Council OKs continuing muni process

BOULDER – The Boulder City Council voted 6-3 Tuesday night to give final approval on third reading of an ordinance allowing city staff to move forward with the process of acquiring Xcel Energy Inc.’s distribution system for the purpose of creating a municipal electric utility.

Xcel issued a statement regarding the acquisition ordinance approval that read in part:”While not completely unexpected, it is unfortunate that the majority of city council voted to move ahead with the authorization to condemn our business and facilities in and surrounding Boulder. We have identified numerous deficiencies and overly optimistic assumptions used in the city’s analysis and we remain convinced that Xcel Energy can help Boulder accomplish its energy and environmental goals faster, better, and at a lower cost than through the expensive and risky path of municipalization.”

The most discussion was on the council’s decision to place a debt-limit measure on the November ballot to compete with a citizen-initiated and Xcel-backed measure that municipalization supporters believe would kill the feasibility of a city-run utility by creating too many restrictions.

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Council voted 6-3 for emergency approval of a ballot measure that asks voters to place a $214 million limit on the total price the city would pay Xcel for acquisition of its assets plus stranded costs – the costs Xcel would be owed to compensate for investments it had made in serving Boulder customers for some future period.

The decision to add stranded costs under the debt limit was one of several changes from the version of the ordinance council approved on second reading. Because changes were made on third reading, the ordinance required emergency approval, and thus a two-thirds majority rather than a simple majority, because Tuesday was the deadline for placing measures on the ballot. That requirement nearly halted the measure.

City staff, which had advocated for the alternative measure, began the discussion with an about-face, offering up four different versions of the ordinance but recommending that city council not place an alternative measure on the ballot.

City attorney Tom Carr said a municipal utility faces significant challenges regarding the issuance of debt just by the requirements already in place in the city charter. After talking with financial advisers and bond counsel, he feared that the city hadn’t had enough time to craft a measure that addressed all risks associated with placing a specific debt limit on the ballot.

“I think that the concept is good,” Carr told council. “The idea of giving the voters a choice is good. But the risk that it could go south because of the unintended consequences of these things is there.”

The idea of an alternative measure came after the group Voter Approval of Debt Limits turned in a petition for a ballot measure that would require an election to approve the amount of any debt issued by a municipal utility going forward, not just acquisition and stranded costs.

The initiated measure would also require that utility customers outside city limits be allowed to vote in such elections, and it would limit those elections to the dates of general elections every other year.The city’s alternative measure adopted Tuesday attempts to give potential nonresident customers assurances that they’ll be treated the same as residents with regard to rates and allowed to serve on a utility advisory board but not allowed to vote in debt-limit elections, an aspect the city argues is illegal.

Council members Suzy Ageton, George Karakehian and Ken Wilson – the same three members who have voted against the ordinance to start acquiring Xcel’s assets – all expressed support for placing no alternative measure on the ballot.

Karakehian is no supporter of municipalization, but he said that the alternative measure could place more limits on a municipal utility than are necessary if the city wishes to form one. He and other council members noted that the initiated measure has holes that could very well lead to its defeat, and that money should be spent fighting that rather than pushing the alternative measure.If both debt-limit measures pass in November, the one that receives the most yes votes prevails.

“As much as I want to establish a maximum dollar amount, I really believe this creates a problem potentially in the future for us,” Karakehian said.

Mayor Matt Appelbaum led the push for the alternative measure, as well as for including stranded costs under the limit. Appelbaum said he believed it was important to address the concerns of citizens who fear the city might have a blank check in creating a municipal utility and of citizens worried nonresident customers wouldn’t have enough protections.

Adding stranded costs, he said, was important because that is what the city included in its modeling assumptions, and that aligning those numbers made the debt limit more transparent to voters.

He believed it was important to say to voters, “Yes, we are confident we can acquire this system with an upper bound.”I think this is a chance for our citizenry to weigh in,” Appelbaum said.

Wavering by a pair of municipalization supporters on council nearly derailed the alternative measure. Tim Plass supported a version of the ordinance that merely reinforced the debt-limit measures already in place in the city charter but that added in the other aspects like protections for nonresident customers.

Plass said he worried that placing a specific number on acquisition and stranded costs potentially creates a situation where the city’s own ballot measure would kill municipalization if the city’s cost projections were off by even a little, even if the utility could have otherwise met the charter requirements.

But ultimately, Plass agreed to go with the measure with a specific debt-limit number because he preferred that versus no measure at all.KC Becker was the other muni supporter who agreed with Plass that a specific number might unnecessarily limit the utility, and she considered strongly voting against the alternative measure because of the unpredictability of what the true costs of acquisition might wind up being if the city has to take Xcel’s assets in condemnation court as is anticipated.

“Juries don’t favor governments in condemnation very often,” Becker said. “The outcomes are not well-known when you go into litigation.”

But she, too, eventually sided with the other pro-municipalization members of council despite her concerns and city staff’s recommendation.

Said member Suzanne Jones in promoting the alternative measure: “I think we do owe it to people who have some distrust in government that we won’t proceed at all costs. I do think we need to set a cap even though that is risky.”

Earlier in the evening, the acquisition ordinance was passed without discussion after a lengthy public hearing on second reading two weeks ago. Final approval was also given to an ordinance accepting the findings of an independent evaluator that concluded the city’s models for a municipal utility were indeed feasible in meeting charter requirements.

The council also formally placed the citizen-initiated debt-limit measure on the ballot, though that was a formality as citizen-initiated measures are required by law to be placed on the ballot.