Santa Rosa, Sonoma County collect more than $240 million in PG&E settlement for 2017 fires

Santa Rosa and Sonoma County together have received about a quarter of the funds from a $1 billion deal that PG&E struck last year with local governments in Northern California to settle claims arising from the 2017 and 2018 wildfires.

Santa Rosa received just over $95 million of its $117.8 million PG&E settlement share, after more than $20 million went to attorneys fees and court costs — the cost of months of representation and negotiation from January 2019 until June, when the wildfire victims assented in a vote that paved the utility’s way out of bankruptcy.

Sonoma County officials this week confirmed receipt of about $149 million PG&E settlement funds out of its $184 million share, after legal fees and costs.

The settlement funds arrived days before Cal Fire’s determination, announced Thursday, that PG&E’s electrical transmission lines caused the Kincade fire last fall — yet another historic blaze for which Sonoma County and Santa Rosa may seek compensation from PG&E.

The settlement funds are a boon for both local governments. In Santa Rosa, they come shortly after the city approved a $437 million budget that, without the settlement funds, would nearly drain the city’s general fund reserves. Santa Rosa residents are expected to have an opportunity to comment on how the money is used when the City Council meets virtually in early August.

Before the pandemic, the funds were expected to be used for wildfire rebuilding and recovery, as well as efforts to prevent another disaster like the Tubbs fire, which in 2017 killed 22 people and destroyed about 4,600 homes in Sonoma County, including about 5% of Santa Rosa’s housing stock.

But now, the coronavirus pandemic has vaulted to the top of the priority list at City Hall, with restrictions on commerce since mid-March that have sharply cut into sales tax revenues that support city services.

“We have a new reality, there's no other way to say it,” said Mayor Tom Schwedhelm, whose City Council district includes fire-ravaged Coffey Park, where more than 1,300 homes were lost in the Tubbs fire. “If we were in January 2020 making this decision, I think it would be a different conversation that having it in August 2020.”

The city and its residents will need to have an open dialogue when it comes to spending the PG&E settlement funds in order to have “a robust and equitable conversation,” said Vice Mayor Victoria Fleming, whose district includes the Fountaingrove area, where about 1,600 homes were lost and where rebuilding progress has trailed Coffey Park.

“I’m relieved for our residents and our entire community that we did get the settlement and that it’s in our possession,” Fleming said.

Unlike the city, which faced a June 30 deadline to pass a budget, the county's settlement arrived before final hearings on a projected $1.9 billion budget in mid-September.

“We will get a sobering analysis about the deficits that we expect to incur as a part of COVID,” said Susan Gorin, chair of the county Board of Supervisors, “and we may want to consider some of those one-time funds to provide some stopgaps in some of the hemorrhaging we expect to see later on, or we may start to talk about evaluating our infrastructure system and how much damage we sustained.”

Mid-September also is set to bring additional budget hearings in Santa Rosa, when city officials plan to review finances as the impacts of the pandemic on revenues become clearer.

The settlement payments to the local governments are cash, as opposed to the mix of cash and stock that’s set to go to fire survivors.

Gorin, the lone Sonoma County elected official to lose a home in the North Bay fires, is rebuilding and said she has yet to receive any money as part of PG&E’s $13.5 billion settlement with individual victims of the 2017 and 2018 fires, including the deadly Camp fire in Butte County. The utility also reached a separate $11 billion settlement with insurance companies.

“It has taken us a long time to get to this point of settling with PG&E,” Gorin said. “We are so glad that the bankruptcy court recognized that all the public entities sustained serious damages and included us (the local governments) as one of the groupings.”

PG&E’s settlement with local governments does not dictate how they use the money. And though Santa Rosa voters in 2016 passed Measure O, which set baselines for general fund allocations to police, firefighters and gang prevention efforts, those mandatory minimum amounts won’t apply to the settlement funds, said Alan Alton, the city’s acting chief financial officer.

“During the year, when we receive revenue we didn’t anticipate, it goes into the reserves and can be used for any purpose; however the Council still needs to appropriate a budget for that use. These revenues are in a sense added to our savings account,” Alton said in an email. “The PG&E settlement goes into that savings account, although to give the Council time to figure out how to spend the money, we keep those funds separate from those available for general use.”

Alton noted that the rules of Measure O call for the baseline calculation only for the main budget adoption in June and not for “mid-year appropriations.”

The Measure O requirements, including a rule guaranteeing just over one-third of general fund spending to the police department, were passed with more than 70% of voter support in 2016. Those rules could be a factor if the City Council decided to spend some of the PG&E settlement as part of the next year’s operating budget, Alton said.

PG&E successfully exited bankruptcy last month, before a June 30 deadline to access state wildfire insurance funds for future disasters.

“Consistent with our commitment to helping our customers and the communities impacted by wildfires recover and rebuild, PG&E fully funded the public entity wildfire settlements on July 1, in accordance with PG&E’s plan of reorganization and the terms of the public entities settlement agreements,” PG&E spokesperson Deanna Contreras said in a statement. “The funds will be administered from a trust account, which is not controlled by PG&E, and distributed in accordance with the terms of the settlement agreements to the public entities, including Sonoma County and the city of Santa Rosa.”

You can reach Staff Writer Will Schmitt at 707-521-5207 or will.schmitt@pressdemocrat.com. On Twitter @wsreports.