MARK SCHUMANN

Through their use of carefully crafted phrases such as “continuing the conversation,” “clearing a path forward,” “tweaking the agreements,” and “remaining hopeful,” City officials are obscuring the deeper truth that the sale of the electric system almost surely will not close before the end of the coming fiscal year, if ever.

Taking cover behind the excuse that he is simply following orders, City Manager Jim O’Connor is nonetheless marching ahead with plans to slash some $2 million out of the 2013/2014 budget, despite the fact that only $1 million in cuts and/or tax increases will be needed to balance the budget if and when the electric system is sold.

Surely O’Connor knows the negotiations to sell Vero Electric are sputtering along at a snails pace, just as a person with his experience in municipal government is also well aware that a city that has already slashed its budget 20 percent and its employee count 25 percent will be hard pressed to trim another 10.9 percent without drastically impacting services.

The city manager may have been hired by the Council, and he may now be answering to and implementing the will of the Council troika of Tracy Carroll, Craig Fletcher and Pilar Turner, but his larger responsibility is to the residents and taxpayers of Vero Beach, the very people who pay his salary.

Despite Councilman Richard Winger’s request for a briefing by the city’s transactional attorneys on critical discussions held Wednesday in Orlando, it appears O’Connor has decided the Council will have to wait until July 16 to learn from its high-priced attorneys if any real progress has been made in the negotiations for the sale of Vero Electric.

In an email sent to City Manager Jim O’Connor Friday, Winger asked that before holding workshops to develop a budget for the 2013/2014 fiscal year, the Council first be briefed on the results of recent negotiations. Representatives of the Florida Municipal Power Agency, the Orlando Utilities Commission, Florida Power and Light, the City and a small army of lawyers met as recently as last Wednesday in Orlando.

Noting that the June 16 Council meeting will be the last before budget workshops begin in July, Winger wrote, “It would be illogical to set the budget (for) the next year and make cuts, if the import of the June 12 meeting is that the deal is delayed beyond that year,” Winger wrote.

Transactional attorney John Igoe is unavailable next Tuesday, and O’Connor rebuffed Winger’s request to hear from the other lead attorney, Rick Miller, or another of the firm’s partners.  “I believe John Igoe needs to be the presenter to the Council and may have more information following the discussions on June 26.”

According to O’Connor, the discussions held in Orlando last Wednesday focused only on one of three key issues – the question of how to restructure the deal to improve the chances of a favorable ruling from the Internal Revenue Service should FMPA officials continue to believe it prudent to seek a ruling from the IRS before signing off on the deal.

O’Connor said that while the agreement between the City and FPL remains intact, separate power purchase agreements between the OUC and FPL that are integral to the deal will have to be “tweaked.” In layperson’s terms that probably means the power purchase agreements need to be shelved and renegotiated.

One roadblock to the deal is an IRS restriction on the sale of power from municipal utilities to investor-owned companies such as FPL.  The transactional attorneys appear to have been hoping against hope that the FMPA would be willing to put at risk the tax exempt status of its bonds by turning a blind eye to the power purchase agreements between the OUC and FPL.

The $500-an-hour attorneys, who have already billed the city for nearly $1.4 million, may finally be realizing that wishful thinking is not a strategy.

When O’Connor says the power purchase agreements need to be “tweaked,” after more than a year of expensive negotiations to settle the City’s obligations to the FMPA, the reality seems to be that the City and FPL are back to square one.

The net effect of all the “tweaking” to be done is that there is little chance of the City and FPL closing a deal in the next 12 to 18 months.

Restructuring the power purchase agreements to avoid tax issues will surely take time, as will the process of seeking government approval for the deal.  The Federal Energy Regulatory Commission, U.S. Department of Justice, the Florida Public Service Commission and the FMPA must all approve the deal.  Those government agency approvals are not going to come overnight, or within the next few months, or even within the next year, if ever.

Still another unresolved question is the issue of the city’s membership in the FMPA’s All Requirements Project.  Without a waiver enabling it to leave early, the City is contractually obligated to remain in the ARP through September 30, 2016.

O’Connor said there was no discussion in Orlando this past week on key issues involving the city’s membership in the ARP.  Quite simply, much is yet to be done to “clear a path forward,” to use and oft-repeated FPL mantra.

Given that the chances of a closing taking place before late 2016 are not good, why make deep and unpopular cuts in city services and why take drastic measures, such as reducing lifeguard hours, closing the 911 call center, or selling off the city-owned cemetery, until it is known if and when the electric system can and will be sold.

Finally, given that the City is now contractually obligated to FPL to make a good faith effort to close the deal, it may be time to consider if it is negligence on the City’s part to continue employing transactional attorneys who climb down one rabbit whole after another.  The lawyers Brian Heady claims to have “found on the internet” are not getting the job done.