MARK SCHUMANN
In an interview with Inside Vero last week, Mayor Richard Winger, City Manager Jim O’Connor and City Attorney Wayne Coment discussed the status of negotiations to sell Vero Electric. Winger, O’Connor and Coment also outlined the results of their April 2 meeting with representatives of the Florida Municipal Power Agency, and they enumerated the steps the City must take to conclude the power sale.
A number of factors, they said, are beyond the City’s control, including the ultimate decision each FMPA member city must make regarding Vero Beach’s request for waivers to its FMPA contracts.
To protect the tax-exempt status of its bonds, FMPA’s contracts do not allow for members to sell their utilities or their power entitlement shares to investor-owned utilities, as Vero Beach is attempting to do. Consequently, all 20 cities with which Vero Beach participates in various FMPA projects much agree to grant waivers to Vero Beach’s contracts. At the same time, in order to protect the security of FMPA’s revenue bonds, these same cities are being asked to agree to never seek such a waiver for themselves. O’Connor and Winger conceded that requesting for such a one-time exception for Vero Beach was a lot to ask.
Off the table is Florida Power & Light’s proposal to pay the FMPA $52 million to absorb for three years Vero Beach’s power entitlements. FPL’s $52 million offer came with several conditions FMPA General Manager Nicholas Guarriello said are “unworkable and unacceptable.”
In the same March 5 letter to FPL President Eric Silagy in which he rejected FPL’s offer, Guarriello encouraged Silagy to pursue a deal with the Orlando Utilities Commission to take on Vero Beach’s power entitlements through Dec. 31, 2017.
The OUC has already agreed to permanently assume Vero Beach’s position in three FMPA power projects as of Jan. 1, 2018. “It seems more straight forward, as I have mentioned before, for FPL and OUC to directly negotiate a price — be it $52 million or any other figure — for the up-to-three-year power sale, which would avoid any IRS private use restrictions,” Guarriello wrote.
O’Connor said FPL negotiators got Guarriello’s message loud and clear, and is now “pursuing other options.” If FPL is able to make a deal with the OUC to take on Vero Beach’s 38 megawatts of Stanton I and II power through Dec. 31, 2017, one more hurdle to the sale will have been cleared.
Winger said it is helpful to think in terms of the four issues yet to be resolved. The City must find a buyer for its Stanton I and II power entitlement shares through Dec. 31, 2017. Contingent liabilities the City has on three FMPA power projects will almost surely have to be backed up by a pledge from FPL. All stranded costs the FMPA will incur as a result of Vero Beach’s withdrawal must be calculated and will have to be paid in full at closing. Finally, Vero Beach must approach each of the 20 cities with which it participates in FMPA projects to request waivers to its contracts.
Given that FPL will be taking on Vero Beach’s 34,000 customers, the company could assume Vero Beach’s secondary liability, but has so far been unwilling to do so. Though the likelihood of the OUC defaulting on the obligations it has agreed to assume of Vero Beach’s behalf is remote, Winger stressed that in the world of municipal bonds there is simply no tolerance for risk.
The stranded cost figure, O’Connor said, is a moving target that cannot be calculated until a closing date is set. These costs could include several million dollars for Vero Beach’s share in an interest rate swap that now has a negative value. There may also be costs associated with clean up of oil spill at the City’s power plant that happened when the City was contributing power to the All Requirements Project.
With their rejection of FPL’s $52 million offer, which included contingencies intended to clear aside Vero Beach’s secondary liabilities, stranded costs and the All Requirements Project withdrawal provisions, FMPA officials reiterated their position that no amount of money will buy their willingness to compromise the integrity of FMPA’s contracts.
Though pro-sale advocates have been loathe to hear the message, FMPA officials have from the beginning insisted their primary responsibility is to preserve the integrity of contracts that protect member cities, and more importantly, bondholders. Winger said all of these issues were known from when the city ofVero Beach first began working to sell its electric system. Continuing to accuse the FMPA of throwing up new obstacles, he said, is counterproductive.
Legislation proposed by State Rep. Debbie Mayfield intended to force the FMPA to compromise failed in committee, never making it to the House floor. Talk of suing the FMPA is likely to go nowhere positive. And the public relations war FPL has been waging against the FMPA has done nothing to alter the agency’s position.
It now seems clear any path toward a sale of the City’s electric system to FPL will be determined, not in “political theatre,” but in the domain of contract law, as the City finally seeks a way to comply with, rather than to circumvent, its FMPA contracts.
Though securing all of the approvals needed to conclude the sale might seem a near impossibility, Winger and O’Connor said they are determined to try. Given continued public support for the sale, they really have no other option. Winger has said, though, he believes the City should pursue a parallel effort to lower rates now.
Indian River Guardian 
Excellent interview, It was a very good summary of the ongoing negotiations. I was impressed with Mayor Winger accepting the fact that Vero Beach is responsible to negotiate the existing contracts with FMPA and not FPL’s. The ongoing question is how many zeros left of the decimal point are in the unquantifiable liabilities and will any money remain in the electric reserve fund to satisfy the under funded pension plan.
I find it interesting that it is Vero Beachs responsibility to negotiate a no RFP, single bidder, non-competitive deal for the benefit of FPL at the lowest possible price, paid for by Vero Beach. I have to wonder how long the people of Vero Beach will be willing to be FPL’s surrogate in their attacks on FMPA. The FMPA members know this and they all have to vote unanimous to make this happen.
Jay, you are absolutely correct in observing that some, including Pilar Turner and Tim Zorc, are acting as surrogates for FPL. Zorc even hopes to fill two short buses full of “protestors” and drive them to Orlando in May to attend the FMPA meeting.
By the way, I was just listening to Charlie Wilson, aka “The Professor of Political Baloney.” He referred to the “so-called” negotiating meeting held in Orlando two weeks ago. In truth, Winger more than once made clear the meeting was being held NOT to conduct negotiations, but in hopes of restarting discussions. Wilson is full of misinformation, including his absurd claim – now repeated by Scripps columnist Rich Campbell – that George Christopher called the FMPA some 171 times in one months. I had once referred to Wilson as a high-functioning moron. That observation is not true, for Wilson is anything but high-functioning.
Keep in mind there were a good number of people from Lake Worth that chartered a bus to goto FMPA and protest as well, interestingly I believe Glenn Heran was involved with that situation as well. The result was less then spectacular and next months Lake Worth capitulated to FMPA and the Council had to personally go to FMPA and apologize.
Jay: The failure of the City of Vero Beach’s hand picked legal representive to engage FMPA has led to this ongoing cluster %#@! that disguises itself as negotiations. I am sure when the newly selected attorney starts adding up the potential cost of this sale/gift to FPL, this deal is going to founder. I am sure the people of Vero Beach are dismayed when the City Council provides a forum for the FPL representative and it’s hand picked lackeys (on both sides of the dais) to deliver a storey how FMPA is not folding to FPL’s demands. The first mistake was made when the discussion of a sale fell under the purview of politicians that failed to hire professionals who have the expertise in the field of electrical utilities. In addition to conducting an appraisal, they should have been tasked with exploring all options to include present operations, partial sale or any other models that would prove to be financially benificial to the residents of the City of Vero Beach.