BY MARK SCHUMANN

VERO BEACH – City voters will go to the polls Mar. 12 to cast ballots in a binding referendum on the proposed sale of Vero Electric to Florida Power & Light.  The City Council set the date for the referendum at its meeting earlier this week.

Between Tuesday’s initial review of the purchase and sales agreement and the Mar. 12 referendum, the Council plans to move quickly to have the agreement reviewed by the Utility and Finance Commissions, and then examined again in a special called meeting of the Council to be held Feb. 12 at 9:30 a.m.  The agreement will then be considered by the Council at its regular Feb. 19 meeting, at which time the deal will presumably be approved.

The Utility and Finance Commission meetings are scheduled for Jan. 29 and 9 a.m., and Jan. 31 at 2 p.m.

At the special called meeting scheduled for Feb 12, the Council expects to discuss, not only the sales agreement, but also plans for financing city government once the city is no longer earning money from a municipally owned power system.  Currently the city transfers just over $7 million a year from the electric system to its General Fund.

City Manager Jim O’Connor and Finance Director Cindy Lawson, along with the Finance Commission, have estimated the city will be facing an annual shortfall of $3 million to $3.5 million.  The loss of revenue will be partially offset by a proposed 6 percent franchise fee, taxes to be paid by FPL, rental income on the power plant site, and proposed cuts in spending.

Proponents of the sale contend the benefits of selling the electric system far exceed the downside.  Utility activists Glenn Heran and Steven Faherty have estimated the city’s 34,000 customers, 60 percent of whom are located outside the city limits, are paying collectively at least $20 million more than they would as customers of FPL.

Members of the Council met individually with representatives of FPL Monday to receive and initial briefing on the final terms of the agreement.  The city’s transactional attorney, John Igoe, explained the agreement in more detail the following day at Tuesday’s Council meeting.

Key provisions of the deal call for FPL to pay $111.5 million in cash plus an additional $85.5 million in other considerations, including $17 million in transmission upgrades, and $7.8 million to build a new substation on the former postal annex site on the southwest corner of 17^th Street and Indian River Boulevard.

FPL will lease the power plant site for three to four years at $1.5 million per year, and will then be responsible for dismantling the plant and the existing substation.  FPL has also agreed to pay up to $500,000 for any necessary environmental clean up.  If additional clean up or remediation is needed, it will be done at the city’s expense.

As a part of the due diligence process, FPL did a “Phase One” environmental study of the property.  According to FPL representatives, the initial analysis of the site did not reveal any issues.  City officials and FPL representatives said they are reasonably confident there are no significant environmental concerns with the site.

When the power plant and substation are finally decommissioned, presumably within three to four years following the eventual closing date, the 17.2-acre site will be returned to the city.  If the sale takes place in late 2016, it could 2021 before the property is finally turned back to the city.

Because the land is protected by the City Charter, future uses will be limited to recreational purposes, or some other public uses.  Voter approval would first be required before the land could be sold or leased for commercial development.

Before the cash offer was reduced from $115 to $111.5 million, the Finance Commission had estimated the city would net some $7 million in cash from the deal.  Now that number is likely to be lower.  In exchange, though, the city is being released from future potential liability arising from its ownership and operation of the utility.

Another key provision of the agreement is the Dec. 31, 2016 expiration date.  In essence, the city and FPL have until that date to close the deal.

Though the city and FPL are hoping to complete the transaction as soon as Jan. 1, 2014, the city must first receive a waiver from the Florida Municipal Power Association in order to end its membership in the group’s All Requirements Project.  Without a waiver, the city will not be able to sell its system before Oct. 1, 2016.

At least according the Heran’s and Faherty’s estimates, any delay beyond Jan. 1, 2014 will cost the city’s electric customers $1.6 million or more a month.

Other contingencies in the agreement include the city first receiving FMPA’s approval for the sale of power from the Orlando Utilities Commission to FPL for three years.  This approval is a linchpin in the deal, for if the FMPA’s bond counsels determine the power purchase agreement will jeopardize the tax-exempt status of FMPA’s bonds, the deal cannot go forward.

The sales agreement is also contingent on approval by the Florida Public Service Commission and the Federal government.  When the city last attempted to sell its electric system to FPL, though the move was approved by 70 percent of city voters, the deal ran into snags with federal regulators, causing FPL to back out.  Thirty-seven years later, city officials and representatives of FPL are hoping they can finally bring a deal together.