Analysis

The proposed repeal and replacement of the entirety of Article V –Utilities does not lend itself to a line-by-line comparison, but all substantive issues and differences are addressed below. Citizens will be voting on the entirety of the proposal; this analysis is offered for those who are interested in the details.

Each section of the proposed new Article V is followed by comment below. Comments were prepared by Felicia Orth, former Assistant Los Alamos County Attorney (1997-2000), former BPU member (2003-2008) and retired Administrative Law Judge (1999-2014), with insights from members and friends of Citizens to Preserve Sound Utilities.

500. Department of Public Utilities.
The Department of Public Utilities, under the direction of a utilities manager, is established to operate the County-owned utilities. The utilities include water, wastewater, gas and electric systems.

Comment: Proposed Section 500 merely rewrites current Section 500 and includes the first sentence of current Section 502. It is not in itself objectionable.

501. Board of Public Utilities.
The Board of Public Utilities (Board) is established, and shall have authority and control
over the Department of Public Utilities (DPU) except as limited herein.
501.1. Membership and Qualifications.
(a) The Board shall consist of five voting members who shall be appointed by the
Council to serve for five-year terms each. One member shall be appointed on the
first day of July of each year in order to provide for staggered terms. Except upon
removal by the Council as provided herein, each member shall hold office until a
successor has been appointed.
(b) The qualifications for appointment and continued membership are: (i) County residency for not less than one year prior to appointment; and (ii) Current County voter registration.
(c) Appointed members are prohibited from: (i) Holding any public office or from being an employee of Los Alamos County; (ii) Conducting any business with the Department except as a consumer; and (iii) Voting on any issue before the Board in which the member has a financial interest other than as a consumer.
(d) The County Administrator, shall be an ex-officio, non-voting member of the Board. It
shall be the responsibility of the County Administrator or a designated alternate
deputy administrator to attend the meetings of the Board and to serve as a liaison
between the Board and County Administration to ensure that (a) the Council is aware
in advance of actions by the DPU which may significantly impact County operations,
and (b) that DPU is aware in advance of actions by the County which may
significantly impact DPU operations.
(e) Council shall appoint one member of the Council as the Council Liaison to serve as
an ex officio non-voting member of the Board. It shall be the responsibility of the
Liaison, or a designated alternate Council member to attend the meetings of the
Board and act to keep the members of the Council informed on utility issues that
may have a major impact on the County.
501.2. Vacancies. Vacant positions shall be filled by the Council for the unexpired term within sixty (60) days of the date Council accepts notification of the vacancy at a public meeting.
501.3. Removal.
(a) An appointed member may be removed from the Board upon a recommendation of
the Board following a vote of no-confidence approved by a majority plus one of the
total number of voting members of the Board. The Council will then consider whether
the member should continue on the Board and may, with a vote, remove the member
from the Board.
(b) Council may remove a Board member if it finds the member: (i) Has failed to maintain the qualifications for office or has acted contrary to the prohibitions on Board members;
(ii) Has been convicted of a felony; or (iii) Has been absent from all regular board meetings during any continuous period of ninety days.
(c) Alternatively, Council may remove a member of the Board upon a no confidence
vote of not less than one fewer than the total Council membership.
501.4. Organization and Procedures.
(a) The Board shall adopt rules of procedure to govern its proceedings and its reporting
requirements, and shall annually review, approve and forward the rules to the County
Council for its information.
(b) A quorum shall consist of three voting members.
(c) Any action shall require the affirmative vote of at least three members.
(d) The Board shall hold regular meetings at least monthly, and may hold special
meetings according to its adopted rules of procedure.
(e) All meetings shall comply with state laws regarding open meetings and all records
shall be subject to state laws regarding the inspection of public records.
501.5. Expense Reimbursement. Reimbursement to members for reasonable expenses incurred in the course of Board duties shall be according to County policy.

Comment: Proposed Section 501 rewrites current Section 501 and adds a number of objectionable provisions.

First, proposed Section 501 adds provisions that are inappropriate in a County Charter and belong elsewhere, such as the requirement that the County Administrator attend meetings of the BPU. Under the current Charter, the County Administrator is already an ex officio member of the BPU. If Council must order him to attend the meetings of a Board on which he sits as a member, and further order him to communicate significant information from those meetings to others in his own administration, that instruction is more appropriate in a job description or performance evaluation.

The same objection applies to the added provision relating to a Council Liaison. Council has long appointed its Vice-Chair as Liaison to the Utilities Board. A provision requiring attendance and keeping the other Councilors informed of major utilities issues does not belong in the County Charter, but is more appropriately included as part of the appointment.

Second, proposed Section 501 requires Council to fill vacancies on the Board within 60 days regardless of whether suitable candidates have presented themselves. The current Charter provides that vacancies shall be filled, and a Board member shall continue until a successor has been appointed.

Third, proposed Section 501 adds a provision allowing for the arbitrary or politically motivated removal of Board members. Under the current Charter, Board members may already be removed if they fail to maintain qualifications for membership, if they violate prohibitions in the Charter, if they are convicted of a felony or of a misdemeanor involving moral turpitude, if they are absent without excuse from Board meetings for 90 days, if they no longer reside in the County or if they vote on matters of substantial financial interest to themselves.

The proposed Section 501 adds “no confidence” votes by the Board or Council “without cause.” Proponents have not yet described any reasonably likely circumstances in which it would be appropriate to remove one or more Board members at a time “without cause.”

Moreover, Council currently makes one appointment a year, as there are five Board members each serving a staggered five-year term. The proposed Charter provisions include no limit on the number of Board members Council may remove and replace by virtue of a “no confidence” vote; one Council would have the authority to remove and replace all five Board members.

502. Powers and Duties of Board.
The Board shall have the following powers and duties according to the specific
authorizations, procedures and limitations contained herein:
(a) Reporting. It shall be the responsibility of the Board to provide quarterly updates to
the Council alerting Council members to all issues which have the potential to
significantly impact the operations of the County at large, or the absence of such
issues.
(b) Appointment and oversight of utilities manager. The Board shall appoint the utilities
manager and, subject to Council approval, shall enter into a contract with the utilities
manager, signed by the Board chair that establishes the utilities manager’s
compensation and other terms and conditions of employment. The utilities manager
shall be appointed on the basis of his professional qualifications and shall serve at
the discretion of the Board. The Council shall approve, disapprove or remand to the
Board for further consideration any recommendations relating to the utilities
manager’s appointment, contract, annual compensation or removal, provided, that
the Council shall not have authority to revise such proposed recommendations.
(c) Rates and charges. The Board shall establish just and reasonable rates for utility
services which will meet the ongoing operating and capital costs to provide for the
long-term viability of each individual utility. All rates shall be uniform for all customers
within the same class. Where joint operations are utilized, the expenses shall be
equitably prorated among the systems. The Board may establish different rate
schedules for different classes of customers. Rates shall be adopted according to
the rules of procedure of the Board, with a minimum of one public hearing to precede
any change in rates. The Council shall approve, disapprove or remand the proposed
rates to the Board for further consideration, provided that the Council shall not have
the authority to revise said proposed rates. The Board shall have authority to
establish charges for other services provided by the department.
(d) Approval of budget. Upon presentation by the utilities manager, the Board shall
approve, amend or disapprove the budget of the department. Upon approval by the
Board, the proposed budget shall be provided to the County Administrator for
inclusion in the budget to be submitted to the Council for approval. The Council shall
approve, disapprove or remand the utilities budget for further consideration by the
Board, provided that the Council shall not have authority to revise said proposed
budget. In the absence of approval of the proposed utilities budget, the prior year’s
budget shall remain effective for the ensuing year.
(e) Planning. The Board shall have the authority to annually review and approve the
strategic and long-range planning needs of the department. The Council shall
approve, disapprove or remand such plan to the Board for further consideration,
provided that the Council shall not have authority to revise said plan.
(f) Bonds. The Council, upon recommendation of the Board and as otherwise subject
to state law, may authorize the issuance and sale of revenue bonds and general
obligation bonds to finance the acquisition, construction, improvements and
extensions of the utilities.
(g) Management review. At least every five years, the Board shall obtain a review as to
the operation and condition of the department by a qualified independent consultant
and shall provide a copy of the consultant’s report to the Council.
(h) Board review. In conjunction with the management audit, the Board shall conduct a
review of its own operations. The Board’s review shall be forwarded to the Council
for its information.
(i) Impact fees. The adoption of impact fees or other development fees shall be as
provided by state law, provided that any such imposition relating to utilities as
specified under this article shall require additional approval by the Board.

Comment: Proposed Section 502 rewrites and collects several current Sections in Article V, including current Sections 502 (DPU Manager), 504 (Rates and Charges), 505 (Accounting and Reporting), 506 (Budget), 507 (Bond Issues) and 510 (Management Audit).

Proposed Section 502 also adds a provision that is not necessary or appropriate in a Charter, to the effect that the Board must send quarterly updates to Council stating whether there are significant issues. The Charter is a governance document, not a memorandum on protocol. To the extent increased communication is desirable from the Board to the Council beyond the communication already assured by the appointment of the Council Liaison to the Board and the County Administrator’s ex officio membership on the Board, those communication mechanisms do not require Charter amendments, and particularly not the repeal and replacement of an entire Article.

503. Powers and Duties of Utilities Manager.
(a) The utilities manager is responsible for developing the long-range planning needs of
the department according to the Board’s direction and is responsible for the day-to-
day operations of the department, provided that the utilities manager’s operation and
direction of employees, in general, shall be subject to administrative County-wide
policies, including, but not limited to, the personnel code and the procurement code.
The special policies and procedures necessary for the operation of the department
shall be proposed by the utilities manager, approved by the Board, and put in place
with the cognizance of the County Administrator. Disputes between the utilities
manager and County Administrator may be brought to the attention of the Board. If
unresolved at the Board, either the Board or County Administrator may bring the
issue to the Council for final resolution.
(b) The utilities manager is responsible for preparing and presenting a budget to the
Board. The proposed budget shall include payments to be made to the County in
lieu of the franchise fees and the taxes that would be assessed against privately
owned utilities that ordinarily pay franchise fees, but excluding water and wastewater
utilities. It shall also include a proposed schedule of funds which shall prescribe the
necessary annual rates for funding all items listed in section 504 of this article.
(c) Within the timelines established by the Board in its procedural rules, the utilities
manager shall prepare and present to the Board and Council an annual financial and
operational report as of the end of the previous fiscal year of each utility in the
department and of the department as a whole.
(d) The utilities manager shall be an ex officio non-voting member of the Board.

Comment: Proposed Section 503 rewrites one line from current Section 501 (making the Manager an ex officio member of the Board), part of current Section 502 (on supervision of all other Department employees in accordance with the personnel ordinance), and part of current Section 506 (on the content of the budget proposed to Council).

Proposed Section 503 also adds two sentences concerning potential disputes between the Manager and the County Administrator, to the effect that they may be brought to the attention of the Board, and if unresolved, taken to Council pursuant to the flawed dispute resolution mechanism provided below.

504. Priority of Budgeted Expenditures.
In order that the department can plan and utilize its proceeds for the maintenance,
improvement and extension of the utilities system, and to otherwise assist in general County planning, all funds derived from the operation of the utilities shall be managed and expended in accordance with the following policies. From the proceeds of the operation of the department, the funds shall be set aside and utilized in the following order:
(a) Those funds required for current operations.
(b) Those funds required to redeem and pay interest on any bond issue for the utility
which shall become due and payable during the next fiscal year.
(c) An adequate reserve to finance replacements required by normal depreciation of the
utility plant or equipment as specified in either the operating or in the Strategic and
Long Range Plan. Funds generated by one utility shall not be transferred to support
another utility, or applied to support other County operations without approval by the
Board and the Council.
(d) Amounts to be transferred to the general fund as set forth in the budget as payments
to be made in lieu of franchise fees and taxes that would be assessed against
privately-owned utilities that ordinarily pay franchise fees, but excluding water and
wastewater utilities.
(e) Amounts necessary for additions and improvements foreseen as necessary to meet
future requirements for the utility systems as provided in the schedule of funds.
(f) The DPU budget will identify a percentage of DPU revenues for transfer to the
County general fund based on a formula agreed to by the Board and Council.
(g) All remaining operating funds shall be transferred to the County general fund.

Comment: Proposed Section 504 rewrites current Section 509 (Priority of Budgeted Expenditures), with one critical difference: the current provision that “all remaining operating profits shall be transferred to the County General Fund” has been changed to “all remaining operating funds shall be transferred to the County general fund.” (italics added)

Without any specific provision in the Charter for dispute resolution, the Board and Council negotiated a transfer from the Utilities funds to the General Fund constituting 5% of profits. This proposal apparently undoes that agreement without negotiation. Moreover, the 5% only applies to distribution, not wholesale. Under the proposed language, profit from wholesale sales, which could be significant, would go directly into the General Fund rather than being used to offset infrastructure and maintenance costs and help keep rates low.

505. Miscellaneous provisions.
505.1. Provision of utility services and commodities to other County departments. The
department shall provide utility services and commodities to other County departments and shall be compensated according to the rate and service schedule.
505.2. Provision of other county services to the utilities department. The County shall provide available services necessary for the operation of the department at a cost to be negotiated between the utilities manager and the County Administrator. Disputes between the utilities manager and County Administrator may be brought to the attention of the Board, which may bring the issue to the Council for final resolution.
505.3. Transfer of County-owned utility. Either the board or Council may propose to transfer a utility already operated by the County to the DPU. Such a proposal will be evaluated by the utilities manager and the Board for both operational and fiscal impact, after which a recommendation will be made to Council. After an opportunity for public comment, Council may approve such a transfer by a majority vote of the Council.
505.4. Sale or purchase of utility. Subject to the provisions of applicable state law, either the Board or Council may propose to add a new utility not already operated by the County to the department or sell a utility currently operated by the department. Such a proposal will be evaluated by the utilities manager and the Board for both operational and fiscal impact, after which a recommendation will be made to Council. After an opportunity for public comment at no less than two Council meetings, Council may either opt not to proceed with the sale or purchase proposed or must put the final proposal to a vote of the registered voters of the County.
505.5. Dispute resolution. If Council remands an item submitted for its approval back to the Board for further action, but the Board does not reach a resolution that is approved by Council, either party, with approval of a majority of that body, may invoke a dispute resolution process as follows: each body shall appoint an appropriate number of individuals to a working group which will have 90 days to reach an agreement. During the 90 day period, Council is required to take public comment on the disputed issue during at least two of its regular meetings. Should the parties still be unable to reach an agreement, Council can, with a vote of a majority plus one of the total number of members currently on the Council, require the Board to implement Council’s policy on the issue in dispute.

Comment: Proposed Section 505 rewrites current Section 503 (Cooperation with Other County Departments) in a way does not protect the ratepayer. The current language gives the Board the option of requiring services from the County but, when too expensive or inadequate, the Department can obtain services elsewhere in order to get the best value for the ratepayers. This is not an academic issue.

A few years ago, when Council directed that the Trinity Site be cleared of County operations, there was discussion of a facility at the airport basin that could serve as shop space for the Utilities Department, but, in early discussions, the associated price tag (fifty million dollars) was excessive. When the County Administrator presented the proposal to Council, the Utilities Department and Board were able to challenge the price and to assure that expenses would be reasonable so that utility rates could remain reasonable.

More recently, in connection with a sewer rates hearing, the Department had occasion to consider additional infrastructure for DP Road, an area suitable for light commercial and industrial development. Current sewer rates would not support payment for the lines and pumps necessary along DP Road; this infrastructure will be particularly expensive because DP Road is essentially a peninsula. Ideally, from the Board and Department’s perspective, development fees would pay for these extra expenses. If the Utilities Department puts in the sewers without the benefit of development fees, all the other Utilities customers will be subsidizing this development. Council may desire to subsidize the development, and the current configuration of responsibility and authority among Council, Board and Department would prompt discussion and negotiation to come to a resolution.

The common thread in these examples is the importance of the arm’s-length relationship between the Utilities Department and Board and the rest of County government, including Council. If this relationship were not held at arm’s-length, the transactions at issue would find the Utilities Department and Board in an entirely subordinate position, without the ability to negotiate to assure reasonable costs for ratepayers. The Department and Board’s special status assure that issues will be resolved at a high level and that the resolution will occur in public, in front of Council.

This is why the dispute resolution mechanism proposed is objectionable—it puts the Board in an entirely subordinate position by providing that Council may simply make a unilateral decision after 90 days. Imagine entering a process characterized as a “negotiation” in your own life under those conditions. Particularly when paired with the provision that allows Council to remove Board members in the middle of their terms “without cause,” having vetted them and appointed them, the proposed Article V reconfigures the fundamental framework for local governance of utilities and utilities revenues in a way that threatens sensible management and reliable service.