Pacific Gas & Electric’s planned Chapter 11 bankruptcy is intended to help the embattled utility company reorganize debts and possibly reduce its financial exposure to lawsuits for damages from devastating wildfires in northern California.
But the effects of the financial maneuver, expected to be filed in a federal bankruptcy court next week, could be felt far beyond the areas scorched by the 2017 and 2018 fires.
PG&E’s bankruptcy could potentially put a cash-flow pinch on hundreds of millions of dollars in property taxes to counties across the state. That’s money cities and counties use to help provide basic services to their residents.
While obligations such as property taxes typically aren’t excused or “discharged” by bankruptcy, “we won’t actually know until this goes to court what will be decided,” said Oscar Garcia, Fresno County’s auditor-controller / treasurer-tax collector.
PG&E is one of the largest private landowners in California, at about 160,000 acres. Its statewide property tax obligations in 2017-18 amounted to more than $461.8 million.
Fresno County received more than $30.3 million in property taxes from PG&E in 2016-17, and another $33.6 million in 2017-18. Only three other California counties in which PG&E owns property got more in property taxes from the company. In Fresno County, PG&E’s property taxes represented 3.55 percent of all property taxes allocated to the county by the state Board of Equalization.
The last time PG&E filed for bankruptcy, in 2001, “they filed a request with the tax collector to waive the penalties” for late payments, Garcia said. “They split their payments and eventually got caught up.”
Garcia said county tax collectors across the state will keep a watchful eye on PG&E’s bankruptcy filing. In federal bankruptcy courts, debtors strive to reorganize their debts under a plan that ultimately must be approved by a judge.
“We won’t know where we are in the pecking order (of creditors), if you will,” he added. “As far as we’re concerned, we’re still at the top, but you never know what a bankruptcy judge will decide.” Garcia said the county could dip into reserves if tax payments from PG&E are delayed during the bankruptcy process.
Across Fresno, Kings, Madera, Merced and Tulare counties, property taxes from PG&E added up to nearly $50 million in 2017-18, up from $44.7 million a year earlier.
“We expect to continue meeting our tax and similar obligations to cities and counties as normal, following the Chapter 11 filing,” Nauman told The Bee.
According to information from the state Board of Equaliztion, PG&E’s property taxes represent an even bigger slice of the revenue pie for some counties than in Fresno: about 5.2 percent of all property taxes in San Luis Obispo County, more than 11 percent in Plumas County, and almost 21 percent in Colusa County.
Property taxes aren’t the only funds that PG&E pays to local governments. The company also has franchise agreements with about 300 California cities and counties to operate and maintain gas and electric lines under streets and highways. Statewide, franchise and other taxes added up to about $170 million in 2017, according to the utility’s annual report.
Fresno County’s share of franchise fees from PG&E is expected to be about $21 million and would be due in April, after the utility files for bankruptcy, Garcia said. “We’re a little concerned,” he said. “Hopefully we will go ahead and be able to collect, but when that’s going to be isn’t so sure.”
For the city of Fresno, franchise fees from PG&E added up to more than $5.3 million in 2017-18, according to city spokesman Mark Standriff. That was more than one-third of all of the franchise fees the city received that year from the utilities using its rights of way, including cable and telephone companies.
What about the employees?
In addition to its property holdings throughout the state, PG&E employs about 23,000 workers, according to the utility’s 2017 annual report. The utility’s Fresno and Yosemite divisions combined have 3,241 employees, from hydroelectric, electric and gas operations workers to employees who deal with customer service, service planning, engineering, vegetation management, environmental and corporate affairs tasks.
Unlike federal workers who have either been furloughed or ordered to work without pay during the government shutdown, Nauman said PG&E’s workers likely won’t be affected by their employer’s bankruptcy.
“Employees should continue to come to work on the same schedule and remain focused on their job responsibilities while putting safety first,” Nauman said. “During this process, we expect that our operations will continue without disruption … and our employees will continue to be paid and receive healthcare benefits as usual.”
Among PG&E’s extensive hydroelectric facilities in Fresno County are the large Helms hydroelectric project and its two reservoirs, Courtright and Wishon, as well as other smaller power plants.
The utility’s Fresno division – which covers most of Fresno and Kings counties and part of Tulare County – also has a distribution control center, a customer contact center, a regional management center and numerous customer offices and service centers scattered throughout the Valley, said Matt Nauman, a PG&E spokesman.
PG&E’s Yosemite division, which covers part of western Fresno County and much of Madera, Merced, Mariposa, Stanislaus and Tuolumne counties, has some hydroelectric facilities, customer service offices and service centers as well, Nauman added.
PG&E bankruptcy could put squeeze on millions of dollars for Valley counties, by Jim Sheehan, The Fresno Bee, January 22, 2019.