Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, August 17, 1993 TAG: 9308170523
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Long
John Williamson, company vice president for rates and finance, said the $2.25 million in yearly savings the city projects from owning the gas utility would turn out to be $1.3 million in additional annual expenses.
The company held a news conference Monday as the dispute between the city and Roanoke Gas over the company's future continued to heat up.
Under terms of the company's franchise agreement with Roanoke, City Council has the option to take over the gas company's assets within the city limits. The 20-year agreement expires Aug. 30.
Roanoke Gas revealed Friday that Roanoke was considering buying the company's assets and launched a public relations blitz that included letters to thousands of customers urging them to call and register their opposition to the city's possible takeover.
They did. Monday afternoon, a dozen Roanoke Gas employees were stationed around a conference table at a phone bank, taking calls from customers. John Lambert, company public relations representative, said that by mid-afternoon, 1,100 people had called with only two taking the city's side.
The fight between the city and Roanoke Gas will not affect the company's ownership of its business in Botetourt, Roanoke and Montgomery counties and Salem, nor its Bluefield Gas subsidiaries.
But Rob Glenn, the company's vice president for marketing and strategic planning, said a takeover by the city would cut the heart out of the company's expansion plans.
The company, which has been in business in Roanoke for 110 years, is owned by roughly 900 stockholders, 75 percent of whom live in Roanoke.
Glenn said he does not consider the city's takeover proposal a bluff aimed at getting better terms on a new franchise. If the city had been bluffing, it would have opened franchise negotiations earlier, he said.
Utilities Director Kit Kiser also says that the city is not bluffing.
The company asked the city a year ago to begin talks on a new franchise. In November, City Council hired a Connecticut consulting firm to explore its options - including a takeover.
The consultant estimated that the city could operate the Roanoke portion of the company $2.25 million cheaper than Roanoke Gas - primarily through the city's exemption from paying income taxes and its ability to borrow money at a lower rate by providing lenders a tax exemption.
If those figures proved accurate and customers' gas rates stayed the same, that savings would become additional revenue for the city to spend on needs such as garbage collection or schools, Kiser said. City Council also would like to cut the real-estate tax rate, he said.
Publicly owned gas companies do contribute significantly to revenues in other Virginia cities. The Richmond Times-Dispatch reported this weekend that a publicly owned gas utility put $5 million in Richmond's general fund last year. Charlottesville's gas company contributed $1.1 million to that city's treasury.
Roanoke held its first meeting with Roanoke Gas officials on July 23 when the city outlined its interest in acquiring the company's assets and asked for a one-year franchise extension in order to explore that possibility.
The company denied the city the extension.
Roanoke Gas wants a new long-term franchise and didn't want to extend the old agreement for the sole purpose of giving the city time to evaluate the company's assets, Glenn said.
Denied an extension by the company, City Council will consider Monday night whether to ask the State Corporation Commission to evaluate the company's assets within the city. The SCC filing would preserve the city's right to buy the assets after the franchise expires.
All City Council would do by approving the SCC filing is to keep its options alive and give it time to make a decision, Kiser said. The vote would not mean the city is definitely going ahead with the takeover, he said.
If the SCC declines to evaluate the assets, each side would pick an appraiser and the two appraisers would choose an umpire. The three would then decide on the value of the assets. If the company and city still disagreed, the matter could go to court.
The SCC could also decide the takeover is a bad idea and order the two side to negotiate a franchise agreement, a company official said.
But Roanoke Gas's Williamson said his study of the city's consultant's report indicated errors, no real savings and most likely higher operating costs. And that does not take into account the inefficiencies of operating two gas systems in the valley, he said.
The consultants also didn't include the cost of separating city-owned lines from the rest of the company's system, he said.
Williamson wrote City Manager Bob Herbert and other city officials Monday asking them to reconsider the takeover.
Kiser said he disagreed with the figures the company is using to value its assets. The city's consultant has said they're worth $14.5 million based on their book value, but the company said they should be priced at what it would cost to replace them.
Roanoke Gas criticized the city for holding all its discussions about taking over the company in closed-door executive sessions.
The company says the matter deserves some public debate before Monday's City Council vote, and that is the reason it went public with the issue last week with the mailing to customers and a news conference where folders full of company-supplied information were handed out.
Kiser said the city would have made the issue public sooner but Roanoke Gas asked to be given time to notify its employees following the July meeting.
By making the announcement first, the company put the city on the defensive, he said.
by CNB