Austin has one of the highest, if not the highest, costs of living in Texas. The situation is so bad that, according to an analysis of Census data, many poor people are leaving the city, moving to surrounding areas because they cannot make ends meet. One would think that utility programs put in place by the city of Austin to assist low-income people are essential to helping these residents survive. When poorly planned, however, the programs waste scarce resources, providing reasons for fiscal conservatives to be cynical about their effectiveness.
Last fall, I investigated inefficiencies in a utility bill assistance program run by the city, the Customer Assistance Program, known as CAP. I discovered that CAP, which gives rate relief to low-income customers, was giving money to wealthy people as well as poor ones.
Over 1,100 customers in homes worth more than $300,000 were receiving CAP funds. While some of these were understandable, such as small homes in gentrified neighborhoods, many others were unmistakably wealthy. One 8,100-square-foot Lake Austin mansion worth about $4 million had its own indoor movie theater. Another CAP recipient owned 44 properties collectively worth $10.7 million.
This is one of several examples where Austin has thrown money at aproblem without thinking it through. Unfortunately, the list goes on.
CAP gives a 10 percent electric rate discount no matter how much a customer uses. While many people receiving assistance are frugal, some consume much more than average. In these cases, CAP is subsidizing waste. Assistance from the city should be going for basic needs, not to pay for luxury.
Another bad example is the city’s free weatherization effort to help poor people save energy. The federal government had a number of stimulus programs to get the country out of the 2008 recession. One of these gave about 2,000 Austin homes free weatherization and appliances, including central air conditioners.
While this may have stimulated the economy, it did not do much to lower bills. A survey of these homes showed so little energy reduction that the average payback on electricity savings would be over 59 years. You could literally give money away as rate relief and do better than this. The saddest part is there is a serious effort by some low-income advocates to expand this failure.
Yet another bad example is the utility’s debt expense. Austin Energyis losing $21 million a year from unpaid bills, much higher than two years ago. In late 2013, the Austin City Council was urged by some low-income advocates to come up with a lenient cutoff policy. The idea was, “Give customers extended payment arrangements, and you will get more of the city’s money back.”
It did not work. Nineteen months later, advocates are asking for still more time. Meanwhile, most people on these extended payment arrangements are getting further behind on their bills, some to the point where they will never dig out because their debt is so high.
The failures in these programs, taken as a pattern, do not inspire confidence.
The poor pay for these mistakes as well as the rest of us. Directly, they pay for failed conservation programs that save almost no energy. Many low- and moderate-income customers also pay for CAP, even when it goes to the wrong people. Poor people that are current on their bills pay for the bad debt of people who are not. In 2014, the lost revenue amounted to $48 for the average Austin residential ratepayer, accelerating the need for a new rate increase.
The poor also pay indirectly. If 10 percent of CAP is lost because of a flawed enrollment system or discounts for high consumption, that is $1.4 million a year wasted. Money spent on failed weatherization programs that save almost no energy is diverted from energy-saving programs that are effective.
If the city wants to help the poor effectively, it needs to stop throwing money at problems. Low-income assistance programs will never have enough money. The funds that are available need to be spent strategically and carefully.