In a June 20th report to the Florida Municipal Power Agency executive board, FMPA chief counsel Fred Bryant reported on the status of negotiations on the proposed sale of Vero Electric to Florida Power & Light.

The following week all four parties to the negotiations held a conference call.  Here’s the executive summary:  All is not well!

In addition to needing approval from the Federal Energy Regulatory Commission and the Florida Public Service Commission, the deal must be cleared by FMPA’s board, bond counsel, bond trustees, and the Internal Revenue Service.

In his report, the audio of which is now available on the City of Vero Beach website, Bryant said the city’s transactional attorneys have abandoned their long-held position that an IRS ruling on the deal would not be required.

Also abandoned was a “Plan A” for funneling Vero Beach’s FMPA power entitlements through the Orlando Utilities Commission to FPL.  This key component to the agreement has been shelved.  An alternate “Plan B,” exists as little more than half a dozen bullet points and has been described by at least one skeptic as “subterfuge.”

Months ago, the transactional attorneys failed to get traction for their argument that Vero Beach isn’t really selling Vero Electric, but is merely abandoning it assets.

As a solution to the contingent liabilities Vero Beach will retain after the sale, the city’s transactional attorneys proposed an insurance policy.  Additionally, the city would pledge revenue from the 6 percent franchise fee and 10 percent utility tax, should the OUC ever be unable to fulfill the obligations it will be assuming on Vero Beach’s behalf.

Also addressed was a process for the city to exit the FMPA’s All Requirements Project.  Vero Beach is asking the FMPA to overlook its deficient notice given last fall.  If proper notice had been given, the city would be free to leave the ARP Sept. 30, 2015.  As it stands, the city must remain a member through September 30, 2016, and will on that date have to pay for strandes costs yet to be calculated.  The city is also asking the FMPA allow it to request a waiver to leave the ARP early without seeking approval from each of the ARP’s 14 member cities.

Between the proposed insurance policy and the costs of exiting the ARP, the city will almost surely need to use utility reserve funds to cover the cost of the deal.  Any hopes of netting $3 million are gone, and any plans for how to use an estimated $30 million in reserve funds that were to become unencumbered are premature.

The wheels may not have come off the deal, but based on the available evidence it is hard to conclude the city’s transactional attorneys are getting much traction for their suggestions on how Vero Beach can sell its electric system to FPL without breaching its contractual obligations to the FMPA and it bondholders.

If the City Council is as committed to honesty and transparency as it is to selling the electric system, then it is time to come clean about where the negotiations stand.

Next week the city will begin workshops to develop a budget for the 2013/2014 fiscal year.  If City Manger Jim O’Connor and the transactional attorneys cannot say with confidence that the sale can close by April 1, as is currently assumed, they need to come clean with the public and admit as much.