How to fix Pepco

It has been about eight years now since the crisis at Pepco came to light, and as far as Montgomery County residents are concerned, nothing has changed.

The 2012 "derecho" storm is the latest disaster, but the problem has been growing for years. In 2011, there were hundreds of thousands of power outages after an ice storm. There were severe outages from storms in 2010, and 2008, and after Hurricane Isabel in 2003.

In Maryland, utility companies are granted a monopoly in exchange for submitting to direct supervision by one agency, the “PSC” (Public Service Commission). The PSC is an independent agency, but the Governor appoints its members and has the power to replace them.

That's why I started a petition on SignOn.org to Gov. O'Malley and the Maryland legislature, which says:

"The state regulators at the PSC are failing. The chairman of the PSC, Douglas Nazarian, has admitted that they were slow to recognize problems at Pepco. But he is still in charge of the PSC and so are the rest of the slow responders. Why?" 

"The PSC is an independent agency, but the Governor appoints its members and has the power to replace them." 

As a county government, we have no direct power over Pepco. I can talk until I turn blue about what I think Pepco needs to do better, the fact is that only the PSC can change Pepco, and only the Governor can change the PSC.

Thank you for joining my call to bring accountability to Pepco and Maryland's utility companies. I welcome your comments below.

Montgomery County Moves Money to Community Banks

Today, the county government announced a new initiative to invest its bank deposits in county businesses. I worked with business leaders in the county to request this initiative and I applaud the County Executive and his expert finance team for launching it.

Montgomery County collects and spends more than $4 billion a year. As part of running the government, the county has to maintain large bank deposits through which it can manage payroll, vendor payments, debt service and other expenses. As of June 30, 2011, the county’s cash and cash equivalents totaled $626 million. Most of this money is deposited with PNC Bank, a regional bank that ably provides the financial services needed by the county, which are very demanding. But while PNC is a sound institution, it is not rooted in our local community. PNC loans our deposits far and wide, and we don’t know how much of that money comes back to the county to generate local economic growth and improve our quality of life.

We have an opportunity to change that by investing a portion of our deposits in community banks, which target their loans to small businesses in local communities. Montgomery County is home to a number of these banks, including Capital Bank, Congressional Bank, EagleBank, Monument Bank, OBA Bank, and more. The county government has announced a new program that would invest up to $10 million in county-headquartered community banks over the next year. In return, those banks would have to loan that money along with $10 million of their own money to county-headquartered small businesses. The banks would have to report on their loan activity and the number of jobs those loans create.

This will be a great test of the value of community banking for governments. If it works, we should expand the amount of money that we invest with the community banks. At the same time, we will be developing a valuable policy framework that we can leverage into our county’s RFP for our overall banking relationship, which comes up for bidding in two years. We may be able to structure the RFP in such a way as to further these goals.

This program shows a lot of promise for leveraging county assets into local job creation. I’m happy that the County Executive is moving forward with it and I will be watching to make sure it works.

Budget Challenges Continue

Our latest six-year fiscal plan shows a sobering reality for Montgomery County: our resources will continue to be constrained, and that will necessitate very careful management of our spending.

Since 2010, the county government has issued six-year fiscal plans.  The plans project revenues, mandatory expenditures (such as debt service, retiree health pre-funding and reserves) and the amounts left over for services. 

This practice allows us to see rough estimates over time for how much we will have to spend on schools, parks, police and fire protection and other county services.

Due to the economy’s slow recovery from the Great Recession, the county’s revenues are projected to rise by just 2.3-3.6% per year through 2018.  That is not very different from what inflation will probably be over that period.  At the same time, the state has mandated local spending increases for MCPS matching its growth in enrollment.  Next year, we are projected to increase our local contribution to MCPS by 1.5% as a result of state law.  If we do, according to today’s estimates, we will have to cut most of the rest of the government by 5.2%.

Over the long run, the answer to our budget problems is to increase our rate of economic growth to expand our tax base.  I’m committed to doing that.  But in the short run, we have to continue to manage our spending carefully and show restraint with our resources.  You can count on me to do exactly that.

Daily journal, 10-20-11

On Wednesday I attended Rail~Volution, a national conference about building better communities through transit. I saw a presentation by Peter Calthorpe that I will go ahead and say was the best presentation about planning and the environment that I have ever seen. We can see all around us now the evidence of a change in living patterns as people return to the cities and embrace/build the high quality of life that a great urban area can provide.

Here in Montgomery County we have great suburban neighborhoods and a truly rare agricultural belt, but our urban districts are only starting to blossom. It is in these urban districts, served by public transportation, that we must focus our future job and housing growth. That will be the best way to keep our suburban and rural ways of life intact while fostering the job growth we need to pay for our government services and accommodating the population growth that we know is coming. And I would say most importantly, it is a necessary change if we are going to avert catastrophic climate change. I think we all know that we cannot continue to add cars to the road and vehicle miles traveled at the same rate in the next 50 years as we have in the last 50 years. We have to make a bold change.

These concerns are what animates me in a lot of the daily battles that we have at the County Council. The council has a huge influence on land-use and transportation. Zoning, for example, is the intersection of community building, economic development, neighborhood preservation, environmental stewardship, transportation planning, and so many other key policy areas. It is NOT an eye-glazer!

On a separate note, if you have been reading this blog you know that I have been working diligently to sustain the Fenton Street Market, a great example of grassroots economic development in the Silver Spring area. I am delighted to see this work get results as Hannah McCann and Megan Moriarty have announced they will work to keep the market going. There was a huge gap between the county and the market over use of public space in Silver Spring that we have been working to resolve. We are close now. If this works I hope to see similar efforts take root around the county.

At the World of Montgomery Festival, 10-16-11

The view from where I'm standing about to join County Executive
Leggett and Councilmember Navarro in making remarks to the attendees.
Now off to do some reading for tomorrow's committee meetings!

Daily journal, 10-12-11

Tonight's youth town hall was a huge success. Yes it was contentious
but it was very healthy. Naturally the young people there raised many
objections and criticisms about the proposed curfew. For my own part I
tried not so much to convince everyone of my views so much as to
explain how I look at this issue and what I want to accomplish.

Alan Xie, the student member of the board of education, asked
questions about education funding that were sufficiently detailed to
provoke some guffaws from the council. I hope he didn't take that the
wrong way. Everyone is just tense over the budget because we have no
money and next year isn't looking very good either.

You can catch the town hall on county cable and on demand at our website.

I also continued my work today on the Fenton Street Market. You may
have seen the market announced that it plans to close rather than
compete for the RFP for veterans plaza. I reviewed the RFP and I can
imagine a document like that does not look friendly (you can see a
copy at the market's website).

If you care about this issue please tell Hannah and the County
Executive and the Council that the community wants this market to
continue! I believe we can find a solution. One day Hannah is going
to have her markets all over Montgomery County.

2012 campaign event in North Bethesda

Today I spoke to an energetic group of Democrats active in the
Montgomery County Obama campaign and also Democratic clubs. It was a
great turnout, particularly for 400 days or so out from the election.
My high praise for Jonathan Prutow and his co-conspirator Lisa Jerrum
who put it together along with Jon Randall, who never slowed down
organizing the County after 2008.

My comments focused on the need for Democrats to get their backs up
and get focused on winning. Not whining. Obama has done terrific work
despite an opposition that would sooner destroy our government than
compromise. And he has had to contend with a 60 vote requirement in
the Senate, which is untenable for democratic government to work
properly. Next time you hear a progressive complaining, turn that
conversation around and get them on board! The stakes are too high to
let morale slump.

Here I am with Sarah Wolf, one of my best staffers and organizers in
my 2010 campaign.

Montgomery County's Budget and a Pepco Update

Dear Supporters,

With County Executive Leggett’s budget in hand, the Council now has until the end of May to pass a final plan for spending and taxes. My commitment to you is to do the best that I can for all of our County priorities -- schools, libraries, public safety, safety net services, parks, public transportation and more.

I will let my sense of fairness guide me and work hard not to burden any particular group with doing more than their share to get through this economic crisis. I will look for solutions that uphold our progressive values while putting the county on a stable long term financial path.

Now is the time for you to speak out. As a Councilmember, my job is to make the best decisions I can based on getting all of the information available. That’s why I read every email that comes to me. I strongly encourage you to email me and the entire County Council with your thoughts on what you want from your county government at this difficult time. What principles, values, and priorities do you think should guide the Council’s decisions?

Reply to me directly at councilmember.riemer@montgomerycountymd.gov with your thoughts and if you want all nine Council offices to receive your email, cc: county.council@montgomerycountymd.gov.

As you follow the story in the news and your neighborhood email lists, I want to provide some background that I have found useful.

The County Executive is proposing an increase to the county's budget from $4.271 billion to $4.347 billion, a net hike of 1.8%. Last year, the county's budget fell by 4.5.%. These two years have seen the lowest rate of budget growth since at least the early 1990s.

Many important services are facing their second straight year of tight budgets. The Executive’s recommendation for the public schools is higher than last year’s amount but is lower than what the schools received two years ago, despite higher enrollment. The fire and rescue service, libraries, transit and health and human services are facing their second straight year of cuts. Library staffing, for example, is down over 30% in the last two years. These reductions will cause real-world problems for county residents.

County employees, who make less than private sector workers with the same education, have gone two years without a salary increase, and did not ask for one this year. In his budget, the Executive recommended that employees bear a much larger share of their health and pension benefits. If the council approves a measure resembling the Executive’s recommendation, that could add up to thousands of dollars less in take-home pay for workers making as little as $50,000 per year.

The county’s fiscal solvency is improving, but we are not yet where we need to be. Last year, the county almost lost its AAA bond rating, which enables it to issue bonds carrying the lowest possible interest rates on our billions of dollars in debt for constructing schools, roads, parks and more. The county was able to preserve its rating by establishing a plan to steadily increase its reserves and meet its future obligations, especially for pensions and retiree health care.

Today, we have to make tough choices. I have not made up my mind on many of the key policy issues as I carefully consider the implications. But policy is not our only challenge.

This debate is also a test of progressive leadership. Can we get through our budget crisis without needlessly pitting residents against one another, without making victory for one concern a defeat for another, without dividing and conquering? As your Councilmember, that is what I am working to do.

When I ran for Council I said that we have to listen to everyone because our collective wisdom is our greatest asset. That’s why I’m asking for your input.

I also said that we should not turn every argument into a zero sum game, because we all have to live with the outcome of every decision, together.

Even in tough times, I believe that it can be done.

While I work through this crisis, I am keeping my eyes on the long term. Our budget is in dire straits because our tax revenue is dependent on two sources of income that have both suffered severe market “corrections”: property taxes and income taxes. Each of these revenue sources are down to a lower, corrected base. They are not going to rebound to their bubble highs.

That is why I strongly believe that we must expand our commercial tax base in this county in order to build a more resilient revenue stream. Fairfax has 200,000 more jobs than Montgomery. If we can add a strong commercial tax revenue stream to our property and income tax revenues, the county will be in a much stronger position to make the investments we need for our quality of life. County County

I consider these times a true test of our progressive values and our ability to put them in practice. Through it all, I keep reminding myself, as others have said to me -- if we can’t figure it out here in Montgomery County, then where?

The stakes are high.

PEPCO UPDATE

Pepco’s power reliability is an issue of continuing concern for its customers. As of this writing, 1,093 people have signed our petition calling on regulators to establish performance standards and not approve a rate hike until the company’s service improves. Thank you to all the petition signatories and we hope even more residents will sign. Soon, we will be sending the petition to both Pepco and the Maryland Public Service Commission.

At the moment, the Maryland House of Delegates and the Maryland Senate have passed two different bills aimed at establishing reliability standards for Pepco. The Senate’s bill is far better. The Senate would begin levying penalties in 2012 whereas the House would levy them starting in 2014. The Senate would impose penalties totaling up to 2.5% of Pepco’s transmission and distribution revenues whereas the House would only allow a penalty of $10,000 per day per violation. The Senate and House must now agree on a compromise. If you would like the legislature to pass a bill more closely resembling the Senate’s version, you should email your state legislators as soon as you can.

Finally, Pepco continues to shower their executives with endless compensation and perks even as the company fails its customers. Pepco’s latest filing with the U.S. Securities and Exchange Commission shows that the company gave its top five executives a combined 20% increase in compensation in 2010. Its Chief Executive received a 14% increase and has an employment agreement that prohibits the company from cutting his salary or revoking any of his salary increases. Company executives also receive a long list of perks including car allowances, parking, tax preparation fees, financial planning fees, executive physical fees, club dues and spousal travel.

Clearly, Pepco has a long way to go before it makes itself truly accountable to its customers.

Reply to me directly at councilmember.riemer@montgomerycountymd.gov with your thoughts and if you want all nine Council offices to receive your email, cc: county.council@montgomerycountymd.gov.

Sincerely,

Hans Riemer

What We Can Do About Pepco

Dear Friend:

Recently, I wrote to you about the large profits Pepco was earning as its outage performance was declining. With million of dollars per year in after-tax profit, Pepco does not need a rate increase to pay for system improvements.

Many of you asked: “What can be done to improve Pepco?” Pepco is regulated by the Maryland Public Service Commission (PSC) and Pepco’s status as a private company and its regulation by an appointed commission establish one central fact: no single elected official on the state or county level has the power to control its operations. But if we all work together, we can make a difference.