With tariff hikes coming up, some at Town Hall are considering reducing the city’s uptake of CPS Energy

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Each year, CPS Energy donates 13% of its revenue to the City of San Antonio, which is part of the price of being a city-owned utility.

This year, CPA’s $ 361 million contribution represents 27% of the city’s $ 1.36 billion general fund.

But with the CPS preparing to raise tariffs, city council may reduce the amount the utility has to pay the city to mitigate the impact of rising energy bills on San Antonio households – if the council wishes.

Thousands of CPS taxpayers are struggling to catch up on their electricity bills after the utility resumed non-payment disconnections in October. And the utility has said for months that it needs to raise customer rates to upgrade its systems and fund growth across the city.

On top of that, CPS subscribers will likely be charged up to $ 2 more on their monthly bills for the next 25 years after CPS paid $ 418 million for the electricity and natural gas it purchased. during the winter frost in February.

“One of the ideas put forward is, ‘Well, we should look at the 13% of revenue (CPS) the city receives,” said Derek Roberts, chief of staff to District 9 City Councilor John Courage, “ and maybe looking to reduce that to reduce this liability (winter storm).

The 1% cut in city revenue from CPS revenue would save the utility more than $ 34 million this year, which might mean a smaller rate increase next year.

Kick

The payment to the city is a kind of return on investment for the owner – the taxpayers of San Antonio – after the city bought CPS in 1942. Since 2016, it has paid the city an average of $ 343 million per year.

The utility is obligated to pay up to 14% of its revenue to the city, but CPS has paid the city 13% of its revenue over the past five years.

These CPS payments are one of the three main sources of revenue – along with sales and property taxes – that allow the city to pay firefighters, repair streets, and provide other basic municipal services.

“I consider it a tax,” District 1 city councilor Mario Bravo said. “Collecting that there (at around 13%) keeps our property taxes lower and allows us to provide more services to the community. “

The CPS did not always pay 14%, or even 13%, of its income into city coffers.

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In the 1970s, after the deregulation of natural gas markets nationwide, gas prices skyrocketed and city council chose to reduce its share of CPS revenues to 11.5%. However, in the 1980s, when oil prices collapsed and ruined the city’s finances, the council pushed back its share of the CPS to 14% to shore up the city’s budget.

“There is a very clear historical precedent for the city that did not take the full 14%,” said Heywood Sanders, professor of public administration at the University of Texas at San Antonio, who brought up the idea. to reduce the payment of the CPS to the city in a recent current Column of San Antonio.

“And that precedent would seem particularly relevant to me now – in a situation where CPS is faced with this huge increase in energy costs,” he said.

City staff offered to help.

Once CPS pays the $ 418 million in fuel costs from the February winter storm, the utility will consolidate the debt into a so-called regulatory asset. Taxpayers will pay a dollar or two more each month to pay off this debt.

But as residents pay these fees each month, it will appear on paper as CPS Energy collecting higher income, even though that income will be spent to cover debt related to the storm.

And since the city receives a percentage of CPS revenues, the city would theoretically reap a windfall if CPS Energy revenues increased due to debt payments.

So the city said it would not collect a payment on the revenue used to repay the debt, a move according to CPS that will save the utility nearly $ 100 million over the 25-year repayment period.

“They don’t have to,” said Cory Kuchinsky, chief financial officer of CPS Energy. “It’s another way to help our customers. “

But this decision does not reduce the city’s share of CPS revenues.

Roberts, Courage’s chief of staff, said he didn’t think a council majority would reduce the city’s payout of the CPS.

Bravo said he was concerned that such a move would mean the city would either have to significantly cut spending on services or increase property taxes.

Sanders, however, maintains that the city’s finances are in a sufficiently strong position to support the reduction in the amount it takes from CPS revenue.

City staff predicted that sales tax revenues would fall in the wake of the pandemic-induced economic crash last year, but the city’s consumer and business spending rebounded stronger than expected.

As late as May, city staff predicted that the city would bring in $ 319 million in sales tax revenue by 2022. But in the budget passed in September, city staff moved forward. expected $ 337 million to be generated from sales tax next year.

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And property tax revenues have increased in recent years, as real estate development has exploded across the city and property valuations have risen. Property tax revenues have increased by 29% over the past five years, but the city’s total budget has only grown by 19%.

“So the city is in a much better income situation than it was before, and the extra money from the (federal government) also provides an extra cushion,” Sanders said, referring to federal funding for the stimulus. .

Bravo said CPS should look to cut costs further before city council considers reducing what it collects from the utility. And he wasn’t sure that reducing taxpayer energy bills by reducing the city’s payment would help low-income households more than spending more on services.

But with a rate hike almost certain, Sanders said the city is now in a privileged position to offset at least part of any bill increases sent to households by the CPS.

“The city is able to have a serious conversation about the CPS part of the revenue stream,” Sanders said.

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