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Wednesday, July 30, 2014

Milwaukee Alderman Bob Bauman Speaks Out on the City’s Future

We Energies, the Bucks and transportation top his list of priorities

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One of the most outspoken and effective members of the Milwaukee Common Council, Robert Bauman, has also emerged as one of the city’s most forward thinking. Bauman, whose district includes part of the East Side, the central city and Milwaukee’s Downtown, has just come through with a major victory pushing through the city’s new taxicab and ridesharing services ordinance and is now addressing the city’s very expensive dependence on electricity provided by We Energies. Bauman sat down with Shepherd Editor and Publisher Louis Fortis last week. Here’s what Bauman had to say:

 

Shepherd: There’s a debate about Milwaukee’s direction and, for some cynics, whether it even has a future. What do you see as Milwaukee’s future?

Bauman: I see a city with some great assets and some very serious challenges. The overarching concern I have is the total breakdown of a regional perspective—the outright hostility between city and suburb, the inability to agree on shared values, on a shared sense of what’s in the public good. Sharing the burdens as well as sharing the benefits of a metropolitan area. When I say region I specifically mean the four-county area—Milwaukee, Washington, Ozaukee and Waukesha counties. This is a serious problem because it really precludes us from moving forward on a whole host of fronts, whether it be more diverse housing patterns throughout the region or the lack of a regional transportation authority. The lack of regional transportation approaches is a serious, serious challenge to the future growth and prosperity of the region.

Shepherd: How do you think that attitude will change?

Bauman: I don’t frankly know how they change it. Will it take changes of leadership on the suburban levels and city levels, on the Milwaukee County level, Washington, Ozaukee, Waukesha counties? Perhaps. I’m not sure how that gets solved, but my theory is that the region and therefore the city is on a path of slow growth or no growth while many of our peer cities accelerate ahead of us in terms of job creation, of wealth creation, of increasing their population, of retaining their college-educated young people, of attracting college-educated young people, and of attracting employers and retaining employers because of the lure of a Chicago, of a Minneapolis, of even Oklahoma City. Fifty years ago, Milwaukee wouldn’t have even been in the same league as Oklahoma City. Now Oklahoma City is pushing us, challenging us on every economic and social indicator.

My greatest fear is that we’re looking at a slow-growth or no-growth scenario. Will life continue? Absolutely. Will Brady Street remain a vibrant street? Absolutely. Will KK Avenue remain a vibrant street? Absolutely. But will the same opportunities that we see in other major metropolitan areas exist here? I fear not.

Shepherd: What do you see as some of the solutions?

Bauman: We know what the tools are to be a strong, growing community. A modern transit system, whether it’s streetcars, whether it’s light rail, whether it’s commuter rail, whether it’s inner-city rail, we in Wisconsin have succeeded in blowing up all four of them. Connectivity is a huge part of urban growth and prosperity, yet we seem hell bent on activity opposing any form of connectivity that does not involve automobiles and highways. That’s extremely shortsighted. And again, the examples of other cities prove overwhelmingly that connectivity through multiple modes of transportation is key to the prosperity and health of modern society and the people. That’s just one example.

Another important area is the schools. Again, concentrated poverty is the greatest challenge to Milwaukee’s central city, Chicago’s central city, St. Louis’ central city, most of Detroit. You break that up through giving people ways to get to the jobs in other parts in the metropolitan area; you provide workforce housing in other parts of the metropolitan area so low-income individuals are not just concentrated in city neighborhoods; you continue improving education, which is a very challenging subject.

Shepherd: The city just eliminated its cap on taxicab permits and will now regulate ridesharing services. You’ve led on this issue. What are your thoughts on how this played out?

Bauman: The unanimous vote on Tuesday was the culmination of 18 months of work to deregulate and reform the taxicab business in Milwaukee. The legislation removes the cap on the number of taxi permits the city can issue and embraces the new app-based rideshare services that have entered the market. We have also streamlined the process for obtaining a taxi permit and public passenger operators license. It will now be possible for an applicant to obtain necessary permits and licenses in one day. The city will still conduct criminal background checks on all applicants, require proof of commercial auto insurance and perform safety inspections on all vehicles.

In short, the legislation will open up the market while insuring basic public safety oversight remains in place. This was also a very transparent process. We held nine public hearings and listened to dozens of hours of testimony.

Shepherd: Another big issue is this whole big question of the Bucks and coming up with funding for a new arena. Where do you stand on this?

Bauman: I do think professional franchises are an important amenity to big cities. I think they do add value, not so much direct value but indirect and intangible value to a city. I do not support a funding mechanism that involves public taxes and public funds for an arena only. If we make a public investment into an arena as part of a larger package of public improvements, of public investments, I could support that, but I think we’re a long way from that at this point, because my sense is the corporate elite that seem sort of obsessed with professional sports and building arenas haven’t yet embraced the notion of including other public goods in any sort of funding push.

And then we have the whole regional issue. We’re all interdependent and we’re all in the same boat and there’s just not that recognition. You’ve had county boards in Ozaukee, Washington and Racine take positions against any form of financial assistance for the new Bucks arena before they even know what the proposal is, and that’s very troubling. I think there’s a 50-50 chance that we do lose this franchise because I don’t know how we’re going to pull together a political consensus to fund an arena without also funding other public goods, which will in turn create opposition from those wanting to fund transit, those wanting to fund parks. I don’t see how it’s going to come together, but there’s a possibility of that.

Shepherd: You are very concerned about the city’s payments to We Energies. What do taxpayers need to know about the city’s electricity rates?

Bauman: Yes, the whole issue with We Energies, our public utility in Milwaukee, has been of increasing concern to me. In 2013, the city of Milwaukee spent about $16 million on We Energies for electricity, natural gas and steam heat. A big chunk of that was for the Water Works, which is a large consumer of electricity.

As I started to look at the full relationship between We Energies and the city, it began to become increasingly apparent that they’re no longer a regulated monopoly. They’re just an outright monopoly.

Since 2002, I believe their overall rate structure in Wisconsin has increased 55%, and inflation has only gone up about 20%. Their CEO, Gale Klappa, is the third highest paid utility executive in the United States. I believe in 2011-2012 his total compensation package was some $17 million. Their overall executive pay plan involves bonus payments of some $55 million in the 2011-2012 time period.

Shepherd: What can the city do about this? Right now, as you point out, they have a monopoly and that monopoly has been overwhelmingly supported by the agency, the Public Service Commission, that is supposed to be regulating it.

Bauman: Basically under current Wisconsin law, the city of Milwaukee as a major customer really has no choice. We can’t negotiate with an Illinois utility, we can’t negotiate with an Iowa utility or a Minnesota utility to purchase our power because state law precludes that. That’s basically the regulation.

The regulation of the utility industry has had some challenges over the last couple of years that it’s been attempted; there has been some abuse, but clearly we do not have a utility that is regulated in the public interest anymore. Their lobbyists literally brag about basically controlling the Public Service Commission through a three-member body appointed by the governor. They like to brag about controlling the Legislature in terms of preventing any sort of statutory or regulatory changes that would rein in their rate increases. And now they’re even going to actively discourage conversion to solar power by suggesting their new rate structure, which will actually increase the cost of solar power over conventional power. Again, there are legislative solutions to this, there are regulatory solutions to this, but currently you basically have an ill-regulated monopoly.

The city really doesn’t have the power to alter the current regulatory environment. We could consider going independent—we could look at generating our own power through various means. Whether that’s feasible or not, or cost effective remains to be seen. We have passed resolutions directing the Department of Public Works and the Office of Environmental Sustainability to look at producing an energy-independence plan, where the city would attempt to generate as much of its own power as possible, whether that’s through wind, solar and even fossil fuel generation, if that seems feasible and cost effective. We’re exploring those options but clearly something has to give in this relationship with the utility and the city of Milwaukee, because they’ve become an active impediment to one of our economic development issues.

Shepherd: Twenty-five years ago, Charlie McNeer, who ran the Wisconsin Electric Power Company, would brag about keeping power rates really low because of how important it was for economic growth. Our low rates were a real plus in selling Wisconsin to businesses that were looking to relocate. Now, over the past 10 years, We Energies has built a massive power plant and has incurred a lot of debt, which is something Charlie would never have done. If you cut back on consumption and add in more alternative energy users, then who’s going to pay for the debt service on this massive investment?

Bauman: Well, the homeowners. Basically, in a nutshell, the individual utility customers. And you’re right, back in the early 1990s, Southeastern Wisconsin would brag about the fact that they had relatively low utility rates, some of the lowest in the Midwest. Now all of the sudden we have some of the highest in the Midwest, and that is a direct result of some of the policies we’ve just spoken about, perhaps overinvestment in infrastructure, perhaps too generous executive compensation plans.

Shepherd: A number of my fellow business owners who read the Business Journal have said to me, if you look at the listings of the top 25 highest-paid executives in our area, five, or 20%, of the highest-paid executives work for We Energies. These small business people are arguing that they have to compete in a competitive market and We Energies is basically like a government agency, like the Water Works almost. So what am I supposed to say to them?

Bauman: That is a very good question and the comparison to the Milwaukee Water Works is a good one. The Milwaukee Water Works is also a regulated utility, virtually identical in concept to We Energies. They produce electricity and distribute natural gas; the city of Milwaukee distributes treated drinking water for domestic use and industrial use and fire suppression. Our water utility is a big operation; it employs several hundred people; it generates tens of millions of dollars in revenue every year. We reinvest massively in repairing water mains, re-laying water mains. But the CEO of our Waterworks, Carrie Lewis, I think makes about $130,000 a year, compared to the CEO of We Energies at $17 million. That ought to send some indication that there seems to be a growing disparity between the way shareholder-owned, privately owned utilities are being run in this country and in this region, and a public utility.

There seems to be an argument there for government ownership of some of these utilities. There are some municipalities that do own their own utilities. Seattle is one that does own its own electric utility. So it’s not an unheard-of notion, an unheard of concept.