Mar 5 2011

The History of Public 20A Fund Losses in Piedmont

Over $450,000 of City funds prioritized for undergrounding Moraga and Oakland Avenues have been loaned to, but not repaid by, private undergrounding district homeowners.  The history of how this occurred goes back many years.

The Public Utility Commission requires that PG&E set aside money it receives from utility users in a special 20A fund reserved for public undergrounding projects*.  This is in contrast to 20B and 20C districts which rely on private funding:

  • 20A Projects use 20A funds to pay for public undergrounding projects. In Piedmont, Moraga, Oakland and Grand Avenues, major corridors, were prioritized for the City’s 20A funds after a comprehensive study conducted by staff. (See Resolution 85-85, p. 1, p. 2, p. 3.)  Grand Avenue undergrounding was completed using 20A funds.
  • 20B Projects use money from property owners self-selecting themselves. City Council approval of the district allows a special assessment district to be formed and bonds issued; construction is performed under the management of the City.  Current 20B agreements between the City and homeowners open the City General Fund to invasion for costs not originally a part of the City’s agreements with property owners who desired the undergrounding project.  The City may bear the risk of cost overruns beyond contingency funds and Acts of God. (Chiang report, p. 6 and 13.)
  • 20C Projects use money solely from property owners self-selecting themselves who work directly with PG&E to manage the undergrounding project.  The property owners pay all expenses incurred and the City plays no management role in these projects.  There is no risk to the City.

Using 20A public funds for the benefit of private districts

Undergrounding proponents have urged the City to make 20A public funding available to 20B private district as seed money since 2003.  (See p. 5-7 and Source Materials below).  At a 2-3-03 City Council meeting the City Administrator advised there were too few 20A monies to fund the undergrounding of any properties except those owned by the City and School District.  (p. 4)  However, the Council supported their use, “agreeing that the likelihood the City will ever use Rule 20A funds to finance utility undergrounding along Oakland Avenue is remote.”  (5-5-03, p. 7.)

In October, 2003 the Council considered and authorized $25,000 to Central Piedmont when proponents ran short of funds.  This fact is noted in a 4-4-05 staff report, but not reflected in Oct. 2003 minutes. The 2005 report goes on to state “Subsequent to that meeting, the city learned that the PUC had revised its rule regarding use of 20A funds and now requires cash payment for engineering within two and one-half years from the date of service whether or not the district succeeds.”  (At p. 2.) This discovery forced the Council to terminate its practice of authorizing the use of 20A pubic funds for 20B private districts in order to comply with its long-standing prohibition against using general funds for 20B districts.

Complying with City Policy Prohibiting the Use of General Funds

A few years later, shortly after Central Piedmont failed to pass and proponents were left with $128,00 in unpaid debts for engineering costs, a new possibility was considered: would PG&E debit the City’s 20A account – rather than demanding cash drawn on general funds (a check) – if PG&E’s engineering costs were not repaid by a private district as agreed?  Staff secured PG&E’s written agreement to debit and assured the Council that “this cost will never hit the city’s general fund”. (see p. 6 of staff report.)  The risk of loss of these funds was pointed out to the Council (Staff report p.3), as well as the restrictions on 20A fund use (Staff report).

With this assurance the Council reinstated its practice of authorizing 20A funds for 20B district.  In addition to the initial $25,000 provided to Central Piedmont, it authorized:

  • $150,000 as seed money to Piedmont Hills in May 2007
  • $150,000 to Hampton-Sea View sometime prior to April, 2008

By 2008, $453,000 of the $460,000 20A public monies had been committed to private 20B districts, exhausting the 20A fund.

The Council officially memorialized its new 20A fund policy on July 7, 2007, enacting a new City undergrounding policy which permits up to $150,000 in 20A funds to each 20B district.   (p. 2-3)

Private Districts Unable to Repay 20A Funds

History shows that private 20B districts have not been able to repay 20A public funds with district bond proceeds, as originally envisioned:

  • Piedmont Hills: Technically, this district may have repaid $150,000 to the 20A account, but did so with a City General Fund bailout, not district bond funds.
  • Hampton-Sea View: did not issue bonds and was abandoned, resulting in $150,000 not being repaid.

  • Central Piedmont: was not approved, resulting in its original $25,000 of 20A fund seed money not being repaid.  In addition, the City used $128,000 of 20A fund account to satisfy the remaining debts of the district, rather than requiring proponents to raise funds for an abandoned district.  In this case, 20A funds were authorized knowing they would not be repaid:  an Amended Preliminary Reimbursement Agreement voiding the proponents’ responsibility to repay the City was executed.

The Council had hoped the $300,000 to Piedmont Hills and Hampton-Sea View would be repaid from bond funds after the districts were approved.  This strategy left the Council with little choice but to approve these district, even in the face of substantial (e.g. 46%) opposition, if the City wished to see 20A public funds repaid.

There have been no further discussions on how the Council intends to restore lost funds to Piedmont’s public undergrounding 20A fund reserve.  Nor has there been any further mention of the overhead lines on the major thoroughfares of Moraga Avenue and Oakland Avenue being undergrounded for the general benefit, health and welfare of Piedmont residents.  Options for a city-wide undergrounding requested by the Council on March 19, 2007 have not yet been obtained.

*Allocation of 20A public funds is limited to the following 3 public purposes:

  1. Such undergrounding will avoid or eliminate an unusually heavy concentration of overhead electric facilities;
  2. The street or road or right-of-way is extensively used by the general public and carries a heavy volume of pedestrian or vehicular traffic; and
  3. The street or road or right-of-way adjoins or passes through a civic area or public recreation area or an area of unusual scenic interest to the general public.

Source material:

Minutes 5-5-03

Minutes 6-2-03

Minutes – 3-19-07

Minutes 5-7-07

Staff Report 6-4-07 (p. 2, paragraph 3)



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