-By Warner Todd Huston
Now this seems like a case of blatant influence peddling to me, but the owner of a water utility company in Arizona is seeking the assistance of a friendly state regulatory agency to allow him to charge his customers a higher rate so that he can use their money to pay his income taxes.
The Arizona Republic recently posted a story by Ryan Randazzo that breaks down all the players nicely, but it is a somewhat confusing story nonetheless.
It appears that a real estate developer named Ed Robson started the community of water customers in question, a community of some 10,000 homes in the southwest valley called Sun Lakes. Not surprisingly, Robson also owns Pima Utilities, the water company that serves that community and the one seeking the rate hike.
Robson’s Pima Utility Company is trying to cajole the supposedly non-political Arizona Corporation Commission (ACC) to give it permission to raise rates on Sun Lakes residents. To further his goal, Robson has attained the services of Mark Spitzer a highly paid lobbyist, former Bush appointee to the Federal Energy Regulatory Commission, and, not coincidentally, also a former member of the ACC.
If Robson gets his way 40 percent of the rate increase will go to pay his personal income tax burden.
How would that work?
First of all, it would be a change back to an older practice if the ACC acquiesces. There was a time when small utility company owners whose companies were organized as “S” corporations, of which there are many in Arizona, were able to use money from rate payers to pay owner’s and even shareholder’s income taxes. That was changed some time ago and Robson wants that reversed.
Robson explains that his request should be no big deal since larger utility companies in Arizona are allowed to roll tax expenses into rate hikes. But those other large companies are not owned by individuals like Pima Utilities is.
Naturally the Residential Utility Consumer Office (RUCO) is not too thrilled with the whole idea.
One of the main arguments from RUCO is that the Pima shareholders might have other business interests that lose money, and if they combine the tax credits of those operations with the tax liability from the water utility, they might not pay taxes at all, even though the customers would be paying a “phantom tax.”
“When this happens, this is essentially free money for the shareholders paid by the ratepayers who receive no benefit from these payments,” RUCO wrote in a brief for the case.
RUCO Director Jodi Jerich also thinks that ACC would be violating its legal duties to protect rate payers if it allows this deal to go through. He also wonders if this precedent would also allow every other utility in Arizona to try and get the same sweet deal? Who would doubt that?
But something else comes to mind here. We have a guy that essentially owns the community and the water company who is setting up a sweet deal with possibly compliant government agencies within which he has friends to get his income tax paid for by the people he supposedly serves with his water service. So who is serving whom here? Doesn’t it seem like the worst case of influence peddling? Doesn’t it all smack of the old company owned communities that so unfairly bedeviled miners reminiscent of the song “16 Tons“?
I’m all for capitalism, but this seems all very unfair. It seems like an awful lot of power in one man’s hands and at the expense of customers.Sort of seems like crony capitalism to a degree, doesn’t it?
The ACC is holding a hearing to discuss this case at 10 a.m. Tuesday at the Sun Lakes Country Club’s Navajo Room, 25601 N. Sun Lakes Blvd.