Accountant's Opinion on the "Deposit" (Gift)
On Tuesday, October 2, 2007, SME's accountant, Randal J. Boysun, had a guest editorial in the Tribune about the $1.4 million dollars that the City of Great Falls has set aside to secure Electric City Power's obligations to SME. (I can't find it reprinted online)
The main point of Mr. Boysun's piece is that the conclusion of an earlier piece by Mr. Larry Rezentes is incorrect. Mr. Rezentes suggested that the $1.4 million dollar deposit was, in reality, a way to secure the City's debt back to SME resulting from the City's subsidizing Electric City Power's customer rates. I recall thinking at the time that, while Mr. Rezentes had a point, I couldn't quite get to his conclusion based on the information I had. In other words, while his suggestion was a possibility, it was only that.
Mr. Boysun responded that this deposit is a) a completely normal vehicle used by SME to ensure repayment and b) that it has nothing to do with repayment of the water credit, stating that the "terms of repayment for any amount owed from water credits are specified by a written agreement between the parties."
I've met Mr. Boysun. He's a good guy and, from what I understand, a good accountant.
But with all due respect to Mr. Boysun, his article misses the point. The question is not whether security deposits are the norm in the energy industry; they might well be. The question is why our City Commission elected to give one in this case when it was not contractually obligated to do so. In other words, if SME dropped the ball on the front end and forgot to require it in the contract, why should we give SME a gift now?
Further, as City Commission Candidate Mary Jolley points out in a comment, the "written agreement" he refers to is the same old Water Service Agreement we've known about all along. And no, it does not specify the terms of repayment.
UPDATE: I made a mistake. The link above does send you to the "Water Service Agreement," but that Agreement is not what provides for repayment of the water credit. This is the Agreement that provides for repayment. The relevant language can be found here.
The language is: "Southern shall give the City written notice of its intention to not construct the Highwood Station and the City shall commence making payments toward the rate subsidy within sixty (60) days after receipt of the notice from Southern." (More on this topic here.)
In any event, in a comment below, Mary Jolley says that she will "agree with the accountant" that the terms are "specified by a written agreement between the parties."
I won't agree. Exactly one repayment term is specified: the period in which payments must start. Terms not specified include the period of time for repayment, the interest rate, if any, the amount of the payments, security for repayment (hmmmm...), etc., etc. These are not insignificant items considering we are discussing a million dollar debt.
Sorry about the error.
13 comments:
This is an example of how twisted answers to questions are. I find my self not knowing if I agree or disagree with the word specific. When I first question the terms, I said they were, without looking at it again, I remember it says, that if SME decides to not build HGS then the city must repay the amount starting in 60 days. The signatures on the agreement are Colleen Balzarini, Mr. Lawton and Tim Gregorie. I guess I'll agree with the accountant. That is if he saw the agreement.
The agreement was signed before the New and Improved ECP was created, after its creation Mr. Lawton has repeatedly said he can not incur debt without the ok of the comissioners. I guess he could before Nov. 1, 2005.
I'm sorry if I am unable to make myself clear but, so many things just don't fit with this pact between the city and SME.
Speaking of Highwood and water. Whats with the half page SME ads in the trib that say: Highwood Generating Station means clean, affordable, reliable energy from a multi-resource plant the uses coal, wind and hydro.
Seems like they want to fool the retarded and senile into believing this is also a hydo-electric facility.
The only thing hydo about this plant is water they will steal from more useful growth.
Bald face lies.
I am pretty sure that the references to "hydro" in the SME ads are speaking not to the Highwood Generating Station, but to the overall energy portfolio from which SME proposes to meet the needs of Electric City Power's customers.
"Highwood Generating Station means clean, affordable, reliable energy from a multi-resource plant the uses coal, wind and hydro."
I read it to Geeguy, it does not say "SME" means..., it says "Highwood" means...
This is cleaver word smithing to plant a subliminal message. I can see where this may confuse senior citizens reading the newspaper. One might think the lights will go out & heat will go off without Highwood Plant.
These ads are misleading by design. Based on what I have witnessed this is how the entire project is being run - It is based on deception.
Let me just say that most young professionals ARE SMART! And if they have children, the DON'T want their younguns growin' up in a mercury-laden toxic dump! And THAT is exactly what this plant is. There is ALREADY enough mercury in our water. Hell, you can't even eat the fish! And this is what motivates us old farts like me. We have children AND grandchildren. I do NOT want IDIOTS poisoning them! Look, the health hazards associated with coal plants are NOT theory! They are veriable, and, unfortunately, there are plenty of victims out there to substantiante the data. I know you guys are young, be we have been fighting such destructive efforts here in Montana for a long time. The reality is that many times elected representatives do not give a rat's arse about your health. Here, I'm including for your perusal a fine example from our past of just such an incident. Mark carefully the words of our former goobernor, tiny tim babcock, and realize that he is STILL out there trying to degrade our environment. (mining under the Cabinet wilderness) I mean my GOD, the man must be in his ninties! Some people don't have the decency to die.
http://www.fluoridealert.org/pollution/1206.html
Seriously, read this artiicle. It is quite good.
Hmm. Why didn't that site take? If you google The Town that Refuse to Die, and look for Garrison, Mt. you should find it.
www.fluoridealert.org/pollution/1206.html
LK
Geeguy
If you loan me 100 bucks and you ask when will I pay you back and I say 2 weeks. At the end of 2 weeks I then say, "Well we haven't really discussed terms, have we?"
All I'm saying that if SME's accountant thinks the terms are specific - then might it mean, "you have 60 days to gather funds together and then just pay it in full." He's the accountant and must have some notation in SME's books to explain when/how it is to be paid back.
I understood what Ms. Jolley was saying. There is a letter of the law and spirit of the law.
We should give credit where credit is due to commissioners willing to honor making a payment, even if they made the raw end of a deal for us.
BD
Mary and Anon, I want to be fair about this, and I want to give credit where credit is due.
I do not believe, though, that your supposition finds support in the facts. The Agreement does not say that the debt will be paid in 60 days, it says that the "City shall commence making payments" within 60 days.
The suggestion that the terms have not been "specified" as stated by the accountant can also be supported by our City Manager who said: "There is no due and payable in 60 days provision or agreement with Southern Montana. We have never negotiated the repayment terms in the case that it [the water credit/rate subsidy] actually had to be repaid."
Doubt me? Watch it here.
I'm not doubting you.
I'm saying Lawyers Know Too Much.
At an ECP Board meeting to discuss the rates for customers, the Chairman asked Colleen B. "Are we going to make up in these rates some of the water credit?"
Coleen responded, "Why would we want to? It is interest free loan."
No more questions were asked.
So I guess we know the term is interest free.
We can only admire SME's shrewdness as they 'pummel' the hapless city commission and staff with these contracts.....
Not very hard to con greedy imbeciles.
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