PILOT payments could dictate BrightRidge purchase of Elizabethton Electric

Zach Vance • Updated Jan 24, 2019 at 11:38 PM

If BrightRidge were to buy Elizabethton Electric, the City of Elizabethton’s annual revenue could significantly diminish, as $1.08 million in payment-in-lieu of taxes would be redirected to the City of Johnson City.

That’s why BrightRidge CEO Jeff Dykes, while speaking to Johnson City commissioners Thursday night, proposed both cities begin considering a “revenue stabilization” mechanism, such as staggering those PILOT payments over a period of time.

“It is proposed that Johnson City, which would continue to receive significant new revenue under the transition plan, would allocate a portion of its new PILOT dollars over time to lessen the recurring budgetary impact in Elizabethton,” a report that summarized Dykes’ presentation to commissioners stated. “This allows Elizabethton time to transition as natural revenue growth replaces those dollars.”

While no votes were cast during the workshop, Johnson City commissioners did authorize City Manager Pete Peterson to begin discussing those potential terms with Elizabethton City Manager Daniel Estes.

“This is really an opportunity for the City of Johnson City and the City of Elizabethton to work together and say, ‘OK, how can we stagger or lessen that impact and allow a balancing of this transition into that,’” Dykes said.

Johnson City currently receives $4.25 million in annual PILOT payments from BrightRidge, the largest taxpayer in the city, while Elizabethton receives $1.35 million from Elizabethton Electric.

With the acquisition of Elizabethton Electric and no staggered payments, BrightRidge would then pay $5.33 million to Johnson City and just $269,899 to Elizabethton. Those payments are based on state law, which determines the amount and allocation of PILOT payments.

Dykes said a purchase price for Elizabethton Electric has yet to be decided, but consultants hired to complete a 12-month study of the deal determined the valuation of Elizabethton Electric to be between $28.6 million and $33.9 million. The report also stated that the redirected PILOT payments would be factored into the total purchase price of the electric system.

In addition to that, BrightRidge Governmental Affairs Director Tim Whaley said BrightRidge would also be acquiring about $31 million in debt from Elizabethton Electric.

Dykes also requested that Johnson City commissioners approve an amendment to BrightRidge’s Certificate of Incorporation to manage the size of BrightRidge’s board of directors, should the Elizabethton Electric purchase be approved.

As the Certificate of Incorporation currently stands, for every person added to the BrightRidge Board of Directors that represents Elizabethton, Johnson City would have to add two representatives to maintain a super majority.

Dykes proposed commissioners amend the Certificate of Incorporation to conform with the terms outlined in the Energy Authority Act, which would allow Johnson City to maintain a majority but allow room to incorporate new board members from Elizabethton.

Dykes said the “consolidation” of Elizabethton Electric would increase BrightRidge’s customer base by roughly 25 percent, from 78,650 customers to approximately 105,000 customers.

While there was discussion about putting the Certificate of Incorporation amendment on the commission’s next agenda, Vice Mayor Joe Wise had some reservations about rushing into the change.

“The majority of this commission was not apart of this initial vote (on the original Certificate of Incorporation), and 40 percent of this commission weren’t commissioners 90 days ago, and we’re about to undo something people invested a lot more time in,” Wise said.

“So I think to put it on our next agenda would seem awfully foolhardy and I’m more conservative than that. I’m not opposed. I just don’t know that we should be voting on it that quickly.”

Even if the PILOT payments are agreed upon and the Certificate of Incorporation amended, a referendum must then be held for the voters of Elizabethton to decide whether to approve the purchase or not.

That referendum would be a special election called 75 to 90 days following the Elizabethton City Council’s approval of a request for referendum. In the meantime, BrightRidge would host several community meetings to inform the public about the deal.

Based upon the study analyzing the purchase, Dykes said $18 million to $20 million would be saved in “efficiencies” during the next decade.

For example, Elizabethton Electric is currently looking to implement advanced metering infrastructure, or AMI, something BrightRidge already has. If the purchase went through, BrightRidge could implement AMI in Elizabehton for $2 million less than Elizabethton Electric, Dykes said.

As far as the impact on electric bills, Dykes said BrightRidge’s pricing, on average, is a little higher than Elizabethton Electric, but it will vary on a case-by-case basis as some households might see rates drop.

“The systems are very close in rate structure,” Whaley said. “In fact, we know for certain the first year, there would be no change at all.”

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