Colorado Springs Utilities has spent more than $8.3 million in the past five years on outside marketing and public relations firms, prompting Mayor Steve Bach to question whether the billion-dollar monopoly is spending ratepayer dollars wisely.
Documents obtained by The Gazette under an open-records request show that Utilities has spent between $1.36 million and $1.9 million annually on outside communications contractors since 2008 despite having its communications staff.
The contractors perform a variety of work, from implementing education campaigns about water conservation, carbon monoxide safety and other topics to providing updates to the public about projects such as the Southern Delivery System water pipeline.
Utilities defended the spending, saying it has a responsibility to keep customers informed “as a four-service utility that provides essential services 24/7 to every household and business in town.”
Sherri Newell, Utilities’ chief public affairs officer, made the same point at the last Utilities Board meeting Nov. 19 after the mayor asked for more detail on communications spending and other budget items.
“You know, it would be wonderful to have as many staff members as peer utilities or other parts of the city organization,” Newell said, directing her comments at the mayor. “But we feel like we’ve been very effective in our messaging with results measured nationally.”
Still, the mayor questioned the spending.
“It is hard to understand why Colorado Springs Utilities would have to spend so much money on public service announcement material,” Bach said in a statement last week.
“As CSU recently informed us, they have 21 employees in their Public Affairs (Division). Why would they require so much outside assistance?” Bach asked.
The city-owned utility and its spending decisions are facing increased scrutiny amid a larger community discussion about the future of Utilities, including its governance.
Under the existing structure, the City Council serves as the Utilities Board and oversees the utility. But critics say council members, who are considered part time and paid $6,250 a year, don’t have the time or expertise to do the job well.
Meanwhile, Bach, the city’s first strong mayor, has said Utilities’ spending requires more scrutiny and what he calls greater transparency of its budget to give ratepayers a better understanding of how dollars are being spent.
“In the current form of governance, there is no supervening accountability,” said City Councilman Tim Leigh, a frequent critic of Utilities.
“We changed the form of government to go to a strong mayor, but we neglected to make the same change at the utility, so we have the equivalent of nine mayors/board members all with equal power. Therefore, there’s no supervision or no accountability at CSU,” he said.
Former City Attorney Jim Colvin, who retired in January 1998, echoed that sentiment during the citizen discussion portion of Tuesday’s council meeting.
“I think there’s one step left to go in the completion of the transformation of the city government to the strong executive or the strong-mayor form of government and that is to place the Utilities under the executive branch and out from under the legislative branch,” said Colvin.
Colvin said he hoped the council would refer a measure to the April municipal election.
“With the coming of six new district council members … I think it’s important that the public debate this issue,” he said, adding that the council should continue to maintain the power to set rates and tariffs “because that is a legislative function.”
The council, acting as the Utilities Board, directed a study of Utilities’ governance this year. Utilities will pay for the estimated $200,000 study through the Public Affairs Division’s budget. Spokesman Mark Murphy said the outside communications firms are, with one exception, paid through the same division, which has a nearly $5 million budget for 2013.
The division is made up of three departments, including corporate communications, which has 8.75 employees.
Utilities says there are “several advantages” to using contractors, including not paying for retirement or health care benefits. In addition, the contractors bring “added value” because of their diverse backgrounds and experience working on other projects.
“All contractors have qualified under Colorado Springs Utilities procurement process and regular reviews are conducted,” Murphy said.
VI Marketing and Branding, which has offices in Colorado Springs, Oklahoma and Missouri, receives the most “creative agency” work from Utilities.
Since 2008, the company has been paid more than $7.2 million.
Utilities said VI works with corporate communications to “guide and implement communication strategies and tactics.” VI also handles purchasing advertising space and time for Utilities in local media, including The Gazette.
“This includes researching and providing recommendations on where, when and how to place our paid communications. This has taken on a greater importance as we integrate new media and digital channels,” Murphy said in an email. “Among other services they provide us: graphic design, layout and audio-visual production.”
On its website, VI says it has 15 years of experience assisting public and municipal utilities with “tough subjects,” including rate hikes and water and energy conversation.
“Delicate matters require a robust strategy,” the company says on its website.
Utilities said employing outside firms helps reduce operating costs, from reducing call center volumes by answering customer questions on social media to preventing wastewater backups by communicating the proper disposal of cooking oils and grease.
“Customers are made aware of safety practices related to our services, which saves lives and protects property. This includes awareness of carbon monoxide dangers, natural gas leaks, downed power lines and digging where underground pipes and wires are placed,” Murphy said.
The information isn’t used to market or sell products, he said.
“Instead, it is intended to protect lives by letting customers know how to use our utility services safely; save customers money by helping them reduce utility bills through conservation ideas and rebates; keep rates low by using communication to reduce operational costs; provide options on services; let customers in need know where to get help to pay their bills; and invite participation in decisions made about our local utility,” he said.
Bach said the council should look into the costs for outside communications firms.
“In the interest of the ratepayers, I hope and expect that council will look into this to determine if these expenses can be substantially reduced,” he said.
Scott Hente, who serves as council president and chairman of the Utilities Board, said the amount of money that Utilities is spending on communications is “reasonable.” Hente said the utility has a responsibility to communicate with its ratepayers.
“We don’t have to advertise, and we’re not advertising. It’s not like, ‘Please use us for your electricity because we’re a monopoly.”
“This is providing community service in terms of information on energy savings, in terms of safety information, in terms of information about conservation. All that information that needs to get out to our ratepayers,” Hente said.