use more efficiently, but would cost an estimated $6 million. Is Bristol going to fund that expense, especially considering it leads to less consumption, and potentially less revenue? Still, the result would be cost-savings for the customer, something BVU should be focused on as a good steward, Rosenbalm stressed.

We agree. Customers need tools to manage their costs and they expect a modern utility provider to offer those tools.

A big reason to support the split is growth.

Rosenbalm noted that BVU increasingly has developed broadband Internet outside the city of Bristol, and those projects are bringing hundreds of jobs to the region. Much of that work was funded by grants, according to BVU CFO Stacey Bright. Another $3 million could be granted next week, by the Tobacco Indemnification and Community Revitalization Commission.

But BVU can’t rely on grant funding forever and Bristol taxpayers can’t be expected to fund projects outside city limits. Yet if BVU were a separate authority, it could base its borrowing on the strength of the revenue generated by all its utilities, and all of its customers.

The group offers multiple safeguards contained in the proposed spinoff agreement.

Bright said people who oppose the plan have said they fear BVU’s assets could be sold, or they claim that BVU itself is a valuable asset of the city that should not be relinquished. She noted that the agreement and utility regulations prevent the sale of the utility’s assets. She also said BVU manages its own debt, through its ratepayers, and would do so in the future.

BVU does provide a considerable return to the community, she said. That too would continue under the spinoff plan.

Currently, BVU funds economic development for the city at a rate of $500,000 a year, and makes a $350,000 payment each year in lieu of taxes for electricity. Those contributions would continue. Plus, beginning in 2013, the utility would contribute another $100,000 a year in lieu of taxes from OptiNet revenues. That payment in lieu of taxes would be recalculated annually.

That contribution also will grow as broadband grows – and rest assured, it will.

If BVU is allowed to become a separate authority, it will be able to expand broadband service more aggressively into a 75-mile radius outside the area where it can provide electricity service. The area is ripe for business development along the I-81 corridor. Just as the broadband development in Russell County helped draw CGI-AMS and Northrup Grumman, this expansion would guarantee more jobs for existing residents and their families.

Flatly, BVU has worked so hard and spread so far that it has already outgrown the geographic boundaries of its launching.

And, as Rosenbalm stressed – and we strongly agree –  developing a larger customer base is key to keeping rates stable for everyone.

To draw more jobs to the region and create more customers for the system by providing more broadband Internet service, BVU should be allowed to become its own authority, with proper oversight.

The spinoff proposal includes the necessary safeguards for the public – the board currently is subject to the Freedom of Information Act and would be in the future. That means citizens can attend all meetings, read all minutes, and local media must be notified of meetings. It also means all documents are subject to review by citizens and the media.

The board would be made up of eight members, seven of whom would be chosen by the Bristol City Council or the authority. Washington County also deserves representation and would have one member. But city interests are not lost by the change, a common fear that has been expressed.

Members must rotate off the board after two consecutive appointments; again a measure we support. Bristol has plenty of talented people and we support new blood on this board to get new ideas, and to prevent cronyism.

Clearly, telecommunications laws are complicated, but the reasoning for the spinoff is simple and worthy of support. To supply high-speed broadband to more of the region, BVU must branch out further. For about six years, most of the growth has been covered by grants from such groups as the tobacco commission. Bristol city doesn’t have the ability to pay for new multi-million dollar projects on its own.

Those goals can be reached more efficiently as an independent authority, but BVU must continue its adherence to low rates, transparency to the public and generating its own cash. We expect to see the authority capitalize on its work and bring even more high-tech jobs and opportunity to the region.