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Can water watchdog rein in spending?

Critics say nonprofit CUB lacks authority to do much good


by: TRIBUNE PHOTO: JONATHAN HOUSE - Co-petitioners Floy Jones and Kent Craford shake hands after deliver over 50,000 signatures for the Portland Public Water District. initiaitveTwo weeks ago, and in record time, the City Council approved a new watchdog to keep tabs on water and sewer spending.

The agreement struck with the Citizens Utility Board came about two weeks before petitions were filed with city elections officials for a May 2014 ballot measure to create an independently elected board to manage the water and sewer bureaus.

On Jan. 8, every member of the council except Commissioner Amanda Fritz — who was absent — voted to authorize a five-year agreement with CUB to review and comment on future spending plans by the Water Bureau and the Bureau of Environmental Services, which operates the city sewer system.

The resolution authorizing the agreement was sponsored by commissioners Nick Fish and Steve Novick. It was first announced in a Jan. 2 news release issued by Fish, who is in charge of both bureaus. Because it was a resolution and not an ordinance, the council was able to approve it at the first reading instead of being required to wait a week.

Fish says the agreement was not a response to the proposed ballot measure, which would remove the bureaus from the control of the council. He says it was first proposed by Novick in January 2013 but was postponed after Mayor Charlie Hales first took control of all bureaus and then later reassigned them.

“I wish we had done it sooner,” Fish says of the agreement.

The speed of the passage caught even some close council watchers by surprise. The City Club, which is currently studying the proposed ballot measure, asked the council to wait a week to allow further study of the agreement. The council refused, with all four members present saying they were convinced it was a good idea.

Regardless of the timing, Fish says the agreement should assure Portland water and sewer ratepayers that their money is being spent wisely in the future. The initiative measure is in response to skyrocketing water and sewer bills in recent years, increases that have been accompanied by stories of questionable projects funded with ratepayer dollars, such as the now-infamous Water House and the public toilets known as Portland Loos.

But can the CUB, a nonprofit membership organization, really rein in such spending in the future? CUB Executive Director Bob Jenks thinks so, noting that his nonprofit organization has saved private utility ratepayers more than $5.8 billion in Oregon since it was created by a statewide initiative 30 years ago.

“It’s too soon to promise anything specific, but, yes, I believe CUB can make a difference,” Jenks says.

But there are significant differences between private utilities like PGE and public utilities, like the water and sewer bureaus. Private utilities are regulated by state laws that determine which projects can be funded with ratepayer money and which must be financed by investors. Their rates are set by the Public Utility Commission, a quasi-judicial state agency headed by a board appointed by Oregon’s governor. Their decisions set the precedents that guide future deliberations.

The council, in contrast, is a political body elected by Portland voters. A lawsuit is underway in Multnomah County Circuit Court on the legality of numerous water and sewer expenditures approved by the council. The council also has reversed some its previous decisions in recent years, repaying the bureaus with general fund dollars for expenditures it later decided were inappropriate.

Kent Craford, a former lobbyist involved in both the lawsuit and petition drive, wishes CUB well, but does not believe it will be effective.

“The council can just ignore it,” says Craford, who turned in petitions with around 50,000 voter signatures on Jan. 21. The measure needs more than 29,000 valid ones to qualify for the primary election ballot.

CUB untested on city level

Jenks says that despite questions raised by the lawsuit and the council’s reversal of some previous expenditures, there are, in fact, clear laws and policies governing water and sewer rate spending. He points to a March 2011 audit that cites both existing Oregon laws and provisions of the City Charter that say water and sewer rate funds can only be spent on services related to the two agencies.

“Specifically, each requires a connection or relationship between the use of ratepayer money and the utility that is being paid for,” according to the audit.

The audit also says the rates set by the council must be based on “reasonable cost-of-service utility ratemaking principles.”

Jenks thinks the restrictions give CUB the ability to identify unjustified spending requests from the two bureaus. Although the council still will make the final decisions, Jenks believes CUB has enough credibility and public support that the council will defer to its recommendations.

CUB still must build at least some of that credibility and support among Portlanders, however. Although it has earned the respect of private utilities and other advocacy groups on the state level, this is the first time it has been asked to review a city’s utility spending.

Portland is not paying CUB for its services. Instead, CUB must raise the money needed to hire additional staff the same way it always has — by persuading ratepayers to financially support it. Within days of the council decision, CUB mailed its members in Portland asking them to contribute to the hiring of a staff member to work on water and sewer issues. The council has agreed to include similar solicitations in future joint water and sewer bills.

Conversation has begun

Craford agrees state law and the city charter requires that city utility rate funds be spent on water and sewer services. But, he says, the council has simply ignored those restrictions in the past. Craford notes that the audit cited by Jenks is titled, “Spending Utility Ratepayer Money: Not always linked to services, decision process inconsistent.” It contains numerous examples of questionable water and sewer expenditures approved by the council.

Although Craford does not think CUB will have much effect on rates if the measure fails, he did not oppose the agreement. “I think we’ve already won. The council is talking more about water and sewer rates now than they ever have,” Craford says.

In the meantime, Multnomah County Circuit Judge Stephen Bushong is scheduled to hear oral arguments in the ongoing ratepayer lawsuit on Feb. 12. Attorneys for ratepayers and the city will argue whether four council-approved expenditures violated state and local restrictions on spending rate funds.

The two sides agreed to argue the legality of the examples as test cases for more than $127 million in contested expenditures. The four include funds spent to support public toilets, the city’s former public campaign finance program, the purchase of unused River View Cemetery property and TriMet light-rail projects.