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City Treasurer, Auditor on Alameda Power & Telecom Telecom Sale

As of Friday, November 21st, 2008, the City of Alameda (specifically, Alameda Power & Telecom) is no longer involved in the telecommunications business. After two years of heated debate, detailed evaluations, and public outcry, the telecommunications system has been sold to Comcast for $17 million. Finally, the financial bleeding has stopped.

Based on preliminary calculations, we believe the net result of this venture is a loss of more than $60 million for the City of Alameda. While the City is still solvent and this loss wont bankrupt the City, this is opportunity lost. In tough economic times, for the City and the community in general, this is money that could have addressed a variety of concerns.

For the past two years, we’ve arqued vehemently for a resolution to what we viewed as the single biggest financial threat to our city. Along the way, we took a lot of heat: claims that our assessment was flawed, accusations that our interest was somehow politically motivated, and denials of our requests for detailed information regarding the telecommunications business. Our involvement in this matter was motivated by one thing: protecting the interests of the citizens of Alameda who placed their trust in us by electing us to serve in city government. While we take no pleasure in the fact that our assessment proved spot-on, we stand by the actions we took and the effort we invested to protect this city.

We’ve stated throughout this period that stopping the bleeding at the telecom unit was the first and most immediate goal that needed to be achieved. The PUB and City Council have now accomplished that through the sale to Comcast. As we voiced in public meetings over the past week, we approve of the sale, although the outcome is not what anyone hoped for when this business begun 10 years ago. The financial certainty the sale brings will allow AP&T to refocus its energy on the electric utility, which has historically proven to be a valuable asset to the city and the citizens.

Now that the first and most immediate goal, stopping the bleeding, has been achieved, we must evaluate how we got to this point. As the saying goes, “Those who forget the mistakes of the past are doomed to repeat them.” This city simply cannot afford another situation like this to occur. To ensure this, the city must perform a complete and public evaluation of the events and circumstances that allowed a loss of this magnitude to occur.

From our perspective, there are clearly three areas in our City government that need to be addressed: accountability, focus and transparency.

Accountability: we must be willing to hold people accountable for their decisions. If city leaders are not held accountable, they maybe less willing to “break ranks” and raise concerns about difficult issues like the telecom venture. Note that many of the current members of the PUB, City Council, and AP&T management have been part of the solution, not the cause of the problem. In particular, the work of current AP&T General Manager Girish Balachandran has been a shining example of solid business sense applied to city government. Yet how do we hold past officials accountable for creating this mess? While there may not be an easy answer, it is an issue the public must place importance on if there is to be confidence in future decisions our government makes.

Focus: the City should concentrate resources on delivering the traditional services the public expects from local government, things like keeping streets repaired, trees trimmed, and parks clean. Competing against private businesses, especially in speculative, capital-intensive projects, should be avoided. If the City does a good job delivering on its primary functions, private industry will flourish, and the City wont need to take the risks that private industry is better suited to engage in.

Transparency: we need a significant shift in mindset in our government. Adhering to the letter of the law, but not the spirit of the law, is not acceptable. In the case of AP&T, the fact that former and current City Council members publicly expressed surprise at the existence of interfund advances after more than $20 million had already been transferred shows the level of transparency present in this matter. We need clear, frank information and discussion on an ongoing basis, not only within City government, but also with all Alameda citizens. We entrust our government with many important decisions. If we cannot have faith in the full and transparent disclosure of all of the information regarding these decisions, it becomes hard to trust these bodies to operate in our best interests.

We’ve worked closely on this telecom issue over the past two years with many of our elected and appointed officials, and with city staff, and we’re confident that they share our desire to never repeat the mistakes made regarding the telecom venture. We’ve also heard from many of you about your concerns regarding this and other projects the city has undertaken. If these issues are of concern to you, let your voice be heard. Rather than trying to erase this experience from our collective memory, let’s work together to strengthen our government so we never have to suffer a loss like this again.

Signed:

Kevin Kennedy, City Treasurer
Kevin Kearney, City Auditor

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