When the "free press" starts running public agency infomercials, during agency budget consideration, that is a red flag of an institutionally sick society. The Daily Memphian’s Behind the Headlines (BTH) aired what can only be described as an MLGW informercial on 11/1/24.

BTH formerly ran Memphis River Parks Partnership infomercials featuring Carol Coletta with Eric Barnes hosting. Only Barnes and MLGW’s CEO Doug McGowen were on the recent 11/1 show. When Barnes is alone on BTH with a guest and without reporters, that is a tell that one may be viewing an infomercial as opposed to local journalism.

So why was this an informercial? McGowen promoted for almost half the show MLGW’s locally welcomed lead pipe replacement initiative. The initiative is not unique and occurring throughout the country. The public replacement of private lead pipes, for those locally in need deserves mentioning, but that also is likely occurring in other cities throughout the country. And then there was discussion regarding xAI regulations but no discussion at all on the FY25 budget matter currently before the MLGW Board of Commissioners and soon the Memphis City Council.

The alarming omission from discussion of the FY25 MLGW proposed budget makes this recent BTH airing an informercial. The BTH infomercial airing also signals that the elitists are for the reckless Way Forward capital public spending spree going on at MLGW.

What the public does not know is that McGowen’s proposed Way Forward program is scheduled to be $800M more costly than the original Way Forward plan initiated by previous MLGW CEO JT Young. The $800M in extra spending is fat with a 75% water rate increase and the arrival of an out of nowhere $70M Engineering Operations facility funded by accessing a portion of the $170M in excess public cash residing on the Gas balance sheet.

Additionally, after the FY24 Way Forward capital budget reset by McGowen, the year over year (YOY) 5 yr capital budget is again exploding upward. This YOY increase, after the reset, is a fundamental red flag and should not be happening, signaling undisciplined, out of control, fiscally liberal public spending.

As proposed by the McGowen led MLGW administration, this reckless FY25 budget currently resides at the feet of the MLGW Board. Alarmingly, like the former MATA Board, this MLGW Board has no guiding standards for budget sizing. A public utility board without standards dooms any public benefit from a public utility, as was the case with the former MATA Board dooming the community benefit of public transit.

As far as McGowen himself, I like him. He has always been cordial and professional to me, so there is nothing personal between us.  I have just over the years inspected his public products with the failed Strickland administration, Riverfront Steering Committee and now MLGW. McGowen’s products are consistently fiscally liberal, reckless elitist crap. The public should be wondering why all the public relations around the uncontroversial work of lead pipe replacement during MLGW budget season? It’s so odd, it should be telling that something else is going on besides lead pipe replacement and that is the MLGW FY25 Budget.

The MLGW Board is the first check on out-of-control MLGW spending. But without Board standards to check MLGW spending, the public benefit of a public utility is doomed. Financial spending ratios provide the MLGW Board and City Council a pathway to check reckless MLGW public spending, away from data blind oversight, as was the case with the former MATA Board and Memphis City Council regarding public transit.  

With respect to the capital spending to depreciation ratio discussed in this blog, a 1.0 ratio means that an entity is investing as much as they are depreciating capital assets. Above a 1.0 means an entity is either improving or growing their capital assets relative to depreciation. For electrical utilities, per the American Public Power Association (APPA) survey, the average capital spending to depreciation ratio in 2022 for utilities with 100K+ customers is 1.33. For this discussion, anything below 1.33 capital spend ratio would signal below average capital spending for an electrical utility during a non-upgrade cycle and vice-versa for ratios above 1.33.

The chart in the following section was corrected from the previous blog in favor of MLGW. MLGW's corrected pre Way Forward capital spend ratio for 2010-19 was adjusted down from 1.69 to 1.51. Huntsville's Electrical Non-Upgrade ratio was raised from 1.0 to 1.6. This was done by my elimination of 2014-15 negative Huntsville capital spend ratios making the actual corrected years for Huntsville's 1.6 ratio 2016-23 instead of 2014-23.

The reason for the elimination of 2014-15 Huntsville years is, I just did not like uncommon negative capital spend ratios as part of the data set. This change goes in favor of MLGW in this analysis. I also removed the "I Love Me" signage from the previous chart while not changing my stance on that matter.

Next, the below chart survey results were derived from the American Public Power Association's 2022 survey, as well as selected public utilities that are part of MLGW's rate survey. These utilities include 2 electrical utilities that are also consumers of TVA in Chattanooga Electric and Huntsville Utilities. As a water utility comparison, St. Louis was selected as an urban center with declining population and Huntsville as a city with increasing population, that like MLGW provides electrical, gas and water service.

I have also shared my work calculations with the MLGW Board.

Going from left to right in the above chart starting with the “Electrical Upgrade” section, MLGWs 2.53 projected electrical capital spend ratio, over a 10yr span for 2020-29, during an electrical upgrade signals red flag excessive capital spending when compared with the APPA’s top 1.95 3rd quarter tier and Chattanooga’s 2010-19 ratio of 1.74 that included a distribution automation upgrade of their electrical grid. Chattanooga's upgrade lasted 3yrs of a 10yr cycle. MLGW's ratio is 3.0 for 2025-29. 

MLGW’s “Electrical Non-Upgrade” ratio of 1.51 prior to Way Forward and above the APPA’s average 1.33, confirms that “decades of MLGW capital underspend” have not occurred. Given the recent underperformance of MLGW’s grid and above average spend, this points to the conspiratorial likelihood, like MATA and MSCS, MLGW and ratepayers have been ripped off through public contract. Huntsville Utilities (2016-23) had a 1.39 ratio and Chattanooga Electric (2014-23) had a 1.31. 

As far as water, MLGW’s 2020-29 projected ratio of 4.23 signals grossly excessive planned public spending, while also knowing and not contained in the chart that MLGW’s planned capital spend ratio for 2025-29 is a ridiculous 6.68. The 2014-23 ratio of 2.49 also confirms that capital underspend has not taken place over the previous decade in the MLGW water division. Please also note Huntsville and St Louis ratios (2014-23 respectively of 2.30 and 1.54.

The MLGW Board of Commissioners needs to adopt data standards to facilitate checks on MLGW administrative budgets. As the local "free press" runs MLGW infomercials, the public benefit of a locally owned public utility is doomed, without MLGW Board standards.

Under MLGW's CEO Doug McGowen, the Way Forward Capital Upgrade plan reset by McGowen in FY24, has increased by $800M from $1.5 billion, the Way Forward inflation adjusted original cost, to $2.3 billion through 2028. Contributing to this $800M increase is, in just one year, yet another McGowen Way Forward FY25 reset of $273M more for years 2025-28. And no one is keeping up with these staggering cost increases, which now require a 75% water rate increase all while MLGW infomercials air.

The MLGW Board of Commissioners is supposed to be board level utility subject matter experts and should not surrender and pass this budget along to the Memphis City Council for final consideration. On matters of agency oversight and public finance, with every breath drawn by Councilors, they are a waste of the planet's oxygen supply. The Historic Council is made up of a group of "strong black women" that refuse to grapple with matters of public finance and a Budget Chair that has made public comments supporting the Council not even engaging in MLGW oversight. Horrible!

Given the former and with the interest of the public in mind, the MLGW Board of Commissioners should take the following steps:

1. Implement ratios for budget sizing.

2. Cut the "out of nowhere" and unneeded $70M Engineering Operations facility.

3. Decrease the 5 yr Way Forward 2025-29 capital budget from $1.7B to approximately $1.4B, while decreasing the FY25 capital budget by $100M

4. Find a way to get $100M in excess cash off the Gas balance sheet and back to taxpayers. Memphis taxpayers need help.

The above will help insure fiscally responsible oversight while extinguishing the explosion in MLGW reckless public spending.

Check the Facts

APPA 2022 Survey

Chattanooga Electric

City of St. Louis Water Division

Huntsville Utilities