Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, August 19, 1993 TAG: 9308190257
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: DANIEL HOWES STAFF WRITER
DATELINE: LENGTH: Long
Roanoke's urgent need to find new revenue - without raising taxes - has led it down diverse paths in recent years. The latest, and perhaps bloodiest, may be its possible acquisition of Roanoke Gas Co.'s assets within the city limits.
City officials have been reeling from a public relations campaign launched by Roanoke Gas on Friday, saying the company violated a gentleman's agreement to withhold public disclosures of the city's intentions. They also say Roanoke Gas knew as early as last summer that the city might move to acquire the company's assets within the city.
Meanwhile, Roanoke Gas executives insist that city officials dithered for months before revealing their intention to explore acquisition and then delivering an ultimatum: Agree to extend the 20-year franchise before its Aug. 30 expiration or we will take steps to "ensure our options" by filing a petition with the State Corporation Commission.
The ensuing firestorm has spurred hundreds of phone calls to the gas company, city hall, City Council members, even the chairman of the Roanoke County Board of Supervisors.
Some council members, weary from the fusillade, have distanced themselves from the move and wondered whether they have been well served by City Manager Bob Herbert and his aides.
"Anytime we have to make a major decision, we have 20 days - or one council meeting," complained Councilman James Harvey. "We should not be fooling with this now. We should have done this a year ago.
"If I had a job paying $99,000 a year and my employers were in trouble, I don't know that I'd be sitting on my butt somewhere," he said, referring to Herbert's being on vacation for the past 10 days. Herbert returned to work Wednesday.
"I'm letting Mr. Herbert know I'm tired of these big surprises," Councilman William White said, ticking off a list of embarrassing flaps - the 2-for-1 pension deal, special raises for senior administrators - that many council members believed could have been avoided.
Even as they criticize Herbert's handling of the matter, council members say they have a responsibility to explore whether it would make good financial sense for the city to acquire Roanoke Gas's assets within the city limits.
"My first obligation is to protect the city," Mayor David Bowers said. "I'm very certain we must file the petition [with the SCC] or we would lose the right of protecting the citizens."
The city must petition the SCC before its franchise with Roanoke Gas expires Aug. 30 if it wants to retain the option to acquire a piece of the company. Failure to file, however, would not preclude the city from negotiating a new - and perhaps more lucrative - franchise agreement with Roanoke Gas. The company has been paying $30,000 annually for the past 40 years.
Why might the city want to acquire Roanoke Gas's assets?
Money.
"We're an urban city in America with critical needs operating with not enough dollars to pay for them," Herbert said Wednesday. "I can tell you the benefits will accrue in a sizable amount of money to the citizens of this community."
Indeed, consultants hired by the city last fall project that the city could make more than $2 million annually if it acquires the gas company's assets within the city. Roanoke Gas disputes that conclusion, saying the acquisition would end up costing the city $1.3 million annually in additional expenses.
Herbert and others concede the city's numbers are preliminary. That's why they asked for a franchise extension. But the company rejected the request, saying it would not give the city time to study an acquisition that Roanoke Gas steadfastly opposes.
Unable to grow through annexation, city officials say they are constantly searching for new ways to raise revenue without raising taxes. If buying the gas company's pipes and fittings under city streets can bolster city revenues, some council members think they have an obligation to investigate.
Even so, it's not clear council will vote to petition the SCC - given the strong public outcry and other political calculations:
Roanoke Gas workers who belong to Local 3-515 of the Oil, Chemical and Atomic Workers International Union announced their strong opposition to the city's effort on Wednesday. That could be bad news for White and, especially, Bowers, both of whom have enjoyed labor support in recent elections.
Bowers, who's shown a knack for political symbolism in his 13 months as mayor, could damage his efforts in Roanoke County to rekindle talk of consolidation if he votes to explore the option of acquiring the city's portion of Roanoke Gas. The city's move could engender hostility among some county residents concerned their gas bills could be driven higher.
Vice Mayor Beverly Fitzpatrick Jr. and Councilman Delvis "Mac" McCadden, each products of Roanoke's white-collar corporate world, could damage their reputations among business leaders and valley politicians who consider them friends of valley-wide concerns.
For now, though, the city appears willing to wage its own battle over Roanoke Gas. Wednesday, Herbert used a news conference to correct what he termed "misinformation" circulating in the community, and to announce a "hot line" that residents could call to get the city's side of the story: 224-3100.
His key points:
The city does not intend to take over Roanoke Gas and throw its employees out of work. Rather, city officials paint a scenario in which Roanoke Gas employees would operate a city-owed gas company under a contract.
"We do not want to own the gas company as a whole," he said. "We simply want to own the assets within the city of Roanoke."
City Council will not be voting Monday on whether to acquire the gas company's assets inside the city. Instead, council simply will vote on filing a petition with the SCC that would enable the city to pursue an acquisition.
"If council votes yes, it does not - I underline not - give authorization to make final purchase," Herbert said.
City ownership of the gas company would not guarantee an increase in gas rates, among the lowest in Virginia.
To combat misunderstandings, Herbert announced the city's own public relations blitz, including newspaper, radio and television advertisements and postcards, headlined "What Roanoke Gas Doesn't Want You to Know!" mailed across the city. Total cost: nearly $22,000.
Herbert acknowledged that Roanoke Gas's announcement Friday - spurred by the requirement for a Securities and Exchange Commission filing - caught city officials by surprise.
"Quite simply, we've been on the defense ever since this issue came forward," he said, lambasting Roanoke Gas for allegedly breaking an agreement to keep discussions quiet. "Yeah, I think the heat has been turned on. What the gas company asked us to do and what they did violated what they asked us to do."
Gas company officials tell a slightly different story. Company negotiators say they did ask city officials to keep their discussions private to avoid disclosures and press accounts that might damage relations between Roanoke Gas management and its employees. The city agreed.
On Aug. 9 and 10, two Roanoke Gas executives - Robert Glenn, marketing vice president, and John Williamson, director of rates and finance - told three city officials the company may be required by securities law to make a public announcement later in the week. City Utilities Director Kit Kiser asked Williamson to let him know when such an announcement might be made.
"We told the mayor - I told him myself - that this . . . would take place on Friday the 13th," Glenn said.
Because securities laws require a publicly-traded company such as Roanoke Gas to make a press announcement simultaneous to any such announcement to shareholders, a news conference was scheduled for 10 a.m. Friday.
Efforts to mail letters to shareholders before Friday morning were blocked by company lawyers, Glenn and Williamson said. Everyone had to be notified within a few hours on Friday morning.
At 7 a.m., company executives conducted the first of two hour-long meetings with their employees, briefing them on developments to that point. At 10 a.m., the company announced the situation to reporters, dominating the headlines and putting city officials on the defensive.
City officials were not informed of the public announcement until after it had been made. The next day, postcards explaining the company's predicament appeared in mailboxes of its 23,000 city customers.
The battle had been joined.
by CNB