City lost out on millions in revenue

Audit notes failure to raise rates for companies' underground conduits

August 05, 2004|By Doug Donovan | Doug Donovan,SUN STAFF

An audit released yesterday revealed that the city government lost out on potentially millions in revenue by failing to increase rates charged to electric, telephone and fiber-optic companies that lease underground public space for wires and cables.

Baltimore's auditor, Yovonda Brooks, told the city's spending board yesterday that $3.5 million was squandered over the past three years because rates were not increased from $0.58 to $1.16 per foot of underground space used by companies. The report estimated that the city could miss out on an additional $9 million over the next five years.

In December 2000, transportation officials told the Board of Estimates that the rate would be increased in July 2001 to cover the costs of maintaining the city's 3.7 million feet of subterranean conduit space. Since then, the transportation department has changed directors and the rate has never been raised.

"My concern is that the city develops revenue enhancements, then we don't implement them," said Comptroller Joan M. Pratt, who oversees audits and sits on the five-member Board of Estimates. "You can see how much money we lost by not implementing the new rates when we should have."

City Transportation Director Al Foxx said he has worked for the city since September 2001 and that his staff developed cost projections different from those of the previous director. Foxx said his staff has been able to maintain the system at the current rate but that rising maintenance expenses are forcing him to charge more next year.

Foxx said the city will implement new rates over the next four years, rising from $0.63 per foot next year to $1.11 per foot July 1, 2007.

Pratt expressed confusion over why Foxx would change the rate now after allowing it to remain the same over the past three years.

"There may be some logical answer, but I want to see the numbers," Pratt said.

Foxx is scheduled to return to the board with a formal answer in two weeks.

City Council President Sheila Dixon, who is chairwoman of the spending board, said the city should not be raising residents' taxes while opportunities for new revenues were being missed.

Administration officials said the rates are established to break even, not make a profit, and that the city is required by law to charge no more than the system's expenses. The conduit enterprise fund generated $4.1 million in the fiscal year that ended June 30 last year.

Mayor Martin O'Malley said companies such as Comcast and Baltimore Gas and Electric could sue if they can prove that rates generate more revenue than is needed to run the system.

Dixon said the audit raises concerns that the transportation department was failing to generate even that basic level of revenue.

The audit found that no written procedures or policies exist for administering the conduit lines; that delinquent bills are not being pursued; and that of the 49 conduit customers, 21 have written lease agreements with the city. In addition, BGE pays significantly less - $0.27 per foot - than other users do. The city is negotiating new rates with BGE, Foxx said.

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