CAIRO — Maren Kasper, HUD Secretary Ben Carson’s senior adviser on Cairo and the Alexander County Housing Authority, and other senior federal housing officials, recently traveled to Cairo to meet with the Cairo Public Utility Co. to seek rate relief for the ACHA.
“Abnormally high utility costs” are among the primary reasons that the local housing authority is insolvent, according to an April 2017 financial review of the Alexander County Housing Authority conducted by Housing and Urban Development.
The report had not been made public yet, and Cairo Public Utility Co. General Manager Larry Klein said that Kasper and the other federal officials traveling with her shared a copy with CPUC officials that day. They also informed the utility that they could only pay so much, and it wasn't their full bill, or they were going to fold.
“They dropped a bomb on us in that meeting,” Klein said.
“They drove the bus and backed it up over us,” added Glen Klett, the utility’s assistant manager.
“But you know, we’ve spent a lot of time under that bus,” Klein said. “It ain’t the first time … I’ve been tied to that whipping pole many times.”
The report indicated that the housing authority’s total utility expenses equated to a monthly average cost of $197.04 per unit, more than double the $86.78 per-unit monthly rate of its peer group. The report indicated that this was due to a number of factors, including excessive consumption due to deferred maintenance needs, obsolesces of the units and ACHA’s isolated rural location.
During the past five reporting periods, the ACHA has paid in excess of $1 million in total utility costs annually, according to the report. Most of that was paid to Cairo Public Utility. The housing authority also manages a housing complex in Thebes that is serviced by Ameren Illinois.
CPUC: We're trying to work with HUD
Klein and Klett said that although they were not happy about the report, they were willing to listen to the concerns of HUD officials and offered to help where they could. Klein said if the utility offers the ACHA a price break — morally and legally — it must do the same for all commercial customers in the same rate class.
Klein said that’s not something the utility has the means to do at this time — but Klett said they have found other ways to work together with the ACHA and the HUD officials managing it in receivership.
Jereon Brown, HUD’s general deputy assistant secretary for public affairs, said that from HUD’s perspective, CPU’s managers have been cooperative and interested in the parties working together to keep the ACHA’s lights on — both literally and figuratively.
“That’s good because it actually will help the housing authority get back on — well, close to — financial footing," Brown said.
Brown also said he could not discuss the terms of the agreement. “I can just tell you that they are being very, very community-oriented and they are interested in keep the housing authority as part of the community affordable housing and we consider that to be a very, very good thing.”
Durbin: Rates are oppressive
Though neither the utility nor HUD would disclose what had been worked out, U.S. Sen. Dick Durbin said he was told by federal housing officials this past week that the two parties had reached an agreement for more reasonable costs moving forward. Durbin said that while that's a positive step, it doesn't address the underlying issue.
“That still leaves a major problem for the rest of the city that signed up for what is oppressive electric utility rates,” he said at the conclusion of a meeting in his Washington office on July 13 with Carson and Kasper, the ACHA adviser, Sen. Tammy Duckworth and others.
Klett noted that the HUD report listed as one of several options for getting the ACHA back on financial footing that it review its options for bankruptcy. Brown said that is a worst-case scenario, one that federal housing officials are trying to avoid. Klein and Klett said CPUC also wants to avoid a total shutdown of public housing in Cairo.
“Their (potential) bankruptcy is a concern,” Klett said. “If you’re in our shoes, what do you do?”
Klein said he doesn’t understand why the federal government cannot do more to right the situation. He said he wants to say to them, “You know, are you just going to walk off and screw these little ole people down here that’re struggling?”
In April, HUD officials announced that officials plan to demolish two large complexes — Elmwood and McBride — after moving the nearly 400 people living in them because the units are no longer safe. Because there is a shortage of affordable housing in Cairo, HUD officials told residents that most people will likely have to relocate to communities outside of Cairo.
The news was received by many as a devastating blow, and residents have pushed for answers about what happened to the millions of federal dollars allocated to the ACHA to maintain the complexes. In light of these questions, the newspaper launched its “Nearly Bankrupt” series in May — borrowing from the words Secretary Carson used to describe the extreme financial condition of the ACHA in a letter to the school superintendent. Utility payments have for years represented an outsized cost for the ACHA, according to HUD.
HUD has been operating the ACHA in administrative receivership since February 2016. Seeking relief from high utility costs has been a prime component of HUD's attempts to salvage and upgrade the remaining complexes and scattered site locations managed by the housing authority in Cairo and nearby Thebes, Brown said.
During the newspaper’s interview with Klein and Klett in mid-June, the two indicated they may have more information to share in the future about their electricity rates, but said they were not ready to discuss it at the time of the initial interview.
CPU about-face: HUD's assessment 'accurate'
Several weeks later, Todd Ely, a Springfield-based consultant, working with the utility company, reached out to provide additional information.
While Klein and Klett expressed disappointment in HUD’s report discussing abnormally high rates, Ely called the federal government’s assessment “an accurate statement.” He said the questions HUD officials have asked about the utility rates have prompted a thorough internal review and that the results have been surprising for Cairo Public Utility Co.
Ely said the results of the internal study revealed that Cairo Public Utility is paying 100 to 125 percent above market for wholesale electricity. “We shouldn’t be paying anywhere near that amount of money,” he said.
Under the terms of a contract that originated in 1990 and was extended in 2005, Cairo Public Utility is required to purchase all of its electricity from the Illinois Municipal Electric Agency through 2035. Ely said IMEA’s rates are uncompetitive because the agency has invested too heavily in coal-fired generating units. CPU has no choice but to accept the rates set by IMEA, he said.
In an emailed statement, Staci Wilson, IMEA’s director of government affairs, said IMEA is aware of the housing and economic crisis facing Cairo and doing all it can to help. Because of the difficulties facing the city, IMEA recently extended a 3.3 percent rate reduction to Cairo, she said. But she noted that whatever breaks are extended to Cairo must be borne by the association's other 32 members. Wilson said that means there are limits to what the IMEA can do for Cairo. She also defended the organization's energy portfolio, saying it is diverse and intended to keep rates steady over the long haul.
Dave Lundy, who is working with Ely to provide consultancy services to CPU through this situation, said the discount doesn’t go far enough. It amounts to about a $160,000 cost reduction from a roughly $5 million annual contract, he said.
Though an agreement has been reached with HUD, Lundy and Ely said CPUC managers understand that others are still burdened by the rates and that they are committed to fighting for IMEA to lower their rates or release Cairo from its contract.
For HUD’s part, Brown, the agency spokesman, said the ACHA is pleased with the deal that’s been brokered.
He said that HUD compared ACHA’s costs to other housing authorities, and also looked at the age and efficiently of the 1940s-era units, and determined the charges were on the high side “which is why we sat down with the utility company.” According to HUD records reviewed by the newspaper, the federal agency did not specifically compare the ACHA’s utility costs to other local housing authorities in Illinois operating in cities that purchase their electricity from the IMEA. Rather, HUD looked collectively at similar sized housing authorities in the Midwest region.
“The bottom line is the utility company and its bills are key to the housing authority returning to sound financial footing," Brown said.