Right on Target

Wind, Water, Solar, Biofuels... Future "LENR"

Right on the target. Lets hope our leaders take this intelligent advice...........

Article published May 7, 2008
Civil discourse and Highwood Generating Station
By LAWRENCE C. REZENTES, CPA

Much has been made of the concept of civil discourse and of its importance in the Great Falls political process. While we may differ regarding the desirability of the construction of Highwood Generating Station ("Highwood"), the concept of civil discourse has come to be used as a vehicle to deflect criticism of Highwood and Electric City Power ("ECP"), to limit discussion on these and other critical issues to one of "happy talk," and to vilify those who, as citizens or as elected officials, pursue questioning or bring to light wrongdoing. This was recently exemplified following the April 15 City Commission meeting, when Mayor Dona Stebbins criticized Commissioner Mary Jolley and accused her of bullying and being uncooperative when Jolley pursued inquiry of Fiscal Services Director Coleen Balzarini regarding water rights issues.

This guest editorial is to show that there are actions and behavior, in particular of public officials, that are so reprehensible and so violating of the public trust that they are worthy not of discourse, but of condemnation.

Let's look at the issues surrounding Highwood in this context:

ECP, the precursor entity to Highwood, was established by Ordinance 2861 that required a vote by the citizens prior to the issuance of general fund debt obligations or the use of tax revenues to fund ECP. Former Great Falls Mayor Randy Gray, together with the city commissioners serving with him, repealed Ordinance 2861, thereby denying the voters the right to vote on this important issue.

Ordinance 2925 replaced Ordinance 2861 and provided that ECP was to operate "at all times" on a "self-sufficient and self-sustaining basis"; that is, to make money. In fact, as I have stated in prior guest editorials, ECP sold power at a loss, in the interest of enticing new customers to Highwood at prices that could not be sustained. The result was a program that forecast ongoing losses through year 2011 and that resulted in losses to-date to the city in excess of $1.1 million. City government and city management ignored the law, and, as a result, large losses have been sustained by the city and an associated debt in excess of $1 million has been incurred to Southern Montana Electric (SME), Great Falls' partner in the Highwood program.

ECP annual financial statements reflecting these losses have been hidden from the citizens: never released to the public, not released for publication by the press, with ECP annual financial results buried within the city's annual financial report. Further, cumulative loss information until recently had never been released, and repeated requests I made to Balzarini, the city fiscal officer and executive director of ECP, for such cumulative loss information, had until recently been refused. Cumulative loss information was only recently provided by Balzarini following pursuit of this information by Commissioner Mary Jolley. Additionally, Balzarini is NOT charging ECP for costs and expenses being incurred by the city on its behalf for travel, space, employee time, utilities, etc. Therefore, total reported losses to date of $1.1 million are in fact understated, perhaps significantly. The large losses being produced by ECP have been hidden from the public by city management and elected city officials to avoid the need to explain the continued operation of a program producing such large losses and doing so in violation of the program's enabling ordinance.

Monthly or quarterly financial statements of ECP have never been prepared, nor provided, to city government, nor to the ECP Board. How is it responsible for the ECP Board of Directors, the former city manager, and the city commissioners and mayor to not require regular financial reporting that would allow them to monitor the ongoing financial results of ECP and potentially avert the large losses that have occurred? Why has such financial reporting not been provided?

The review by the County Commission of the request by the Urquharts to rezone their property to heavy industrial was a biased affair designed to accomplish a predetermined outcome. Member of the county Planning Board and president of First Interstate Bank, Bill Weber, represented in a letter that he sent to the county Planning Board, that his bank had no conflict of interest because it had only a depository relationship with SME. Not mentioned was First Interstate Bank's purchase of $1.5 million in city of Great Falls (a member of SME) general fund obligation notes and that First Interstate Bank stood therefore to benefit from approval of the rezoning. He should have recused himself from the vote to recommend or not recommend approval to the County Commission, but did not. The hearing by the County Commission occurred in kangaroo-court fashion, with Southern Montana Electric being given a full 2-1/2 hours at the start of the hearing to present a continuous, professionally prepared, presentation and afterward to have their supporters provide individual testimony in seven-minute intervals for an additional 1-1/2 hours. The landowners and other opponents were given NO time to provide an initial presentation in opposition. Instead, individual opponents were finally able to begin making seven-minute presentations late in the evening, beginning about 8:30 p.m. Several individual presenters were interrupted by Chairman Lance Olson, with him indicating that they were repetitious or, in the case of my presentation, that he did not understand the relevance of the potential financial failure of the plant to the rezoning request. It was particularly outrageous to have the attorney for the landowners rushing through his seven minutes to present his case (he was only allowed later to speak further after midnight).

No, the process of approval and oversight of the ECP and Highwood programs represents failure of our city and county government and a violation of the public trust. The result of the failure of the process and by city and county officials is a loss of rights by the citizenry, concealment of the results of operation of a major city program, expropriation of the value of agricultural and residential land of landowners, and total losses to the city of in excess of $3.5 million (including several million dollars in loans by the city in support of the ECP and Highwood programs). The losses to the city will never be recovered, as it is highly unlikely Highwood will ever be built. Skyrocketing costs of construction, rejection by the Rural Utility Service of the financing of Highwood, antipathy by the financial community toward coal plants, a horrific credit market, the recent decision averse to the program by the Montana Department of Environmental Quality, and the withdrawal of Yellowstone Valley Electric Cooperative from participation, means Highwood will likely never be built. ECP will be left, additionally, with a debt of $1 million owed to SME as a result of ECP's under-pricing of power in support of Highwood. These fruits of the failure of our city and county government do not merit further discourse, but rather condemnation.

So what can we learn, and what can we do? I suggest we can and should do the following:

Be certain that the newly hired city manager understands he reports to the elected city government and not the other way around. Elected city officials' lack of oversight of the prior city manager, and lack of follow-up, lack of attention to detail, and an unwillingness to stand up when city ordinances are being violated, has resulted in the large losses and injustices noted above.
Appoint an independent investigator to review the status of ECP. An associated review should be undertaken in concert with the city's independent accountants to assess expenses currently not being charged to the program so that a correct accounting for losses can be made. If the program is found to not be in compliance with Ordinance 2925, ECP should be shut down with sufficient lead time to allow customers to obtain a replacement power source.
Citizens should attend City Commission meetings and inquire about results of operation of ECP. Such follow-up and oversight is the only way we as citizens can establish accountability for the mayor, city commissioners and city management for actions taken.
The city and citizenry should be circumspect when it comes to assessing proposals for the city to become involved in activities outside of the provision of municipal services. The city should stick to what it is best qualified to do: provision of these services (fire, police, water, etc.). When business decisions and business management meet city management and elected officials without experience and competency in either, the large losses and poor results noted above will occur.
Bill Weber should be asked to explain to the county Planning Board and to the citizens why he did not choose to disclose the lending relationship of his bank to the city of Great Falls, as a basis for deciding his suitability for continuing membership on the County Planning Board.
The County should appoint an independent investigator to investigate the actions and plans surrounding the rezoning hearing to assess the motivation and justification for the outrageously biased forum and format of the hearing.

Lawrence Rezentes is a certified public accountant with experience as CFO in public, venture-capital and private-equity funded enterprises. He currently works in the public sector for the U.S. Department of Justice, Office of the United States Trustee. The views expressed herein are his own and are not intended to represent the views of the U.S. Department of Justice, nor those of the Office of the United States Trustee.

Originally published May 7, 200