COMMENTARY

“It might also be instructive to note that Heran formed a political action committee and an electioneering communications organization, both of  which were really little more than a front for FPL. Last spring, Heran used nearly $100,000 of FPL money to successfully convince voters to approve a contract full of blanks and holes.  More recently, FPL contributed some $40,000 to Heran’s effort to aid former City Council member Tracy Carroll’s unsuccessful bid for re-election.”

MARK SCHUMANN

In his weekly pro-sale newsletter, Dr. Stephen Faherty this week circulated more fuzzy math, which he attributed to Glenn Heran.

The two activists, who seem to have made is their life’s mission to drive the City of Vero Beach out of the electric utility and water and sewer business, are now claiming Florida Power & Light’s latest offer is worth $209.5 million.   They arrived at this inflated number by failing to subtract the $30 million premium FPL will not now, under the latest plan, have to spend to buy Vero Beach’s FMPA power entitlements from the OUC for up to three years.

	FPL/COVB/FMPA Purchase & Sales Agreement 02/2014               (1, 2, 5, 6) *
FPL Pays:
Cash	111,500,000.00
FPL also Pays for:
COVB Unfunded Pension Liabilities & accrued leave	16,400,000.00
Lease on Plant at $ M / year *	4,500,000.00
Decommissioning of power plant, clearing land, etc. *	5,500,000.00
Installation of upgraded Transmission lines ****	7,800,000.00
Move substation ****	7,800,000.00
Payment of cost for 1st 3 years of Stanton 1 & 2 electricity by FPL****	30,000,000.00
FPL Payment of $26 M FMPA Penalty	26,000,000.00
FPL Loan of $26 M to City for FMPA Penalty
Total FPL pays COVB for electric utility	$209,500,000.00

**** = Figures combined in original offers

Faherty’s February 28 “Utility Update” email newsletter also presented Heran’s “analysis” that the latest deal will leave the city with $41.5 million, rather than the $2 million to $3 million, excluding reserve funds, estimated by city staff.  Heran further fuzzied the numbers by including the $1.5 million FPL is to pay to rent the power plant site for up to three years.

First, there is no guarantee FPL will need the site for a full three years, and second, the lease of the land for three years in exchange for rent is a transaction apart from the sale itself.  Heran’s logic seems to assume the city would have no other opportunities to use or to lease the land.  Surely there are at least a few developers who have other ideas.  Heran also does not account for the cost of land the city will be deeding to FPL for its new substation. Heran also did not account for the city’s considerable transaction and transition costs.

Heran’s calculation of the cash the City net from the sale makes no allowance for a long list of costs the city will incur, including the pension liabilities for electric system employees who choose to retire rather than taking up FPL’s offer for short-term employment.

Faherty wrote, “Contrary to local anti-sale bloggers/press, Glenn and I have been fairly accurate in our estimates of what the City could expect from its electric utility…In 2010 we had estimated the City would receive about $104 million in cash for the sale whereas the current figure is $111.5.”

Selectively presenting only the facts that might bolster his argument, Faherty failed to tell his readers that the Heran financial model he was circulating in late 2009 while building initial support for the sale projected the City would NET $156.5 million in CASH.

Faherty’s latest “Utility Update” is laced with the same inflammatory language used by Very Beach 32963 reporter Lisa Zahner.  He wrote, “Do we really know the total amount of the Ransom being requested by FMPA for COVB’s 33,000 hostages?”

Being an effective propagandist, Faherty seems to realize that angry people are easier to control.  That must be why he uses words like “hostages” and “ransom” to greatly mischaracterize the nature of the City’s relationship with the Florida Municipal Power Agency and the out-of-city customers’ relationship to Vero Electric.

The $52 million to be paid the FMPA is not a “ransom,” as Faherty claims, and as Zahner told her readers this week.  Rather, the money will compensate the FMPA for the cost of assuming Vero Beach’s power entitlements for up to three years.  Once FPL negotiators and the transactional attorneys finally realized their bright idea to have FPL buy the power by channeling it through the Orlando Utilities Commission would never be approved by the Internal Revenue Service, they ask the FMPA to take on the power.  Now, Faherty wants us to believe the FMPA is holding the city “hostage.”

Interestingly, the OUC reportedly has also given FPL a proposal to absorb Vero Beach’s power through the end of 2017.  Yet, FPL seems inclined to strike a deal with the FMPA. Despite this fact, Faherty continues to insist the FMPA’s offer is beyond unreasonable.

Over the years, Faherty and Heran have floated rather bizarre proposals of which they continue to be proud.  Just this week Faherty wrote, “About 3 years ago, Glenn and I proposed that the City sell its utility except for a 2 square block area around City Hall.  That would have maintained it as a Municipal Utility and the City wouldn’t have to negotiate its FMPA contracts just pay annual fees from sale proceeds.”

The Faherty-Heran proposal to create a legal loophole by shrinking Vero Electric to the size of a postage stamp is about as sound as the proposal the transactional attorneys tried to sell the FMPA about how the city wasn’t really selling its electric system, just abandoning it.

Before allowing one’s self to be swamped in a wave of euphoria over Heran’s latest “analysis,” it might be helpful to remember that in the past his faulty logic has lead to monumental miscalculations. It might also be instructive to note that the political action committee and an electioneering communications organizations formed by Heran were both little more than a front for FPL. Last spring, Heran used nearly $100,000 of FPL money to successfully convince voters to approve a contract full of blanks and holes.  More recently, he used some $40,000 of FPL money to support former City Council member Tracy Carroll’s unsuccessful bid for re-election.