BY MARK SCHUMANN

Recently I spoke with a former mayor of Vero Beach who has been reading Inside Vero, and who asked me, “Why are you opposed to the sale of the electric system?”

That question, and its underlying assumption, reflects a common, yet simplistic view of the city’s options.  Even if one accepts the premise that Florida Power & Light is the only logical buyer for Vero Electric, it does not necessarily follow that the city had to accept whatever deal FPL put on the table.

The city’s options are not limited to keeping the electric system or following FPL down a road that will likely not results in a sale until late 2016, if ever.  Supporters of the political action committee, Citizens for a Brighter Future, which received nearly $100,000 in campaign contributions from FPL, may not want to accept this, but the fact is the utility giant is using them to help the company take advantage of Vero Beach’s taxpayers and residents.

Every reasonable measure for lowering rates now should be pursued, including negotiating with FPL to sell the city’s 22,000 county customers as soon as possible.  However, for the city to have committed to a deal that will keep rates arterially high through at least 2016 was hardly in the best interests of the city’s county customers.

In tandem with transacting a partial sale, there are several key steps the city could have taken to significantly lower rates for the 12,000 customers that would have remained a part of the system.  Unfortunately, for at least the next three years all 34,000 customers of Vero Electric they will see bills higher than they are paying now.  Why?  Because of the Council’s decision to jack electric rates up to cover now more than $1 million in legal bills, and to pay cash for capital improvements that should instead be financed.

Not only is the current agreement far from the best deal that could have been negotiated on behalf of the city’s county customers, because of the high cost of a delay, it is also a particularly bad deal for city residents and taxpayers.

The public relations spin coming from FPL representatives would lead a trusting person to believe there is a reasonably good chance of the deal closing well before late 2016.  Those assertions are misleading at best.

Councilwoman Pilar Turner is planning a 14-city magical mystery tour in which she hopes to persuade each and every member city in the Florida Municipal Power Agency’s All Requirements Project to grant Vero Beach the waiver necessary to allow for a closing before late 2016.

Because the granting of a waiver would put the remaining All Requirements Project cities on the hook for Vero Beach’s share of contingent liabilities, it is difficult if not impossible to expect that Turner will discover the largess she is hoping to find.

Over the next three years, as legal fees mount, and capital improvement costs are tacked on to bills, the city’s county customers will shell out some $30 million more than they would have otherwise paid, if only the city and FPL had been willing to transact a partial sale now.  Utility activists who claim to be working on behalf of ratepayers, and who deny they are simply doing FPL’s bidding, have done the city’s 22,000 county customers a great disservice by not pushing for a partial sale.

Why else is this deal a high risk for the city?  Consider the “if ever” component of the caveat, “not until late 2016, if ever.”

Because FMPA’s long-term revenue bonds are secured by the customer base of its member cities, its contracts do not allow member cities to just come and go from the joint action as they please.

As currently structured, the deal calls for the Orlando Utilities Commission to assume Vero Beach’s FMPA obligations in exchange for $34 million in cash, $10 million in gas transmission rights and an additional $30 million in subsidies from FPL that would otherwise have gone to the city as sale proceeds.

The problem is that these power purchase agreements do not address the fundamental question of how, if Vero Beach sells its electric system, it could ever meet its contingent liabilities on FMPA bonds.  Without some resolution to this issue the deal will never happen.

Finally, there is the question of whether the power purchase agreements will jeopardize the tax-exempt status of FMPA’s bonds.  The city is asking the FMPA to accept written assurances from its transactional attorneys and from OUC’s bound counsel that the deal will not put its bonds at risk.  Quite prudently, FMPA officials are insisting they will require a ruling from the Internal Revenue Service before they will consider approving the deal.

Given the certain three-year delay, and the prospect that the deal may never close, we are back to the exceedingly simplistic question, “Why would one have opposed the March 12 referendum?”

All of the issues the deal now faces could and should have been resolved before it was ever put before voters.  Notice how politicians will simply refuse to answer questions.  Why shouldn’t the voting public feel equally empowered to refuse to address questions politicians put to them, especially when those questions are ill timed.

It will not be at all surprising to see the deal slowly unravel over the next 12 to 18 months, at which point the city and FPL will return to the drawing board to begin structure the very same partial sale they could be transacting now.  Why the city’s county customers are not outraged over being taken on a long, circuitous detour to lower rates is beyond me.