VERO BEACH – The Utilities Commission voted unanimously today to recommend the City Council approve a proposed contract between the city and Florida Power & Light for the sale of Vero Electric.

“This is a good deal for the citizens of Vero Beach and for the citizens of Indian River County.  This is a huge economic opportunity for the community,” said Chairman Scott Stradley.

Stradley emphasized the savings in electric rates the city’s 34,000 customers are projected to have once FPL takes over service in the area.  Commissioner William Grealis, representing the city’s customers in the Town of Indian River Shores, echoed Stradley’s points.  “Looking forward, the savings will likely increase,” he said, pointing out that the long-term trend has been for Vero Electric’s rates to increase more than FPL’s.

Before endorsing the proposed sales contract, the Utilities Commission heard from Mark Arnold, an attorney with Edwards Wildman, the law firm representing the city in its negotiations with FPL, the Florida Municipal Power Agency and the Orlando Utilities Commission.

Arnold outlined the nearly 100-page agreement, explaining the purchase price, the conditions under which the offer could change, representations and warranties, provisions for termination, and contingencies.

FPL has offered $111.5 million in cash, plus other considerations.  Company representatives have placed the total value of FPL’s offer at $179 million.

As structured, the deal could close as early as Jan. 2014, or as late as Dec. 2016.  Because the fundamental terms of the agreement are fixed regardless of when the sale takes place, a number of the members of the Finance Commission raised questions about the possible financial consequences of a three-year closing window at their meeting Jan. 18.

Some of the questions from Utilities Commission members focused on the responsibilities the city will have to make long-term capital improvements to the electric system, should the closing date be pushed back by as much as three years.

Other questions explored what liabilities the city will have if it is forced to absorb uninsured casualty losses while waiting for the closing to take place.  City Manager Jim O’Connor told the Commission the Federal Emergency Management Agency is not likely to reimburse the city for losses while the system is under contract to be sold to an investor owned utility, such as FPL.

The remainder of the Commission’s questions centered on the terms under which Vero Electric’s 100 employees would go to work for FPL.  Any of the city’s employees who do not retire before the closing date will be offered jobs with FPL for a minimum of two years.

FPL has agreed to credit Vero Electric employees for their years of service, both for calculating pension benefits, and for establishing earned vacation and sick leave. Any accrued benefits beyond FPL’s limits will be paid by the city at the time of closing.

A key provision of the agreement is FPL’s offer to assume the pension liabilities for Vero Electric’s employees, while letting the city retain whatever is now invested in the city’s pension fund on their behalf.  Though the total value of those investments has yet to be calculated, it is said to be in the range of $10 million.

Finance Commission Chairman Peter Gorry, who attended today’s Utility Commission meeting along with fellow commissioners Glen Brovont, Scott McCraken and Dan Stump, explained that the funds will likely be used to reduce the underfunded portion of the city’s pension obligation for its remaining employees.

Currently the city is paying some $3.5 million a year to catch up on more than $30 million in underfunded pension liabilities.  According to the city’s pension consultant, Rocky Joyner, the total underfunded pension liability will be $22 million after the sale of Vero Electric.

The Finance Commission will next take up the proposed purchase and sale agreement Thursday, Jan. 31 at 2 p.m. On Feb. 12 the City Council will hold a workshop to discuss the agreement, and will then vote on it at its regular meeting the following Tuesday.  The deal is set to go before voters in a referendum March 12.