[bouldercouncilhotline] Hotline: Top down evaluation of Municipal Utilities

[kohls at bouldercolorado.gov]

Sender: Wilson, Ken

I know that our consultants are working on a business analysis model for potential municipalization.  I am assuming this will be a "bottom up" model that will take projected revenue and projected costs to build up a model of what the City might expect.  Last week I thought of a complementary approach to doing a business model that might be helpful.

We have looked at several cities that currently have Municipal Electric utilities, such as Longmont, Ft Collins, Colorado Springs and Palo Alto, CA.  They have all been discussed as successful municipal utilities.  I'm sure all of their budgets are public record that could be examined for analysis.  I am particularly interested in the money they spend for operations on an on-going basis.  We could do a Top Down analysis by seeing how much "extra" money they bring in after paying for generation and operations.  How much money do they put into "extra credit" activities like solar rewards, rebates for conservation, undergrounding, etc.  If we had a good handle on that for four cities that are around the size of Boulder, we could then look at their numbers with respect to hypothetical numbers we might see.  The biggest issue is the debt burden Boulder would have as a start up, which none of these four cities have.  So, for example, if our acquisition and startup costs were $200 Million, at the expected bond rate that we could get, how would we fare if we used the examples of each of the four cities.  Would we be above water or below water, based on their typical operational costs with the addition of a large debt burden that those cities don't carry?

Perhaps the City's consultants are looking at this type of analysis already, in addition to a bottom-up approach.

Ken Wilson