Aug 24 2009
As the City Council awaits Mayor Nickel’s budget proposal, it is no secret that the ensuing process will be arduous. The city is faced with a budget gap of $72.5 million. You may have read in The Seattle Times on August 7, 2009, that the City is exploring the idea of employee furloughs. Under the current proposal, uniformed police and fire personnel and employees represented by the International Brotherhood of Electrical Workers Local 77 (IBEW) will not be requested to take furloughs. I recognize the need to minimize service disruptions in these critical areas because they are essential to keep our city functioning. As you know from previous postings, City Light is also facing a significant budget shortfall because of less-than-projected wholesale revenue. As part of the budget process, it is prudent to review rates and prepare for budget cuts. Before cuts are made, I am directing the Utility to take a hard look at reducing expenses that would minimize the impact on customers and employees.
In a letter to Superintendent Carrasco, I proposed cost cutting ideas for City Light to explore which will decrease the budget shortfall and minimize the impact on customer rates. The intent of the letter is to make sure the Utility remains creative as they look for solutions. As City Light moves forward, it is imperative that the utility make smart investments and cuts and that it knows the direction that the Council wants them to head. Below is my letter.
August 17, 2009
Seattle City Light
Superintendent Jorge Carrasco
700 5th Avenue, Suite 3200
PO Box 34023
Seattle, WA 98124-4023
Based on the last several months of reviewing our region’s economy, the national economy, and more specifically, Seattle City’s Light’s financial projections and budget, I wanted to provide you with some preliminary thoughts and policy direction as we prepare for 2010 and beyond. In light of the financial challenges that City Light faces from rising costs and falling revenue, I urge you to consider the following measures to minimize the size of any future rate increase and to mitigate the impact of necessary cost containment efforts on the Utility’s service levels and workforce.
These topics are not presented in order of priority and should be viewed as inter-related mechanisms toward a common goal:
1. Review City Light’s real estate inventory. City Light has a number of pieces of real estate throughout the city for which it has no apparent or current use. Some of these properties may be slated for use or for a particular purpose in the near future, but for others there may be no near-term purpose at all. You should consider disposing of many of these properties to help offset the shortfall in revenues this year. I am confident that the Department of Executive Services will cooperate in moving any properties through the city’s surplus property review process so that they can be brought to market quickly. We have attached a preliminary list of surplus properties as Attachment A, indicating a combined assessed value of $27,242,700.00. In the alternative, if the utility can demonstrate a compelling need or basis to continue holding such properties in their current condition, please provide us with the rationale or business case.
2. Curtail consulting contract expense. Although consulting contracts may be an expedient way to accomplish certain tasks, in difficult times like these where the utility is obliged to cut back on its labor costs, it signals the wrong message to the workforce to give work to consultants. I believe heightened sensitivity and an increased scrutiny should be used when issuing consulting contracts.
3. Think outside the box in cutting labor costs. In the event that cost containment requires reductions in labor costs—which seems likely at this point given that labor costs are the largest component of your discretionary costs—you should consider engaging the workforce, through appropriate channels for represented employees, in a discussion on ways to achieve savings without resorting to layoffs. While we monitor the discussions of work furloughs throughout the city, it will be critical to have an open and transparent dialog with your labor force in order to reduce expenses. I continue to believe that suggestions from your labor force will generate ideas that compliment the parallel talks throughout the city regarding work furloughs.
4. Changes in Financial Policies. The Energy and Technology Committee has reviewed the financial policies in place at City Light as well as recommendations coming from the advisory committee. In the event that the Council believes any change to the existing financial policies are necessary without jeopardizing the financial health of the utility, we would require that the utility be in a position to monitor the real time-effects of such changes such that the utility’s operations or credit ratings are not put at risk. Examples of the financial policies are its current cash reserve requirements or the confidence percentage attributable to wholesale revenues. The need to monitor our credit ratings increase when changes in financial policies occur.
While I assume that you are aware of these parameters based on our previous conversations and work you have already performed, I wanted to assure you of my support in your efforts to find ways to meet the current challenges with the minimum impact to City Light’s customer service.
Bruce A. Harrell
Chair, Energy and Technology Committee