The proposed purchase and sale agreement worked out between the city’s transactional attorneys and representatives of Florida Power & Light has a target closing date of Jan. 2014.  And yet, though the agreement allows for the deal to be concluded as late as Dec. 31, 2016, none of the key provisions in the agreement are linked to the variable closing date.

The net effect is that the city will be taking on great risk and could stand to loose millions of dollars. With fixed terms and a 36-month window for a closing, the proposed agreement leaves the city open to all kinds of liabilities and additional expenses it would not be facing with a fixed date to complete the deal.

For starters, the city is agreeing to pay the Orlando Utilities Commission $34 million to assume its obligations to the Florida Municipal Power Association, and another $20 million to terminate a separate wholesale power contract 16 years early.  The city is also giving the OUC gas transmission rights valued at $10 million.

Assuming those amounts represent a fair price as of Jan. 1, 2014, it is virtually impossible to argue those same numbers should be in play if the closing is delayed up to three years.  That delay seems likely, given the city’s commitment to remain a member of the FMPA’s All Requirements Project through Sept. 30, 2016.

Beyond the fixed price the city is agreeing to pay the OUC, the proposed deal puts the city on the hook for some $20.3 million in long-term capital projects scheduled for 2014, 2015 and 2016.  Why would the deal not require that FPL bear the bulk of the cost for these projects.  After all, FPL will benefit the most from these planned improvements to the system?

Then there is the question of why the city would give FPL the 4.6-acre former postal annex site for a substation, when less valuable land is available.  Further, why would the city turn this land over without a reverter clause?  In a $197 million deal, from which the city is likely to net no more than $3 million, why should the taxpayers of Vero Beach be asked to hand over a fee simple dead to property FPL could someday sell at great profit.   If FPL ever determines the land is no longer needed for a substation, that property should revert to the city.

The city is also being exposed to additional pension liabilities.  If the deal closes in late 2016, rather than in Jan. of 2014, almost surely there will be employees of Vero Electric who will retire during that time.  While FPL has agreed to assume the pension liabilities for all 100 electric system employees, any who retire before the closing date will remain on the city’s pension plan.  Why not structure the deal so that FPL will make additional payments to compensate the city for any employees who retire after Jan. 1, 2014 and before the closing date?

Clearly FPL has sent to the table a team of effective, touch negotiators.  It seems doubtful that the city is equally well represented.