Click on a Link Below to Learn More About The History Of Tacoma Public Utilities


TPU Worker
Tacoma Public Utility
TPU Rails

The following is a P.S. to Mitchell Shook's Letter to the Editorial Board of the Tacoma News Tribune November 15th, 2014

P.S.      It should be known that Plan-B, which brings Click to profitably by adding 6,000 customers, was calculated using Click’s own accounting formulas. What I call "their numbers".

Personally, I was alarmed by the accounting that Click presented in support of their 2012 proposal for Plan-A. It seemed odd, for this was the first time we had ever heard any suggestion that Click was losing money.

Since Plan-A faced overwhelming opposition from the public, it occurred to me that, without such losses, TPU management would have no reason to bring Plan-A before the TPU Board in the first place -and there would have been very little chance of it being approved.

In studying the matter more deeply, I learned there were many assumptions in Click’s accounting. The TPU annual report says the accounting "requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes"

I learned that profits and losses could easily be moved around, between the various departments and divisions within the organization, simply by changing the "estimates and assumptions" of the underling ratios and formulas used to allocated various "interdepartmental" capital costs, depreciation rates, revenues they charge themselves and expenses they share between divisions, etc. With formulas that allocate 70% of the expenses to one department and 30% to another, then 7 years to depreciate certain items with 15 or 25 years for others, it became impossible for us to understand the accounting. One thing was for sure, TPU, as a whole, makes a lot of money.

One would be left to wonder if formulas had been applied in a way that might portray the Click division as a losing endeavor to win sympathy and political support for their upcoming proposal to offer retail Internet and phone service. Click’s “losses” were mostly a result of the "Depreciation and Amortization" expenses, so we tried to find out how the capital costs had been allocated for building the network. In 2002 it was widely reported that Click had cost $100 million to build; but, now it had ballooned to $200 million.

We wondered, how could the costs have risen so? What were the costs for? Would management show us how that was calculated? 17 years has passed since the Network was built, so how much "Depreciation and Amortization" remained? When would it finally be paid off?

Answers were not forthcoming and we had no way to get the information, so we simply went ahead and solved Click’s profitably issue by using "their numbers". Plan-B does that by adding 6,000 customers.

Things are on track now and sales are improving. Here are some interesting facts that demonstrate this. From the Tacoma Power 2013 Annual Report: "Click! Network commercial revenues grew from $24.9 million in 2012 to $26.3 million in 2013. The wholesale Internet Service Providers (ISPs) grew by 8.5 percent ending the year with 20,211 active customers. Click! provided 250 broadband transport circuits to Click! wholesale service providers allowing them to provide an array of telecommunication services to many businesses in the service area. Click! also continued to provide the City of Tacoma CityNet services to approximately 190 sites keeping the cost of telecommunications low for many government entities".

We have recently learned that the costs for the “Telecommunications Plant” will be fully paid off in just 4.8 years! Since there are $203,842,399 in total Telecommunications Plant assets, with accumulated depreciation of $141,342,080, there is only $62,500,319 left outstanding. At the current annual amortization rate, which was $12,897,718 last year, it’s almost written off. I am not sure what percentage of that total is allocated to Click, or Inet and other departments; regardless, when that "Depreciation and Amortization" expense goes away, Click should to be very profitable.

For specific information about these issues, please see Mitchell Shook’s letter to Mr. Andrew Cherullo, CFO at City of Tacoma.