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Lodi City Council is making a mistake by borrowing money from the state instead of electric utility
Monday, August 24, 2009 5:36 AM PDT
"Utterly ridiculous." I thought about that before I said it. You see, I thought it would be utterly ridiculous if the City Council didn't take $1.2 million from the electric utility to fill the budget gap caused by California borrowing about $1.2 million from Lodi's share of property taxes.
Well, after the actions on Wednesday night, I will say it again — utterly ridiculous. That is what I think of the council's decision to join other agencies in borrowing money to fill the gap and, if that doesn't work, to "borrow" the money from the PCE legal settlement fund. Either move would be utterly ridiculous.
Our electric utility has about $13 million in reserves; reserves that are your money and my money. This number represents a little more that two months of expenses for the utility. Now that may not sound like much, but let's not forget that the utility is a monopoly, in that we are all customers and we have no choice but to buy from it.
The decision by our council not to use $1.2 million of the utility's reserve shows just how out of touch our council is with the operations of the electric utility. If they use their own formula for the reserve and they add the Energy Cost Adjustment, the reserve doesn't need to be more than about $11 million.
Those on the council who are worried about the utility's credit rating must also want to save money for a future tornado or flood. Why does the utility need a high credit rating? So it can borrow money at a lower interest rate.
Does the electric utility have any variable rate debt? No! Does the electric utility plan to issue any debt (sell bonds) in the near future? No!
Those are not my answers, but answers from city hall.
So again, what does the credit rating have to do with any of this? My answer — it shouldn't have anything to do with it.
With $13 million in the bank, our City Council is going to borrow. Sure, when California pays the money back to us, we will get interest, but there are costs involved so this will not be free.
Also, "borrowing" from the PCE legal settlement fund, the second option, is a bad idea because, what if California takes its time to pay it back? Aren't we supposed to be using that money to clean this mess up?
Sooner or later, our City Council will come to realize that we are all paying high utility rates while the electric utility accumulates cash and that our return needs to be increased.
Shifting gears to last week's topic, park patrols, I found out that the Police Partners do currently spend a portion of their time at the parks. I also found out that a reserve police officer, Matt Liu, volunteers — yes, volunteers — four to six hours per week, mostly on Sundays, patrolling at Lodi Lake.
Now you may say that I should have done better research on this before last week's column, but the information that I used did come from city hall.
I applaud the Police Partners and Mr. Liu for volunteering their time to help make Lodi's parks enjoyable for everyone.
Finally, you probably know that you cannot feed the birds at Lodi Lake — a law that I think is dumb. Well, I guess since they cannot feed the birds they are going to feed the squirrals in the nature area.
If you are the person leaving piles of sunflower seeds and cat food in the nature area, I have a message for you: Let the little squirrels climb the trees and get a nut — they will be healthier and less aggressive.
John Johnson, CFA, is a Lodi-based business appraiser. Contact him at john@johnejohnson.com or 369-1451.
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lynn wrote on Aug 27, 2009 10:01 AM:
You state the bond is structured so that the state has to repay the loan not the city. Do you really think the state will have the money to repay the bond when it is due? If they don't then what? They will come back to the cities and take more money to pay it off. The state needs to stop the games and cut the budget for real, not with smoke and mirrors. "
lodidian wrote on Aug 25, 2009 10:23 PM:
dogs4you wrote on Aug 24, 2009 2:36 PM:
Switching gears as John likes to say, seems the Lodi CC and Electric are stuck in 1st gear.
Don`t feed the birds, I`ll go with that since goose poop looks like a large dog or dogs have made daily visits to the lake. Don`t feed them and maybe they will fly away, NOT, since they continue to be fed, they are so fat they can`t fly in the first place. And all the squirrels are not to be found at the lake, many show-up at CC meetings. "
Gator wrote on Aug 24, 2009 7:46 AM:
such purchases. That is the price you pay for having little Generation. All
you need to do is go back to the energy crisis a few years back and see how
the price of electricity can fluctuate. In San Francisco at 77 Beale street PG&E has a secure office manned 24x7 where power is bought and sold
all over the western Grid. Lodi’s sources are very limited and that is a big
reason to have good credit and a reserve fund at the ready. Bonneville Dam
has 8 generating units for a total generation of 532 mega watts and part of
that comes to Lodi. That is one of the dams on the Columbia and Snake Rivers and there 18 more. So it’s not as simple as you make it out to be. Lodi could have had their own power plant to bad it didn’t get done… "
mark wrote on Aug 24, 2009 6:31 AM:
As far as last week's article, it sounds like you should have done some better research. Why would you use information from City Hall regarding police patrols? I would think the Police Department would be the clear choice as the best source of information on their own patrols, and you would have found out this information before the article actually printed. Anyway, just a thought. "
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