Dividend Payment In Jamestown Budget Surprises BPU Board Chairman

Not everyone is on board with the proposed revenue dividend payment from the Jamestown Board of Public Utilities to the city of Jamestown in the 2014 executive’s budget.

John Zabrodsky, BPU board chairman, said he was “surprised” when he read that Jamestown Mayor Sam Teresi had allocated $475,000 into the proposed city budget from BPU electric and water revenues. Teresi has proposed $400,000 from the electric and $75,000 from the water to be paid to the city as a profit dividend. The mayor said in his budget message – which he delivered earlier this week – that the BPU is projected to make $4,194,000 in revenues, which is $174,000 more than what was budgeted for the fiscal year 2013.

Last year, Teresi said for the first time in 50 years, the city used the BPU profit dividend toward the budget. In the 2013 budget, $300,000 was used from electric and $120,000 was used from water revenues. Both the state constitution and general municipal law allow for such a payment to occur from a city-owned utility.

Zabrodsky said last year he voted against the BPU revenues going toward the city’s budget. The BPU board is comprised of the mayor, who is the president of the board; the Public Works Department director; two City Council representatives; and five community members, each appointed by the mayor. Carl Pillittieri and Wayne Rishell, BPU community board members, also voted against the measure last November, which was passed by a 6 to 3 vote. The “yes” votes were cast by Teresi; Greg Rabb, Jamestown City Council president; Jeff Lehman, Jamestown public works director; Fred Larson, community board member; Len Faulk, community board member; and Vince DeJoy, who was on city council at the time, but is now the city development director. Maria Jones replaced DeJoy on the board as a council appointee to the board. The BPU Board has not yet decided about a dividend payment for the 2014 city budget.

“The discussion around this was it was a one-time thing. When I read in the newspaper that it was already a line item in the budget I was surprised,” Zabrodsky said. “Last year, because we thought it was a one-time thing, we really didn’t discuss it in length and there is no policy in place for this dividend payment.”

Zabrodsky said the revenues generated should go toward operations to be able to continue to offer low electric rates. Also, he said using BPU money in the city’s budget is not a typical dividend payment like a privately owned business would make to its stockholders.

“If someone is going to get paid a dividend they get a check. In this case, I’m not getting a check,” said Zabrodsky, a city resident. “When this was done before, and I think it was longer than 50 years ago, they were paying (a dividend) and actually cutting checks.”

Zabrodsky also said besides the possible BPU revenue dividend, the city-owned utility also pays a tax-equivalent payment, which is similar to a property tax payment, to the city. The BPU also makes other payments toward the city budget for items like street lighting.

“There is a lot of money already flowing to city government,” Zabrodsky said. “We’re not just giving money to the city, but the schools too.”

Teresi said last year was the first year of the dividend payment because they weren’t aware of the state’s laws allowing for revenue from the city-owned utility to be used toward the budget. The dividend payment for the 2013 budget was something added by the City Council after Teresi had prepared his executive budget.

“It was brought to out attention last year for the first time,” Teresi said. “It is like everything else in business and life, you learn about new things as you go along. It was brought to our attention and we did the research. It was determined it had been a practice to be making profit sharing dividends many years ago. That practice had not occurred for several decades. It is something that is a legally used mechanism used in other locations with municipal-owned utilities, and it was a practice used in Jamestown.”

Teresi said the dividend payment toward the city’s budget should be exercised on as needed basis with great restraint.

“I would oppose and I would divert any attempts of an inordinate amount of the net profits out of those two utility operations being used,” he said. ”The majority of the operating profits are retained as cash flow for physical improvements on the utilities … and it is a means to upgrade our plant equipment and infrastructure. However, in a restrained fashion, making a dividend payment to the owners of the utilities is appropriate. Our goal is to not handcuff the utility.”

Teresi said city officials look for every resource to toe the line with expenditures and revenues.

“We have to work the budget from both sides of the equation. We have to get the knife out to make cuts on expenditures and look for revenues to take the burden off of property taxpayers. We look for ways to find maximum usage from city-owned assets.”