Seattle City Councilmember Bruce Harrell

As we begin to examine the City of Seattle’s budget, including Seattle City Light’s budget, it has become clear that City Light believes some form of an increase in your electric rates is necessary to sustain its operations. You may recall the Council reduced expenses from City Light last year and the Energy and Technology Committee closely monitors its revenues and expenses. For 2009, we have reduced its O & M costs by $20 million and capital spending by $40 million. Even with these efforts, the recession and the plummeting cost of natural gas have caused revenue from City Light’s wholesale activity; revenue it receives from selling its surplus energy, to significantly drop. For example, City Light received $161.2 million and $169.9 million in 2007 and 2008, respectively. For 2009, we project wholesale revenues to be less than $73 million. This has a significant effect on the cost and rate structure of the Utility. As we examine rates, the process will be thoughtful and thorough. I recently proposed legislation that modified the older version of the Rate Advisory Committee (RAC) which now consists of nine members made up of ratepayers; four Council appointees and five mayoral appointees. We are currently in the process of identifying the appointees.

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In May and June, our office conducted an aggressive outreach to hundreds of City Light Customers to gauge their satisfaction and experience with streetlight repairs. Our research indicated there were approximately 4,000 of the 80,000 streetlights in need of repair. Night visibility and safety is an issue I am passionate about. I placed this issue on our agenda at the July 15, 2009, Energy and Technology Committee (ETC) meeting. I wanted City Light’s top management to actually hear the real-life, common experiences that our citizens are having regarding their lights. I began the discussion by informing City Light that the streetlight on my neighborhood’s corner had been out for nearly two years as evidenced by its on and off flickering. We provided feedback regarding how customers were treated by City Light when they called in failed lights; how many customers did not realize they had to complain to have their streetlights fixed; and, how effective City Light was perceived by customers regarding their efforts.

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(Note: Some word play in the blog title to commemorate the 40th anniversary of the moon landing.)

Today, July 20, 2009, I presented legislation before my fellow Councilmembers to approve $250,000 in Technology Matching Funds for 19 community projects. Officially, council bill 116584, received the support from all Councilmembers. During the last budget process in 2008, Council added an additional $75,000 for the Technology Matching Fund from the proposed $175,000, demonstrating Council’s commitment to put “People First.”

The number of applications submitted this year was a record high—67 applications were submitted from organizations working to help low income youth, immigrants, seniors and people with disabilities. Grants are awarded to distinctive projects that can be completed within one year. The non-profit organization is required to match the value of the fund granted by the City. Since the inception of the program in 1998, the Technology Matching Fund has awarded over $1.6 million for 134 projects in the last 11 years. This year’s funding will bring the total to $1,850,832 and 153 projects.

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“Reinvesting in Youth” as an organization headed by former elected official Jim Street, has mobilized communities for the purpose of addressing our schools’ dropout issue. Its work has been informative and groundbreaking. Educators and administrators alike agree that schools need the support from the larger community in meeting the challenges faced by struggling students.

The 2007 Legislature established the Building Bridges Workgroup under 2SHB 1573. The Workgroup built a set of recommendations in their December 1, 2008, report to the Legislature and focused on important steps on how to address the dropout issue. Their recommendations were heavily influenced by the “systems” approach utilized by Reinvesting in Youth.

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On February 7, 2009, I posted a piece about City Light’s Boundary Dam facility in Pend Oreille County. I described the on-going talks to reach an agreement of impact payments that City Light pays to Pend Oreille County. Impact payments are designed to cover the costs of the facility’s impacts on the area. You may recall that Pend Oreille County was asking for three times the $1.3 million that City Light has been paying annually. The last agreement expired at the end of 2008 and the parties have been without an agreement for 7 months.

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During the week of July 8th, several local media outlets disclosed the Mayor’s decision to provide a $40,000 performance and retention bonus to City Light Superintendent Jorge Carrasco. Uninformed critics of the Mayor’s decision would suggest that the City Council somehow supported or approved of that decision. To my knowledge, no councilmember was involved in that decision or approved of it. The Seattle City Council’s role, by law and legal charter, is to establish the appropriate salary bands, approve fair and reasonable labor agreements and to set compensation schemes intended to establish and maintain a competitive workforce. The Mayor is provided discretion to manage his direct reports within that scheme and the decision as to when and to what extent he should apply those schemes rests there. His decision was consistent with a 2003 ordinance approved by the City Council and consistent with Carrasco’s employment contract. However, these facts should not be construed as endorsing the $40,000 discretionary decision as critics of the Council would suggest.

Do I think it was prudent for the Mayor to issue an incentive bonus to the Superintendent at this time? No, that would not have been my preference. While some type of retention bonus and incentive bonus could have been justified, I would not have provided the maximum allowed under contract at a time when City Light must reduce its expenses, its wholesale revenues are declining and employee morale needs a boost. During tough times, it is critical to send the right message to your employees and rate-paying customers. I would only authorize the maximum if I believed it were absolutely imperative to the success of the organization.

Many studies in salary treatment and employee performance indicate that salary alone is not the driver of performance. High performance can also be achieved by recognition, respect and through empowerment in decision making. Notwithstanding how I would have handled the Superintendent’s bonus issue, I will respect the separation of powers provided by our charter. The legal compensation scheme we have established is consistent with best practices and provides common employment tools for retention. It did not mandate the payment of a $40,000 bonus but appropriately provides a mayor with a scheme to use sound discretion.

A Seattle Times article pointed out that compensation levels and bonuses of publicly traded utilities are much higher. For example, the CEO of Puget Energy earns $788,906 in 2008 as part of his $3.3 million pay package. The CEO of Avista received $2.1 million in 2008 compensation, including a $404,597 bonus and $1.1 million worth of stock awards. By way of comparison, Carrasco earns $224,000 per year.

While these facts are interesting and to some extent provide a context of bonus awards, they are simply that; interesting and should not be construed as a controlling or binding legal precedent.

People should be concerned with any highly paid city executive receiving a bonus. We are in a recession and unemployment rates are high locally, regionally and nationally. Many residents in Seattle are struggling. While criticism of a discretionary bonus is valid, it should be noted that Carrasco has provided leadership to a utility that suffered from a lack of leadership, long term strategic planning and financial discipline. In addition, it is currently faced with increased costs, challenging state and federal regulation and an inconsistent and declining wholesale revenue stream. While I would not have approved of the bonus, I am glad we are not searching for a new Superintendent during this critical period in our economy.