BY MARK SCHUMANN
VERO BEACH – The latest invoice from the city’s transactional attorneys arrived at city hall yesterday. What followed today was a bill from the Florida Municipal Power Agency’s bound counsel, Nixon Peabody.
For legal work done during the month of Dec., the transactional attorneys billed the city $107,841, bringing their total charges through the end of 2012 to approximately $879,000. Added to the Nixon Peabody invoice for $34,816, the city’s legal costs for negotiating a sale of Vero Electric are fast approaching $1 million, with little if any end in sight.
The transactional attorneys have structured a deal with Florida Power & Light that creates a three-year closing window, essentially fixing the sale price, while leaving the city on the hook for tens of millions of dollars in additional expenses.
More than a year into complex negotiations with FPL, the Florida Municipal Power Agency and the Orlando Utilities Commission, the transactional attorneys earlier this month met for just the second time with representatives of the FMPA.
Because the city shares a fractional interest in three of the FMPA’s long-term power projects, all of which were funded through tax-exempt municipal bonds, the deal is exceedingly complex. In exchange for $34 million in cash, gas transmission rights valued at $10 million, and FPL’s commitment to buy power from them for three years, the OUC board has agreed to take on Vero Beach’s FMPA obligations.
But because the deal calls for the OUC to sell power to FPL, the tax-exempt status of FMPA bonds may be place at risk by the deal. FMPA’s bond counsels and trustees representing FMPA’s bondholders are not in a position to allow the tax-exempt status of the bonds to be jeopardized, and so they may well require an IRS ruling on the proposed deal. That ruling could be a long time in coming.
Other issues which have been reported on extensively include the FMPA’s insistence that whatever deal is finally agreed upon must include some means of covering the secondary liabilities the city will continue to have on its share of the FMPA’s bond debt.
Presumably the OUC will be in a position to pay off the bond debt it is assuming on behalf of the city. But if the OUC should falter, the obligation will fall back on Vero Beach. Having sold its system to FPL, the city would have no way of making good on the debt.
Beyond these issues, there is the matter of the city’s membership in the FMPA’s All Requirements Project. Because the city, with the help of the transactional attorneys, missed a critical notification deadline, it may be late 2016 before the city can extricate itself from its commitment to the 18-member group.
For the city to leave the All Requirements Project before late 2016, each and every member city will have to agree to give Vero Beach a waiver. Some with their ears to the ground hear rumblings in distant cities, while at home the sale’s most ardent supporters are hanging their hopes on a proposed 18-city tour. Councilwoman Pilar Turner has offered to accompany the transactional attorneys, as they journey from city to city present their case for why the All Requirements Project members should make an exception for Vero Beach.
Why might the other member cities not be inclined to give the city a pass, so to speak? For starters, giving Vero Beach a waiver would establish a precedent that could jeopardize the All Requirements Project contracts. Secondly, for as long as the city remains a member of the group, it shares in any contingent liabilities that might arise.
Letting the city out of the All Requirements Project early would only serve to increase the potential liability for the remaining members. If the tables were turned, it is hard to imagine the Vero Beach City Council agreeing to such a request.
Proponents of the sale speak with unflinching optimism about the prospects of closing the deal in early 2014. But wishful thinking is hardly a sound business stragegy.
If the City Council moves on Feb. 18 to sign a binding sales contract with FPL, and if the closing cannot take place until late 2016, rather than in early 2014 as has been envisioned all along, the city and its taxpayers and ratepayers will bear the burden of incalculable potential liabilities, along with tens of millions of dollars in additional expenses for debt service, capital expenditures, legal fees, and pension obligations to employees who retire before the delayed closing date, all of which will reduce the value of the deal to the city.
Just yesterday the City of Lake Worth awarded a new wholesale power agreement to the OUC, choosing the municipal utility over four other bidders, including FPL. The price for which the OUC has offered to sell power to Lake Worth will likely soon be known. That number could be key in determining the potential for Vero Beach in selling 22,000 county customers and then operating a smaller, presumably more efficient system.
Councilmen Jay Kramer and Richard Winger have both said publically they think a partial sale could enable the city’s county customers to have FPL rates sooner than if the full system is sold in 2016, while also bringing rates for the remaining 12,000 city customers to within ten percent of FPL.
Realistically, though, despite the potential benefits of a partial sale, the option will remain largely unexplored by Council members Tracy Carroll, Craig Fletcher and Pilar Turner. Their current thrust toward a sale of the full system is not likely to shift, unless and until it becomes clear the sale, as presently structured, is simply not possible. Only when the horse the Council troika is riding finally reaches the edge of the cliff of realty, will Carroll, Fletcher and Turner be willing to consider other ways of lowering electric rates.
More to the point, though, FPL appears to be the party calling most of the shots here. Only after it becomes obvious a sale of the full system is not possibly in the foreseeable future, will FPL be willing to let Carroll, Fletcher and Turner consider selling just the city’s 22,000 county customers.
In the meantime, legal fees are mounting and rates are being held artificially high.
Indian River Guardian 
First I would like to thank Mr.Schumann for getting this information out in the open and making it clear.
One can only conclude that there are three members on the Council that have an interest in selling our electric utility to FPL even though it may not be what is best for our City.
Have they been promised support for their campaigns by the lobbyists for FPL?
Are they heavily invested in FPL or a connected company and are they putting their own economic or political gain above protecting the City or are they just outright stupid and cannot foresee the results of what they are pushing for?
What else can explain their stubbornness in not being willing to consider other possibilities.
If it cost $107K for a single field trip for the transactional attorney and … there are 18 cities that require additional visits, that kind of looks like another $2,000,000 smackers to me! When does lunacy end?
I am disturbed about the fact that all portions of our local government, the County Commission, the City Council and the School Board seem to spend a great deal of taxpayer money on lawyers. What is even more disturbing is that the lawyers are not local. Should not our local government be concerned with improvement of the economic conditions of its own neighbors?
I do not think that there is yet any conflict of interest on the part off those who are involved in the decisionmaking process in regard to the sale of the utility which has the support of majority of the ratepayers.. However, we have to remain vigilant to the fact that there is some potential conflict of interest that is possible once the inevitable sale is complete. Thus, all those involved in the sale should be required to abstain from profiting from how the property is used in the future whether it be a marina as some have suggested or any other commercial use. The only sure way to have no conflict of interest is to ensure that the property is retained as a public park for the use of all city residents.
It should be made a matter of public record if any of the decisionmakers or their immediate families have investments with FP&L.
I am very appreciative of the fact that there is often an identification made that the President and Publisher of the Vero Press Journal identifies that his wife is an employee of FP&L.
Pat Lavins is correct in everything that she has written.
The majority of the ratepayers are in favor of the sale to FPL, but the majority of the ratepayers live outside the City limits and the decision makers are City Council Members. They are elected to do what is best for the City, not what is best for the ratepayers outside the City limits. This is politics not a court of justice. It may seem unfair to those who do not live within the City limits, but that should not be the concern of the City Council. They are elected to protect and improve the City.
We also need to know, as Pat Lavins rightly says, if our City Council Members have investments in FPL or its PARENT COMPANIES and we need as well to protect the City Property for public use by City and County residents.
We should also check to find out how often FPL has sat down with the Press Journal and what was discussed at those meetings. They have occurred. Is FPL trying to influence how the news is covered by our local paper? Does anyone out there know more about these meetings? If you know, please come forward and tell the public what was discussed.
Those members of the City Council who support the sale of the utility are doing what is best for the city. The sale is the only revenue source possible to address the issue of the unfunded pension liabilities that were neglected by previous office holders. There is both a moral and legal obligation of the city to provide the employees what was promised to them for years of service. The city has neglected this obligation for far too long.
The President and Publisher of the Vero Press Journal, Bob Brunjes is married to a woman who represents FP&L. This has been an example of the kind of full disclosure that we have yet to see from others who are involved in the sale of the utility.