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BWL's 2023 "return on equity" payment to Lansing was $26,428,992 August 24, 2024
For years, the Board of Water & Light has been making huge payments to the City of Lansing which they call "return on equity". The 2023 payment was $26,428,992. In return for that payment, the BWL gets...nothing. Nothing but the affection of the mayor and city leaders.
Investopedia.com defines return on equity as follows (note that there is no mention of a payment):
Here's how the BWL explains return on equity in its 2023 Financial Report (page 34):
The $26,428,992 figure represents 6% of revenue generated from electric, water, steam and chilled water utilities. That seems to mean that if the BWL didn't make that payment, our electric, water, steam and chilled water bills would be 6% less. But if the City didn't get the payment, they'd have to raise taxes or cut services to make up the difference. Although Lansing residents are going to pay one way or another, you can bet the mayor and city leaders appreciate this little arrangement.
Sometimes there is pressure to increase the return on equity. In 2015, BWL commissioner Marge Bossenbery resigned because "she was fed up with attacks on the Board of Water & Light’s commissioners by the city’s political leadership..." (Lansing State Journal, 7/28/2015) Mayor Virg Bernero expressed appreciation for her service:
It is surely coincidence that the $26,428,992 return on equity is almost the same as this year's $26,907,181 amortization payment on the City's underfunded pension systems.
Although the return on equity probably saves Lansing residents from paying more in taxes, that is not the case for East Lansing, another BWL customer. East Lansing residents pay the same rates we do, but the city gets no return on equity. Which might have generated a question from an ELi reader in 2014. ELi's answer didn't say this, but there could be some resentment on the part of East Lansing residents that 6% of their electric and water bills goes to finance the City of Lansing.
Is the 6% an indirect tax? Back in August 1995, Lansing city council enacted a fee to pay for the sewer separation project. The fee was assessed on properties that allowed rain water to run off into storm drains and was based on the amount of paved surface on the property. Churches, car dealerships and Frandor shopping center got hit hardest, but ordinary homeowners had to pay, too. A guy named Alexander Bolt, an activist who was one of the people who fought the early retirement of 1992, saw the "fee" as a tax, and since it had not been approved by a vote of the people, sued the city. It went all the way to the Michigan Supreme Court, where on December 28, 1998 the "rain tax" was declared unconstitutional.
Send comments, questions, and tips to stevenrharry@gmail.com or call or text me at 517-730-2638. If you'd like to be notified by email when I post a new story, let me know.
A reminder that you can find detailed payroll reports for the City of Lansing, the Board of Water & Light, Capital Area Transportation Authority and Capital Area District Libraries here.
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