You may have seen the announcement about the tax hike, but you may not have recognized it as such because that’s not how it was portrayed. Rather than something that would be costly to residents, the announcement was presented as something that would be beneficial to them — a page right out of the Barack Obama Redistribution of Wealth Playbook.
The city announced a new power franchise agreement with American Electric Power, which if approved, will “bring as much as $3.3 million in new revenue for the city,” according to the announcement.
Well that sounds exciting. The city can certainly put millions of new dollars to very good use to benefit residents. For that matter, according to the announcement, city staff has been working for a year to forge this new contract with AEP. The announcement said that as a result of these efforts, the city will have millions of new dollars to use for such things as paving, something residents have been complaining about.
The new agreement with AEP is “more advantageous to the city and its residents” than the current agreement, according to the announcement.
But is it really?
The fact is that the $3.3 million in new money to the city isn’t coming out of AEP’s profit — perish the thought. Rather, it’s coming right out of the pockets of AEP’s Kingsport customers.
Bristol, Johnson City and Elizabethton each get millions of dollars each year from the Tennessee Valley Authority. Those communities have municipal systems which buy power from TVA. In 2013, Johnson City received $3.5 million, Bristol $1.65 million and Elizabethton $750,000.
Kingsport by comparison received a paltry $443,000 from AEP in return for the city protecting it from competition. Perhaps in negotiating the new contract, the city thought it should get more money from AEP.
All well and good. But in return for a 20-year monopoly and writing the city a big check, the announcement indicated that AEP would raise rates on city customers by 5 percent to pay for it.
According to information provided to the city, to cover the cost of the new franchise fees, both residential and commercial Kingsport customers would see a 5 percent increase in their rates. And that’s not our fault, the city says.
“The pass-through is not Kingsport’s decision. That’s up to AEP,” says Assistant City Manager Ryan McReynolds. “They have the ability and right to show that line item out, just as cable providers and others do,” McReynolds said.
Indeed they do. And the city has the ability and right not to sign a contract that raises rates on city customers, only to transfer that money to the city coffers.