At a time when Palo Alto and other cities are moving toward reducing and possibly eventually eliminating the use of natural gas, a measure seeking voter approval for the city to continue transferring profits from the city-owned gas utility to the general fund might seem like a step in the wrong direction.
If an important long-term goal in addressing climate change and reducing carbon emissions is to phase out the use of natural gas in favor of electricity, why would we want to continue our dependence on profits from a shrinking gas utility to fund $7 million a year in city services and create an incentive for maintaining a robust gas utility?
The simple answer is that this measure doesn't change the city's current practice; it simply allows the continuation of an established important source of revenue for funding city services, for now. We think that makes sense and is in the community's best interest. This is the wrong time to cut off this source cold-turkey.
There is a legitimate difference of opinion about the wisdom of funding city services with transfers from profits earned from the gas utility, as has been happening for decades. The issue is before the voters because of a successful legal challenge to the practice by a Palo Alto resident who argued it was an illegal tax because it violated Proposition 26, passed by voters in 2010, requiring voter approval for such transfers. (Rather than appeal the trial court's decision, the city recently settled the suit by agreeing to refund $17 million to ratepayers.)
If voters reject Measure L, which corrects the legal problem, the city will be unable to continue the practice of transferring gas utility profits to the general fund, resulting in $7 million in cuts to city services.
Supporters of Measure L, who include the city council, members of the Utilities Advisory Commission and many community leaders, argue that redirecting gas profits to a special dedicated fund to ease the future transition from gas to electric, as some opponents of Measure L have suggested as an alternative, may seem sensible and innovative. But doing so would put more pressure on the city's operating budget at a time when city services have already been cut back due to the loss of revenues due to the pandemic. The further loss of $7 million would only exacerbate the problem.
For the time being, the transfers from the gas utility need to continue, at least until the city develops a full financial plan for how to accomplish the carbon emissions reductions we all hope to achieve through a transition away from natural gas. We urge voters to support Measure L.