THE MLGW HONEYPOT HAS ACQUIRED A NEW SMELL

February 21, 2007

As the mayor announces a new FedEx type project (a new football stadium) you are asked to believe that it will not cost the taxpayers any property tax increases. Are we asked to believe that this will be financed without the backing of the citizens of Memphis and Shelby County with full faith and credit guaranty backing up any other source of revenues? And now we have the investigation of the MLGW (long overdue) concerning special no payment deals given to Edmund Ford and who know who else. As we approach an election in October, expect many other proposals that are intended to enhance the Mayor’s reputation so he can get another term. However remember the following.

• The corruption in the City of Memphis and Shelby County is well entrenched and getting worse. Who knows who will be the next public figure to fall.
• The City Council, the City Administration and the MLGW are changing fast as people run to secure a higher salary or pension as they are unsure who will be the next figure to fall. Look at the deal (a $40,000 raise and a $28,000 a year pension starting immediately) Gale Jones Carson got at the MLGW.
• The only thing that is in relatively good financial shape in Memphis and Shelby County is the MLGW. As of December 31, 2005, they were sitting on $192 million in unrestricted cash and cash equivalents as compared to $151 million as of December 31, 2004. They have stated that they only need cash to cover 30 days purchases and this would be an average of $94 million. Why do they not return this $98 million dollar excess in lower rates?

But you have to ask yourself why are they in such good shape? The obvious answer is that they are a monopoly and they can charge whatever they and the City Council choose. They always look good in their statements because they have ghost positions in their budget which they do not fill and therefore they come in under budget. If they make a mistake in gas purchases, they simply pass the mistake along in their purchased gas adjustment (PGA). A recent analysis shows that the gas rates in the last five months are running up to 65% higher than the Henry Hub Natural Gas Price index used as a standard for spot gas purchases rates. But you will only be able to know late this year if you have been ripped off because the MLGW is always very late in publishing their annual financial statements and they do not publish their annual budgets on their website as the City and the County do. WHY do they hide this information?

According to the law the MLGW is supposed to operate at a break even position with any profits returned to the rate payers in lower rates. Section 7-34-115 of the Tennessee Code states:

Operation of utility systems- Disposition of revenue. (a) Notwithstanding the provisions of any other law to the contrary, as a matter of public policy, municipal utility systems shall be operated on sound business principles as self-sufficient entities. User charges, rates and fees shall reflect the actual cost of providing the services rendered. No public works shall operate for gain or profit or as a source of revenue to a governmental entity, but shall operate for the use and benefit of the consumers served by such public works and for the improvement of the health and safety of the inhabitants of the area service. The law further states that “any surplus remaining, after establishment of proper reserves, if any, shall be devoted solely to the reduction of rates.”

Year after year they keep piling up profit when they should be returning these profits to the ratepayers in lower rates. Why do the City Council and the media not investigate this surplus? Could it be that the Mayor has his eyes on this surplus to finance his new stadium as he did with the Water Division of the MLGW which is required to pay $2.5 million per year for the FedEx Arena for over $60 million total. Time will tell but not before the election.