Calling the proposed agreement with BGE “completely lopsided in all aspects,” the Baltimore conduit division has quietly written a scathing response to Mayor Brandon Scott’s plan to end the franchise fees paid by the utility in favor of promised investments in the underground system.
“Very difficult to understand why the City would even entertain this sort of arrangement,” says the Department of Transportation (DOT) staff report, objecting to a draft agreement struck between BGE and the city that was revealed last week by The Brew.
“The current deal has not won the support of DOT Conduit professionals,” the eight-page PowerPoint document, obtained by The Brew, says.
Titled “BGE Plan for the Conduit System does not serve Baltimore City,” the report reiterates and expands on criticism made by former mayors Bernard C. “Jack” Young and Sheila Dixon about the secretive deal, which was originally set to go before the Board of Estimates as early as today.
The agreement is still expected to be ratified by the board – controlled by the mayor and his two appointees – in February, even though the plan has not been disclosed to the public or to members of the City Council.
The report’s authors asked not to be identified because they were not authorized to speak to the media.
Asked yesterday if the conduit division had taken a position on the BGE agreement, DOT’s communications director did not answer.
“The Department of Transportation and specifically DOT’s Conduit Division are always involved in negotiations,” Marly Cardosa-Moz replied, referring questions to the mayor’s office.
Under the proposed agreement, BGE would stop paying the city $28 million a year in franchise fees and instead use about the same amount of money to undertake conduit improvements of its own choosing.
The city “loses control and loses money,” the staff report asserts, which would leave the 700-mile network under city streets – worth an estimated $500 million – a public asset “in name only.”
According to the report, the “public-private” arrangement would:
• Strip DOT from determining which conduit projects get done.
• Surrender control of public rights of way to BGE.
• Put in jeopardy street improvement projects requiring matching federal highway funds.
• Allow BGE greater latitude to tear up city streets to repair or install cable lines.
• Put the city at risk of shouldering “significant” costs for maintenance and inspections now covered by the franchise fees.
• “Completely sidestep” the city’s minority and women’s business requirements, which currently require 27% MBE and 10% WBE participation.
The conduit office faults the law department, under City Solicitor Jim Shea, for amending the BGE franchise agreement without input from knowledgeable staff.
Shea left city government on January 13, the same day that BGE submitted the amended agreement to city officials.
The law department is faulted for negotiating the deal without input from knowledgeable staff.
The report says that assertions by city lawyers that the conduit system loses money, echoed at a Board of Estimates meeting by Mayor Scott, “do not hold up.”
Rather, City Hall “will give up the very control of the city-owned conduit system voters voted to retain,” the report says, referring to the last November’s charter amendment – approved by 77% of voters – blocking the future sale or transfer of the conduit system.
“BGE will be in position to dictate conduit upgrades best for their electrical system needs without regard for what’s best for the telecommunication companies also sharing the city’s system,” the report argues.
“This will become even more critical going forward with respect to broadband and other telecommunication initiatives.”
“Windfall” for BGE
The report predicts that the amended agreement will produce a “windfall” for BGE and Exelon, its parent company, by allowing them to capitalize conduit expenses.
At the same time, DOT’s budget will be significantly reduced, the report says, which will directly impact the conduit division.
The division is currently comprised of 120 full-time positions and $6.2 million in salaries, plus another $2 million for consultant services.
Since 2016, the division says it has spent $205 million in system upgrades, as required by a settlement agreement that ended a BGE lawsuit alleging that the city unfairly raised franchise rates.
Many of the conduit funds were allocated to KCI Technologies and Commercial Construction (now Commercial Utilities), which stirred controversy because Commercial was an untested firm allegedly backed by J.P. Grant, whose six-figure payments to former Mayor Catherine Pugh were part of her 2019 conviction for bribery and tax evasion.
Grant, who recently gave a maximum $6.000 campaign contribution to Mayor Scott, has denied involvement with the Commercial Group or the conduit contract.
As one of the city’s two major “enterprise funds” (the other being water and sewage services), the conduit division is supposed to spend all of the revenues it receives from franchise fees in service upgrades.
BGE uses over 75% of the underground network for electric lines, street lighting, transformers and switches.
Comcast, Crown Castle, University of Maryland, Verizon and other entities use portions of the underground network, mostly for telecommunications.
Collectively they pay about $9 million in annual fees to the city.
If the mayor signs the deal, as he indicates he fully intends to do, BGE’s franchise fees would terminate immediately, and the conduit division would face a 60% budget cut, the staff report says.