Monthly Archive

A group led by TC resident Paul Nepote has turned in signatures to put the city’s non-discrimination ordinance on the November ballot. The signatures still need to be reviewed but there appear to be enough of them.

I supported the non-discrimination ordinance at the city commission and I will support it with my vote as a city resident in November. My reasons were here: http://planfortc.com/2010/08/07/protecting-the-rights-of-everybody-august-8/

Despite the potential for controversy, getting an issue decided directly by the voters is never a bad thing.  I do hope residents will remember the two predictions made by opponents of the ordinance last summer and fall:

1. that it would drive away business from Traverse City

2. that the city would persecute people for their religious or personal beliefs.

It’s been 9 months since the ordinance went into effect.  The complete failure of these predictions to come true is really worth thinking about. 

I’m sure more discussion will follow in the months to come.

In the late fall of 2009 the city manager and I discussed a plan to devote more resources and effort to grant-writing. The idea was inspired in part by comments to this site by John Snodgrass and Matt McDonough about the bayfront plan.

At that time, there were already grant writing efforts underway in TC but this represented an increase in focus and emphasis. The city commission embraced and supported the strategy. There were three reasons for it: 

One, there are many quality projects in the Traverse City queue that could enhance our community if we could fund them.

Two, at the time we started it in 2009,  economic forecasts said our local revenues were going to be flat or down, and a greater emphasis on grants was the only viable strategy for increasing the capital and operating dollars we had to work with.

Three, for all the divisive issues the city deals with this was an effort almost everyone could get behind. It offered boards and staff the opportunity to work on legacy projects in addition to the day-to-day business that consumes so much time and energy. It was responsive to the valid concern about city tax dollars often being spent in ways that benefitted the larger community, by bringing some money from the larger community into the city. And many of the grants were made possible through partnerships with stakeholders in the broader community. 

The city recently compiled a list of grants received over the past fiscal year. The city’s total was over $4 million. Highlights in round numbers include:

• 8th St master plan demo project – $100,000 from the U.S. Dept of Housing and Urban Development for design, engineering and data collection. Info on the project is here: http://planfortc.com/2011/03/31/8th-st-master-plan-demonstration-project/
• Energy efficiency – $16,000 for efficiency upgrades at the wastewater plant, $73,000 for lighting, and $157,000 for partner organizations to do 420 neighborhood residential audits (the energy “sweep”). Info on the sweep project here: http://planfortc.com/2011/03/09/an-energy-sweep-and-the-tabu-lounge-closes/
• Police and fire – $136,000 in Homeland Security and other grants for equipment, training, and enforcement of drug and alcohol laws. 
• Century Inc. expansion – $750,000 in Community Development Block Grant funds that pass through the city for an expansion that will add 35 jobs to the company’s payroll.
• Brown Bridge dam removal – $1 million from the Great Lakes Fishery Trust, which will be added to over $1 million in federal funds obtained by the Grand Traverse Band of Ottawa and Chippewa Indians and partner organizations for the project. More info here: http://planfortc.com/2010/12/02/another-1-million-for-the-boardman-river/
• Senior Center – $30,000 from the Grand Traverse Band for the Senior Center capital campaign.
• South Campus entrance – $664,000 in MDOT grants for the south campus entrance road to the historic barns and Grand Traverse Commons campus. (about $288,000 of this was money to replace the Grand Vision funds that were lost). More info here: http://planfortc.com/2010/12/19/snow-trash-and-the-south-campus-entrance/
• Bayfront plan – $450,800 from the MI Natural Resources Trust fund, and $452,500 from the local funders collaborative, for a total of over $900,000 of grant funding to which $450,800 of DDA match is added for a total of almost $1.4 million. More info on the trust fund grant is here:  http://planfortc.com/2010/12/01/money-for-the-bayfront/   More info on the funders collaborative is here:  http://planfortc.com/2011/03/11/more-for-the-bayfront-local-version/ The recent grant from DTE for the stream through the old zoo property is mentioned here:  http://planfortc.com/2011/06/02/more-money-for-the-bayfront-from-dte-for-the-stream/

One thing to note is that while the funding is in place, most of these projects have not been done yet – so we are in the next year going to start seeing the fruits of these efforts. 

Another thing to note is that we as a city have gotten good at convincing others that we are a good place to spend money earmarked for making quality communities.  When city planner Russ Soyring and I went to the Trust Fund meeting last November to pitch the bayfront project, MNRTF chairman Dennis Muchmore made a point of noting to the many other applicants that Traverse City seems like it gets more than its share of funding, but that’s because Traverse City always brings forward such quality projects that it would be hard to turn us down.

The success of efforts like these is a real testament to the work of city staff and volunteer board members, and it’s my hope that these kinds of efforts will continue after I leave in the fall.  It’s a strategy that’s working.

Later this week we’ll take a look at funds available internally within the city that could be used for placemaking, and how we could get started this year on more visionary upgrades to our neighborhoods and public spaces.

The city commission will take a second shot at approving the TCLP budget Monday night. This is a very important vote, for two reasons. One is is the resident dividend concept described a couple entries below on this site.  The other is a ramp up of energy efficiency spending.

The energy efficiency proposal has the potential to be game-changing. Passage of this budget would enable TCLP to save us money, keep more money in the community that we now export for power supply, and position us once again as the green energy leader in Michigan.

TCLP has been spending about what it is required to spend on energy efficiency by Public Act 295 of 2008 – the Michigan Clean Energy law.  The law refers to Energy Optimization, or EO, which is a combination of energy efficiency incentives, conservation measures, and activities to manage peak demand on the utility’s system (also called load management).

In FY 08/09, the utility spent $170,000 on its EO program which was about 0.6% of its revenues, and exceeded the 0.3% energy savings target mandated by the new law by a fair margin.  EO program spending went up to $275,000, or 1.0% of revenues, in FY 09/10 to meet a higher target of 0.5% energy saved under the new law, and again TCLP exceeded the target. In FY 10/11, TCLP spent about $391,000, or 1.3% of revenues, on its EO program to again meet a higher target under the law.

This year, TCLP proposes to spend $526,000 to meet this year’s energy savings target under the law, plus another $500,00 for Increased Energy Optimization Efforts, for a total of $1,026,000 in energy efficiency spending, which would be 3.1% of the utility’s revenues and would be an unprecedented commitment for a utility in Michigan.  This proposed budget would, on a pro rata basis, make TCLP the state’s leader in committing its resources to saving energy. 

What are they proposing to spend the money on?  A whole bunch of things. 

A lot more engineering goes into a good EO program than you might think.  Basically, the program consists of three elements – energy savings measures, determinations of what to spend on each measure to ensure that it gets installed and used, and a determination of how much energy is saved by each measure.

The measures are listed in a database kept and updated through an industry collaborative process at the MI Public Service Commission.  The database is called the MI Energy Measures Database, and you can find it here: http://www.michigan.gov/mpsc/0,1607,7-159-52495_55129—,00.html. (Click on 2011 MEMD master database)

The data base is a spreadsheet that lists categories of users (residential, commercial, industrial), measures that save energy, the amount to be spent on them (usually as an incentive to purchase), and the “deemed energy savings” that is projected to occur if they are in use. 

To use the simplest example, consider a residential CFL light bulb as the measure. The cost to the utility is the cost of the incentive for the light bulb. So if for example TCLP needed to provide a $1 coupon for each bulb to incentivize the customer to purchase it, the cost of the incentive is $1. The deemed savings is determined by taking the energy used by the “base efficiency level” (an incandescent light bulb) minus the energy used by a CFL bulb, over the lifetime of the CFL bulb.

That number is then adjusted by some value to account for the people who would have purchased the bulb without the incentive, for the fraction of the bulbs purchased but not installed, etc. The energy that could be saved by all the bulbs purchased with the coupon is the gross energy savings. The energy savings represented by the bulbs that are actually installed by people who would not have done so without the coupon is the net energy savings. The “net-to-gross” ratio is applied to the total savings of the measure to determine actual savings.   

In order to make the EO program work, the cost of the actual energy savings achieved by the measures must be less than the cost of generating, transmitting, and distributing the energy saved by the measures during their lifetime.  This is called the Utility Cost Test, or UCT.  The UCT is what people are referring to when they say studies show that energy efficiency investments pay for themselves at a rate of $3 in savings for every $1 invested. They are saying that the cost of generating, transmitting, and distributing the energy saved by the measure is three times the cost of the measure.

These calculations are reported as dollars spent per kilowatt hour or Megawatt hour saved ($ per kWh or MWh).  It is not a coincidence that this is the same way a utility measures the cost of generating and selling the electricity to a customer. The UCT test results show that if done right, energy efficiency is a very economic way to spend utility dollars.

The law states that the spending and the energy savings should be roughly proportional to the revenue from each customer class – residential, commercial, and industrial.  That means the biggest savings actually comes in the industrial class, because that’s where the energy is (and where the revenues are too).  This will be even more the case soon, because the federal Energy Independence and Security Act is going to begin phasing out most kinds of incandescent light bulbs next year, meaning that utilities will no longer be able to use CFLs to meet their savings requirements.  As mentioned earlier, an EO measure doesn’t “count” if the energy savings would have occurred anyway, which is always the case with government-mandated measures. 

The concept of paying in your utility rates the cost of providing yourself and others with incentives to install energy savings measures is surprising to many people when they first hear about it.  However, a good EO program gets you a few things in return. 

First and most obviously, it saves the money necessary to generate, transmit, and distribute the energy. If a utility was going to spend $100 to provide a given amount of energy, and the utility could save an extra 1% of that energy with an EO program that had a UCT number of 3:1, that means the utility would spend $99.33 to meet its requirements instead of $100. That’s because the cost of saving $1 worth of the total energy requirement was 33 cents.

It doesn’t sound like much but if you think about a municipal utility with a $30 million budget it adds up fast.  At the rate at which power supply costs are increasing, it will add up faster in the future than it does now. It also has other positive benefits.

One of those other benefits is saving capacity.  Capacity refers to the utility’s need to be able to supply its peak load (usually the peak occurs on a hot summer day due to air conditioners).  Utilities meet their capacity requirements either by owning the generating units to supply peak energy, by having a power purchase agreement with a generating plant that gives “dibs” on an agreed amount of the plant’s capacity, or by buying capacity like a commodity on the market. 

To participate in the energy grid, each utility needs to show the operator of the grid (Midwest Independent System Operator, or MISO) that it has enough capacity to meet its projected summer peak plus a “reserve margin” of perhaps another 10%.  While capacity is cheap now, it is not going to stay cheap. Detroit Edison for example projects the cost of capacity in a few years to be over 300 times what it is now (not going up 300%, going up over 300 times its present cost).  An EO program that saves an additional 1% of energy per year will reduce the utility’s capacity requirement by an additional 10% in 10 years. 

Finally, there is a local vs. out of state component that favors increasing EO spending.  TCLP currently spends about $21 million in power supply costs. These are pass-through costs, most of which represent the cost of coal mined in Wyoming and Appalachia, hauled by train to Michigan, and burned at power plants near Holland, Lansing, and St. Clair. 

If we increase EO spending, and thereby reduce our requirement for power supply, we are keeping more of our money here – by spending it on more energy efficient lighting, appliances, and commercial and industrial equipment, instead of on coal mines and railroad freight tariffs. 

Oh – and we also cut the emissions of carbon, mercury, sulfur dioxide, nitrogen oxides, ozone, particulates, and other pollution we are responsible for generating.

All of this happens only if the city commission stands with TCLP and supports this kind of innovative, green, and cost-conscious thinking.  The TCLP board has made some adjustments based on some good points offered by city commissioners and the public at the last meeting, but now it’s time for all of us to support this positive and bold new step.

We had a great turnout for the first TCLP budget discussion, but would appreciate hearing from you before or at the meeting if you believe in what our public utility is trying to do. You can also follow other TCLP happenings at Mike Coco’s blog, http://ourtclp.com/. These are great new developments, and we hope the community will embrace them.

The following was delivered at the beginning of Monday night’s CC meeting:

This fall I will not be running for re-election as mayor of Traverse City.

The effort of doing my primary job and this job for two years has worn me down. I’m tired, and in November I’ll be ready to go. I’ll be sad to go but I’ll be ready to go.

I have great co-workers and cases and clients and I need to put more energy there. Most important, I have a great wife Colleen, and we have our own plans and challenges, and I need to put more energy there.

I am proud to have served with this commission. I appreciate how each of you put yourself out there for really nothing more than the good of our city. I’m thankful for the work of the staff, Mr. Bifoss, and Ms. Zeits. I appreciate both of your steadiness, intelligence, and skill.

I am grateful for our volunteers on the planning commission, Traverse City Light and Power, parks and rec, human rights commission, DDA, and others. I have appreciated the many communications from residents during my five years in city government. I’ve appreciated your support when you agreed with me, and the empathetic manner of most of your criticism when you’ve disagreed.

I’m proud of the things we’ve done together: $1.5 million raised for the bay front, funding for streets and sidewalks, an ordinance that protects everyone’s civil rights, reclaiming our city beaches and near-shore waters, supporting affordable housing at the Depot and the Grand Traverse Commons, the traffic calming policy, and the recent millage relief.

The work of improving a community never ends, and we have much still to do in the next five months. If I had to pick just one accomplishment for the time remaining, I hope we will establish the neighborhood ombudsman. I will ask for time in July to pitch that proposal to you.

I want to close by encouraging others to step up and serve – as mayor, city commissioner, or volunteer board member. We have so many bright and talented people in our city I feel comfortable letting go, and confident about our future.

When my brother Mark and I were kids we watched Hockey Night in Canada on the CBC Windsor channel 9 every Saturday night. In the Montreal Canadiens locker room in the old Montreal Forum, inscribed above the door was a line from the World War I poem Flanders Fields. I always remembered it because it’s such a remarkable thing to have inscribed in a locker room:

To you, with failing hands, we throw the torch

be it yours to hold high once again

I’ve taken my turn and done what I could. Now it’s someone else’s turn. I look forward to the next five months, and then I look forward to hanging it up. I love this city, it’s been an honor to serve, and I am truly grateful for the experiences I have had.

 

The CC passed the proposal outlined two posts below last night by a 6 to 1 vote. Thanks to fellow commissioners for a thorough and civil debate.

The TCLP budget outlined below came close to passing. It will be up again in two weeks. This is a crucial vote for energy efficiency and for a resident dividend. Hope to see you there.

Best wishes.

Three weeks ago, TCLP chair Mike Coco presented the idea of a resident dividend to the CC. TCLP’s budget is up for approval Monday night. A resident dividend would function like a stock dividend, except the “distribution” would take the form of a periodic rebate rather than a periodic check. Here is one way this could be handled -

Premise

The premise for instituting a resident dividend is that TCLP is a business and city residents are the shareholders of the business. The board acts to drive shareholder value.

The basis for this premise is the city charter. Section 118 says that TCLP shall be operated for the benefit of the City of Traverse City. Section 179h says that rates shall be uniform for each customer class, but rates within the City limits may be less than for the same class of customers outside the City limits.

This hardly leaves other customers out in the cold. TCLP still has an obligation to them as customers – to meet their their needs for safe, reliable, cost-effective service. However, the obligations of a business to its customers and to its owners are different obligations.

Current rates

TCLP did a rate study in 2006. The utility’s rates to each class of customers (residential, commercial, industrial) roughly correspond to the cost of providing service to that class. TCLP’s rates are below market for each customer class. Here is a comparison of rates from last year with the Michigan market, including power supply, general operating, and sales tax. The source of market data is the US Department of Energy’s Energy Information Administration, http://www.eia.doe.gov/electricity/epm/table5_6_a.html, Figures are in ¢/kWh:

customer class           EIA average           TCLP

residential                   12.67                        9.32

commercial                 10.66                        9.09

industrial                     7.41                           6.81

All customer classes are significantly below the state average. However, because they are based on the cost of service, residential rates are higher on a per kilowatt-hour basis than commercial or industrial.

TCLP’s financial performance

Based on the 2006 rate study, TCLP’s financial performance has been strong – despite lower sales due to Energy Optimization programs and a weak economy, despite upward pressure on power supply costs, and despite the utility’s decision to hold generating rates rates steady the past few years.

The rate track proposed in the rate study from 2006 sought to achieve an average operating income through 2011 of $2,251,535, and an average net income through 2011 of $3,283,073. TCLP actually achieved operating income from FY 06-07 through FY 09-10 of $2,775,003 and net income for the same period of $3,835,911.

TCLP did not make some anticipated capital expenditures during that time, which increased net income by decreasing expenses, but TCLP also did not implement some of the rate increases recommended in the study.

The rate study recommended TCLP achieve a cash balance in 2011 of $29,048,814, while the 2010 audit report indicated a projected balance in the range of $31 million.

Resident Dividend

The residential class is 20% of revenues; the city resident portion is 16% of revenues. One way to issue a dividend would be to determine each year how well the utility performed against projections. Then divide the residential customer class into a city resident class and a nonresident class.

If TCLP’s actual revenue exceeds budgeted revenue, spread the difference back to the city residential customers as a refund – either once a year or spread it over 12 months as a reduction in the bills.

So for example, in FY 09/10 projected revenues were $2,961,000 and actual revenues were $3,132,000 on total operating revenue of $26,575,000. If the $171,000 difference were spread back to the city residents as a refund, it would reduce city resident electric bills by 4% for the next year. That is not a radical transformation of the rate structure but it would absolutely feel like a dividend.

An advantage of doing this as a refund based on actual revenue performance is that it won’t put pressure on other rate classes to make up the difference. It would be something spread back to the our public utility’s shareholders, not something transferred from one rate class to another.

It also would not hamstring TCLP from making other necessary investments in generation or demand side management (energy efficiency). It would not significantly impact the excess cash balance built up beyond the projection in the rate study, saving that capital for other objectives like undergrounding, baseload planning, or DSM.

And it might even engage city residents in the business performance of their utility. As TCLP discusses planning and policy decisions, the residents would be engaged in the future of TCLP much like the shareholders of a corporation would be – only with the advantages that the board of directors are their neighbors, and the goals of the utility are broader than just the bottom line.

Other news

In other TCLP news, the utility proposes to increase its energy efficiency spending beyond state requirements, and to invest further in community relationships while suspending the community investment fund grant program. The energy efficiency goals are summarized by Mike at http://ourtclp.com/. A tight vote is expected on the TCLP budget Monday night, and they could really use some support.