BG Reads 8.1.2024

🗞️ Bingham Group Reads - August 1, 2024

August 01, 2024

Bingham Group Reads

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www.binghamgp.com

August 1, 2024

Today's BG Reads include:

🟣 Austin Energy makes a case against giving more to the city’s General Fund (Austin Monitor)

🟣 Even with tax increase, Austin ISD will need significant spending cuts (Austin Chronicle)

🟣 Austin airport faces 'concerning' staffing struggles as major expansion program continues (Community Impact)

Read On!

[BINGHAM GROUP]

🟣 [NEW] BG Podcast Episode 262 - On this episode Bingham Group CEO A.J. Bingham and Associate Hannah Garcia wrap up the week of July 22, 2024 in Austin politics, and discuss the week ahead.

🟣 Bingham Group has renewed its MBE and DBE certifications with the city of Austin. We are currently seeking sub-consultant services to support projects in the Austin Metro. Learn more here.

[AUSTIN METRO NEWS]

Austin Energy makes a case against giving more to the city’s General Fund (Austin Monitor)

During a budget work session on July 30, Austin Energy made a case for not transferring an extra $4 million to the city’s General Fund, which goes toward basic city services like parks, fire, police and EMS.

The city’s ratepayer-owned utility is the largest of the city’s enterprise funds and currently transfers $115 million every year to the general fund. In the contentious 2022 rate case, City Council froze the General Fund transfer at a 11.6 percent transfer rate each year. However, from Fiscal Year 2024-25, keeping the same rate, the transfer would already increase to $125 million. Now, city budget staff wants them to bump that to 12 percent, meaning a $4 million increase to $129 million, that an Austin Energy spokesperson told Council would “impact the key financial metrics of the utility.”

Those financial metrics are appraised by credit ratings agencies, and if Austin Energy’s rating goes down, the cost to repay loans on large purchases would go up – and the utility might have to raise rates on consumers to meet those rising costs.

Austin Energy is already at risk of a ratings downgrade, due to one of the key metrics ratings agencies look at: cash reserves. Austin Energy’s policy is to have 150 days of cash on hand to cover emergency operations – most utilities have a 200-day reserve – and it’s not even hitting that goal.

Austin Energy has had two events recently when it’s had to dip into its reserves: One was during the pandemic, when revenues were down due to reduced rates, and the other was last year when, during congested grid conditions, Austin Energy had to pay $250 million to buy energy from the ERCOT market because there’s no readily dispatchable generation within Austin Energy’s region. That $250 million was half of Austin Energy’s cash reserves, said Austin Energy General Manager Bob Kahn. He told Council that Austin Energy has been in violation of the 150-day reserves policy since 2021... (LINK TO FULL STORY)

Even with tax increase, Austin ISD will need significant spending cuts (Austin Chronicle)

School is still supposed to be out for summer but Austin ISD’s budget problems are so bad that the board of trustees is already back to work.

The board’s July 25 meeting was billed as another discussion of the VATRE – the Voter Approved Tax Rate Election the trustees will almost certainly approve next week. The VATRE will ask Austin voters to say yes to a property tax increase which could bring an additional $40 million into the district next year. But even if that extra money comes, the district will still be $78 million in the red – and everyone already knows this.

So Thursday’s meeting was less an exploration of the VATRE and more an appeal to the public to tune into a different, less-known reality: That no matter what happens with the VATRE, the district will need to make painful budget cuts for the next two years.

That being the case, the district is prepping the public by explaining where the cuts might come from. AISD’s Jacob Reach presented 23 separate possibilities to the trustees. Some of the heftier ones include: eliminating planning breaks for teachers in elementary schools (projected savings: $8 million); closing and consolidating schools ($1 to $1.5 million per school); reducing bus service ($6 million); eliminating staff positions ($4 million); and laying off nurses ($2.5 million)... (LINK TO FULL STORY)

Austin airport faces 'concerning' staffing struggles as major expansion program continues (Community Impact)

Austin's airport is continuing to see high vacancy rates and struggling to fill empty positions, while passenger traffic rises and its multibillion-dollar expansion program moves along.City Council members heard updates on Austin-Bergstrom International Airport's operations July 30 as part of their fiscal year 2024-25 budget review.While ABIA has seen its staffing levels improve over the past year, nearly one in five Aviation Department positions sat unfilled as of this summer.Airport vacancies fell from more than 35% in July 2023—the highest of any city department at that time—to 19.6% by late June 2024. This summer's rate was still the second highest in the city and more than double the overall civilian vacancy rate. (LINK TO FULL STORY)

[TEXAS NEWS]

Tech groups challenge Texas law requiring parental consent for kids’ social media accounts (Texas Tribune)

Two tech industry groups, the Computer and Communications Industry Association and NetChoice, filed a lawsuit on Tuesday to block a new Texas law that would require platforms like Instagram and Facebook to register the age of all users and get consent from a parent or guardian before minors create an account.

Here’s what you need to know… (LINK TO FULL STORY)

Houston City Council members call for revenue cap increase in wake of call to address HPD shortages (Houston Chronicle)

Police Chief Larry Satterwhite stressed the need for more officers and resources as he addressed an internal investigation into the department's dropped cases scandal. For Council Member Sallie Alcorn, who chairs the city’s Budget and Fiscal Affairs committee, that cry for help signaled the city's need to raise its revenue cap. City leaders have floated the idea of raising Houston’s revenue cap for years.

The current revenue cap was approved by voters in 2004 and tied the increased property tax revenue the city can collect each year to the combined rates of population growth and inflation, or 4.5%, if it was lower. In 2015, the city ran up against its revenue cap, Alcorn said, and taxes have gone down ever since.

“This was a horrible situation at HPD, but the underlying issue is lack of staffing, and we have known this now for 10 years ... Ultimately, the public needs to know we cannot have it both ways,” Alcorn said.

“We cannot have super low taxes, where we're decreasing our tax rate every year and demand that we do a much better job at policing.” Mayor Pro Tem Martha Castex Tatum said she agreed with Alcorn, and so did Council Member Joaquin Martinez, who also added that the city also needed to consider a trash fee. “There’s been a plan, and it’s called the revenue cap,” Martinez said. “It’s called the trash fee.”

The idea to raise that cap has come up again in recent months as Houston balances both its growing financial concerns and a $1.5 billion deal with Houston’s Professional Firefighters Association following an eight-year contract stalemate. The mayor wouldn’t commit to an answer on where he stood on increasing the revenue cap Wednesday after Satterwhite’s presentation. Whitmire said he would do everything it takes to keep Houston safe… (LINK TO FULL STORY)

Storms wreaked havoc on Houston power infrastructure. CenterPoint wants customers to foot the bill. (Houston Chronicle)

CenterPoint Energy expects to incur as much as $1.8 billion in costs from its efforts to restore power after May’s severe storms and July’s Hurricane Beryl, company executives said during a second-quarter earnings call Tuesday in which it reported a steep jump in profits over the year earlier. The company said it would seek approval from the Public Utility Commission of Texas to issue bonds to recover $1.5 billion to $1.7 billion of its storm-related costs, Chief Financial Officer Christopher Foster told investors and analysts.

Foster estimated residential customers could see a 2% increase in their electricity bills for the next 15 years to pay down the debt, which carries interest. Another $100 million of investments in its transmission system, the long-distance towers and lines, would be included in CenterPoint’s next scheduled rate increase request, Foster said.

CenterPoint reported income of $228 million for the quarter ended June 30, up from $118 million in the year-earlier period.

Failure to recoup the costs could shake investor confidence in the company, one analyst said. The storm-related cost estimates come as CenterPoint executives try to walk a fine line of satisfying Texas’ elected officials — who are calling for accountability from the company and even floating proposals to claw back profits — while easing investor concerns over whether the company will gain approval for past and future capital spending. CenterPoint earns a 9.4% rate of equity, essentially profit, on its capital expenditures.

It has dramatically increased capital investments in recent years, boosting the investor-owned utility’s stock price. If CenterPoint were unable to recover its May and July storm-related costs, investors would lose confidence not only in CenterPoint’s current management team but also in the wisdom of investing in Texas utilities going forward, said Anthony Crowdell, an utility analyst with the investment bank Mizuho Americas.

“Does the risk change with investing in a Texas utility? That’s what everyone’s trying to figure out,” Crowdell said. After Monday’s fiery first hearing of a special state Senate committee tasked with investigating utilities’ response to Beryl, senators on both sides of the aisle suggested they were opposed to CenterPoint recovering its hurricane-related costs… (LINK TO FULL STORY)

[US and World News]

Trump attacks Kamala Harris’ racial identity at Black journalism convention (NPR)

Former President Donald Trump made inflammatory remarks about Vice President Harris at the National Association of Black Journalists convention Wednesday, questioning her biracial background.

Harris is Black and Indian American. When asked if he agreed with comments from some Republicans who claim Harris has political power because of “diversity, equity and inclusion,” Trump falsely suggested Harris has changed how she discussed her racial identity.

“She was always of Indian heritage, and she was only promoting Indian heritage,” Trump said. “I didn't know she was Black until a number of years ago, when she happened to turn Black, and now she wants to be known as Black. So I don't know, is she Indian or is she Black?"… (LINK TO FULL STORY)

[2024 Austin City Council Race Watch]

This fall will see elections for the following Council Districts 2, 4, 6, 7, 10, and Mayor.

Declared candidates so far are:

Mayor

District 2

District 4

District 6

District 7 (Open seat)

District 10 (Open seat)

_________________________

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