BY MARK SCHUMANN

VERO BEACH – Representatives of Florida Power & Light meet individually Monday with members of the City Council to present the company’s formal offer to purchase Vero Electric.

Councilmen Jay Kramer and Richard Winger recorded their meetings and invited interested members of the public to attend.

Former Councilman Ken Daige sat in on Winger’s meeting.  An hour later, a dozen residents and members of the press attended FPL’s meeting with Kramer, where they were invited to ask questions.

FPL negotiators explained that the company’s cash offer has been reduced from $115 million to $111.5 million in exchange for releasing the city from any contingent liabilities on the system.  Because FPL is also offering to pay an additional $500,000 a year to lease the power plant site for three years, the city will actually net $2 million less in cash than had previously been offered.

A key provisions of the agreement is the Dec. 31, 2016 expiration date.  Because Oct. 1, 2016 is the earliest the city may be able to terminate its membership in the Florida Municipal Power Association’s All Requirements Project, an expiration date of Dec. 31, 2016 would still allow time for the sale to be concluded, though well beyond Jan 1, 2014, the date that has for months been held out as a target for concluding the deal.

If the deal cannot be closed until late 2016, the three-year delay will cost the city’s electric customers some $75 million.  Utility activists Glenn Heran and Steve Feherty have estimated Vero Electric’s customers are currently paying $25 million more per year than they would as customers of FPL.

Winger asked why the city and FPL are not exploring the option of a partial sale, which could be concluded well before late 2016.  “Why not get the rates down now?” he asked.

Kramer has raised the same question.  In fact, for more than a year he has maintained the fastest way to reduce rates for all 34,000 of the city’s customers is to move more quickly to sell FPL the right to serve the 22,000 customers located outside the city limits.

Both Kramer and Winger say that because FPL prefers to hold out for buying the whole system, and because a sale of the full system may not be possible until after Oct. 1, 2016, rates will remain high for three years longer than necessary.

“The county customers and city customers are being held hostage to this deal,” Winger said.

The purchase and sales agreement contains a number of contingencies, including passage of a referendum, now scheduled for mid-March.  Other contingencies include successfully concluding negotiations with the FMPA over ending the city’s involvement in the All Requirements Project.  Perhaps the most challenging negotiations will to resolve resolving contingent liabilities the city has on its bond obligations with the FMPA.

FMPA’s bond counsel has raised a number of concerns about protecting bondholders and maintaining the integrity of the tax-exempt status of FMPA’s bonds.

The deal calls for the Orlando Utilities Commission to assume the city’s obligation to buy power from the FMPA and to resell that power to FPL for three years.  FMPA’s bond counsel is concerned that the sale of FMPA power to an investor owned utility could jeopardize the tax-exempt status of FMPA bonds.

Through Dec. 6 of last year, the city’s transactional attorneys billed $771,727.  Kramer and Winger have both expressed concern that the city’s legal costs for negotiating the deal are climbing toward $1 million without any apparent progress in resolving key issues with the FMPA.

Several members of the public who attended Kramer’s meeting with FPL asked questions and raised concerns.  Former Mayor Warren Winchester said he fears the deal will leave city residents paying higher taxes with little or nothing in return.  Others questioned FPL representatives on the company’s commitment to maintain utility right of ways as meticulously as the city has done.

Representatives of the Vero Isles Home Owners Association wanted to know about plans for maintenance of landscaping in the right of way along Indian River Boulevard.  The community, they said, invested $250,000 in landscaping and irrigation.  They wanted assurances that the buffer between their homes and Indian River Boulevard will be maintained.

Others, including Daige, questioned why the contract calls for the substation to be moved from the west end of the power plant site to the old postal annex at an estimated cost of some $8 million to the city.

O’Connor said it is his understanding the Council wants “a clear site on the river,” with all 17.2 acres cleared of all structures and foundations when FPL decommissions the plant in three to four years.

Former Councilman Brian Heady, who served on the Council when negotiations with FPL were begun, as well as Kramer and Winger, have all said it is not at their request that the substation is being moved.

Because the Council has never publically discussed relocating the substation, some, including Daige, wonder who gave O’Connor directions to have the substation moved.

If the Council’s remaining three members, Carroll, Fletcher and Turner, want the substation moved so that the power plant site will be cleared for other possible uses, including commercial development, they have never approved a motion to that effect.

Beyond the direction received from Council members he did not name, O’Connor said the other reason for moving the substation from the power plant site to the old postal annex is FPL’s request that it be given at least four acres free and clear.  That land, they said, needs to be within one and a half blocks of the transmission lines along Indian River Boulevard and 17^th Street.

Giving FPL the western four acres of the power plant site would require voter approval, O’Connor explained.  The old postal annex site, valued at approximately $1 million, is not protected by the City Charter and can be given to FPL without having to go to the voters, he said.

In answer to questions about what alternatives the city may have, O’Connor acknowledged the southwest corner of 17^th Street and Indian River Boulevard could be retained for future development, if voters were inclined to let FPL have four acres of the power plant site.  That would leave the city with 13.2 acres, which O’Connor said would presumably be “grassed over” for use as a park.

Fletcher, though, recently said he would like to see the land put to some use that can “make money for the city.”  Selling or leasing the land for commercial development would, however, require voter approval.

In addition to retaining ownership of the old postal annex, another possible advantage to letting FPL keep the substation in its current location is that the city would presumably net an additional $7 million in cash from the deal.

“But we are not paying to move the substation.  FPL is paying to move it,” O’Connor said.  Kramer and Winger both counter that because the $7 million cost of moving the substation is included in the total value of FPL’s offer, it is reasonable to ask for $7 million in additional cash in exchange for allowing the substation to remain in place.

In his meeting with O’Connor and FPL representatives, Winger was also critical of being handed a “two-and-half-inch-thick set of documents” absent the two-page executive summary he said both O’Connor and the transactional attorney had previously promised to provide.

O’Connor said the next step will be to present the proposed deal at the Jan. 15 Council meeting, where it can then be referred to the Utility and Finance Commissions for review later this month.

The proposed purchase and sale agreement will then be brought back to the Council on Feb. 5, where it will be scheduled for review in a workshop to be held Feb. 12.  The Council will take the agreement up for final approval on Feb. 19.