Statement for Seattle City Council March 6, 2003

Position on Reconfirmation of City Light Superintendent has not Changed

Good morning. I am Putnam Barber, Chair of the Municipal League of King County.

Thank you for providing us this additional time to talk with you this morning. Frankly, I would rather not be here. The Municipal League has communicated with the council about City Light many times in the past year or so. Most recently, we conveyed to you our recommendation that you should decline to reconfirm Gary Zarker as Superintendent of City Light.

Nothing about that recommendation has changed.

As you know, on Monday the mayor sent a letter to the League which was also posted on the City of Seattle website and published in the Seattle Times. That letter troubled us in several ways, and I want to spend a minute of your time this morning talking about why.

First, it came very late in the process and was based on information that was not available to us when we prepared our recommendation. If that information had been available, we would have considered it carefully, as we have considered a great deal of material about the situation and prospects of City Light over the past year and a half. In fact, we requested recent financial information from City Light in January and were told that it could not be provided to us until May.

Second, our concern about the leadership provided to City Light is not based on any short list of facts or assertions. We have looked into the affairs of City Light ourselves, and we have witnessed the leadership approach of Gary Zarker directly as well. But we have also relied on reviews of the utility done by investigative reporters, a blue-ribbon committee appointed by the mayor, and a highly regarded firm of electrical utility consultants chosen by the City Auditor and selected in part because of their independence from the utility and the city of Seattle more generally. These reviews suggest several broad areas in which there have been consistent and repeated failures to lead the utility in the way we think the city of Seattle deserves. The supporting documentation for our recommendation that you not reconfirm was drawn largely from the report of the independent consultants’ review -- and often we quoted directly from the review itself.

The issue before you now is not the Municipal League and the accuracy of its presentation of one or another specific fact or moment in history. The issue is whether the record of the past eight years can support reconfirmation of Gary Zarker as Superintendent of City Light. You already know that we believe it cannot.

Third, and perhaps most troubling of all, is the fact that this recent letter from the mayor is of a piece with the disappointing response of the utility over the past several years. Our attention to City Light began, in fact, because we felt City Light’s account of the impact of the 2001 drought and the concurrent disruption in energy markets did not give enough attention to the weaknesses in leadership that had left the utility exposed to the risks that, as it turned out, resulted in dramatically adverse financial results during that period.

We have been waiting since the Vantage Report was published in early November for a complete, forthright and direct response from City Light. Such a response would have worked through every one of the findings in that report and demonstrated how the utility would deal, or already had dealt, with each issue raised.

Such a response has simply not been presented. Not to the council, not to the Municipal League, not to the community at large.

I have with me a written statement that says a little more about the three issues the mayor raised in his Monday letter to us. In it I provide an explanation from our point of view for our conclusion that there is no reason for us to revise our recommendation that you decline to reconfirm Gary Zarker as Superintendent of City Light. We conveyed that position to the mayor’s office on February 24th, and to you on February 27th. The information presented by the mayor more recently may well be useful for understanding the history and future course of the utility. It may well suggest that City Light’s financial situation is improving -- which would, of course, be a very welcome development. But it cannot change the record of the past eight years.

Our recommendation to you is unchanged.

Thank you, again, for this opportunity to talk with you again.

Written Statement

The Municipal League has reviewed the mayor’s letter of March 3, 2003. We find nothing in this letter or its attachments that would cause us to alter our statement to the Council or our recommendation that you decline to reconfirm Gary Zarker as Superintendent of City Light.

Cost Cutting. The mayor’s comments on this subject are apparently based on information we sought from City Light in a public disclosure request in January. We were told at the time this information would not be available to the public until May. We plan to review it carefully when it becomes available to us.

Having said that, whatever real cost reductions (as opposed, for example, to transfers of cost centers to other agencies) were or were not made during 2002, are not the issue we were addressing. Our review of the Vantage report and other information convinced us that cost containment has not been a commitment or priority during the term of Mr. Zarker’s leadership. We remain convinced of that today.

Reducing City Light's budget is not the same thing as controlling costs. We have not called for City Light to reduce its budget. Reducing debt and reducing rates imply lower expenditures on current operations, of course. Our complaint, though, has been that the City Light is reported, by Vantage and others, to have higher costs when compared to other electrical utilities on a wide variety of measures. The Vantage report concluded by saying that City Light’s commitment to cost control is “underwhelming.” It is that pattern, not a single quarter’s financial results, that prompted our comment. And that pattern should be a concern for the council and ratepayers alike until City Light demonstrates a new, and more determined, approach to controlling costs. Reducing the budget does not demonstrate a change of management practices on this score.

Qualifications of Senior Management: In delivering the formal testimony of the League, we pointed to the “lack of senior managers at SCL with in-depth electric utility experience.” This statement is a direct quote from the Vantage Report; and our subsequent comments to the Council were based on the Vantage findings.

Attached to the mayor’s letter was a three page Executive Summary of the EES Consulting Management Review Report dated February 27, 2003. Nothing we have seen in the report challenges or disputes the Vantage finding quoted above. On the contrary, it confirms that finding. Further, EES Consulting recommends the appointment of a Chief Operating Officer at City Light with expertise in the operation of an electrical utility. As you know, the mayor’s blue-ribbon committee made this recommendation and the Municipal League has endorsed it.

We will look forward to receiving and studying the full report from EES Consulting as a part of our ongoing monitoring of City Light.

Centralia: The Municipal League’s statement to the Council made no mention of Centralia. Events surrounding the sale of the city’s share in the Centralia plant and the need to replace the energy it provided were among the topics we looked at carefully and which we raised questions about in our letter delivered to the council in the spring of 2002. The 1999 council staff memo attached to the mayor’s March 3 letter demonstrates that the council had been told that there were risks involved in the sale of the city’s share of the Centralia plant. It does not demonstrate that those risks were fully and carefully presented to the council accompanied by realistic options for addressing them. More to the point, the reviewers who have commented on this aspect of the questions about City Light have said that there have been repeated occasions when the discussions between the council and the utility reveal a pattern of inadequate attention to the full ramifications of what is at stake. That lack of attention stems, we believe, from City Light's own inattention to issues of that sort and from the character of the presentations and discussions at council meetings. It is here among other places that the leadership shortcomings manifest themselves.

We continue to recommend that the Council should decline to reconfirm Gary Zarker as Superintendent of City Light.