“Given these realities, I am left wondering what Faherty meant when he recently labeled three Vero Beach City Council candidates “pro-sale,” and three “anti-sale.” Such simplicity may play well in a time when the public has little interest in details, and even less interest in hearing more about the power sale issue. But the fact is Faherty’s labels mean absolutely nothing. Given that none of the candidates, if elected, are going to be in a position to move the power sale forward, and given that some of them are claiming otherwise, you have to wonder what their promises really mean. Maybe it is more useful and relevant to determine which candidates are committed to standing up for the interests of the people of Vero Beach and the customers of Vero Electric.”
Just yesterday, a friend asked me, “Why are you against the power sale?”
“In principle, I am not opposed to the sale,” I told him. I went on to explain that the all-important underlying issue has always been how to structure the sale, and plan for its consequences, in a way that does not result in a significant decline in the quality of Vero Beach’s municipal services.
My friend lives on the south barrier island, so I took his question as an opportunity to remind him that he and his fellow south barrier island residents cannot buy so much as a roll of toilet paper without driving into the City of Vero Beach to shop. “Imagine how uncomfortable you would be, and how difficult it would be to carry out commerce, without police protection,” I said.
For that matter, imagine trying to run any successful business, real estate brokerage for example, if Vero Beach were not able to offer such excellent services and amenities – plentiful, well-maintained parks and green space, guarded public beaches, recreation programs, clean streets, not to mention the Riverside Theatre and the Vero Beach Museum of Art, both of which occupy land leased from the City for just $1 a year. Without question, my friend and thousands of others who live in the unincorporated areas of Indian River County and in Indian River Shores benefit in countless ways from the quality of life made possible, at least in part, by the City’s exceptional services.
Shores Mayor Brian Barefoot, for example, enjoys Vero Beach’s free, public dog park. As is true with the Theatre, the Museum, McKee Botanical Gardens and many other local non-profits, Vero Beach’s dog park receives generous support from donors living in the Shores. There is, then, an interdependent and symbiotic relationship between all the residents of Indian River County.
For Indian River County residents living outside the city limits of Vero Beach to not appreciate the extent to which their quality of life is intertwined with the qualify of life in Vero Beach is to miss the larger picture. Further, to believe that quality of life is not somewhat dependent on Vero Beach’s exceptional level of municipal services is to misunderstand what makes Vero Beach and Indian River County so special.
In 2009, when utility activists Steven Faherty and Glenn Heran first built support for the power sale, Vero Electric’s rate per 1000 kilowatt hours was $158.82, compared to FPL’s rate of $114.43. That rate differential of 28 percent had people listening; and what Faherty and Heran told them was that the sale would net the City some $170 million. Interest earnings on much of the proceeds, they said, would more than make up for the lost revenue of some $5 million a year to the General Fund. In short, the Faherty-Heran message was that a sale of Vero Electric to FPL would lead to lower electric rates, and would not necessitate cuts in municipal services or tax increases.
When it later became clear there would be no proceeds from the sale, Faherty, Heran and others argued that the expected rate savings for Vero Beach residents, then projected to be $10 million a year, would more than offset any tax increase needed to help continue funding police protection, parks and recreation and other services.
Faherty’s and Heran’s promises did not come true. In the fall of 2013, with the purchase and sale agreement with FPL signed and expected to close the following spring, three members of the City Council, Tracy Carroll, Craig Fletcher and Pilar Turner, proposed budget cuts of 15 percent a year for the following three years. At that point, the City’s employee count was already down more than 100, or more than 20 percent. Also at the time, City Manager Jim O’Connor said any additional cuts would require reductions in services. (Given that 80 percent of General Fund expenses are associated with payroll, it is all but impossible to make significant cuts without laying off more employees.)
As it turned out, Carroll, Fletcher and Turner did not have in mind raising taxes in exchange for far greater savings in electric rates. Instead, their plan was to appease limited-government extremists like Heran by emaciating municipal services. To be sure, making drastic cuts in Vero Beach’s municipal services is not the way to preserve the quality of life in Vero Beach and Indian River County.
Apart from concerns about how to maintain the services that contribute to quality of life is the fact that FPL simply has not put enough money on the table to settle all of Vero Beach’s contractual obligations to the Florida Municipal Power Agency and its bondholders. Some who claim to be “pro-sale,” whatever that means, seem to believe the solution to concluding the power sale is to persuade the FMPA to set aside its contracts and bond covenants. This approach ignores the fact that we live in a nation of laws. The enforcement of those laws make our democracy and our free-market economy possible.
Sure, if you own NextEra (FPL) stock, you might benefit from the sale, but if you happen to be someone who, in good faith, bought the FMPA’s tax-exempt revenue bonds, you, and more importantly your bond trustees, are not going to look favorably on any concessions that might devalue your investment. Expecting the Florida Legislature, or the Florida Supreme Court, to set aside contract law simply to allow for the sale of Vero Electric is, at best, wishful thinking.
Then there is the question of what constitutes a fair price. In 2013, FPL offered just under $200 million, but that number did not cover Vero Beach’s contingent liabilities. Recently, FPL offered $27 million for 3400 Indian River Shores customers. If that price is legitimate, then the full system, one might argue, is worth more like $270 million.
But even if FPL were to bring another $70 million to the table, that still leaves unresolved the question of who can and will legally assume Vero Beach’s position in three FMPA power support contracts, and three power purchase agreements. Again, as much as we might wish otherwise, Vero Beach is not going to be allowed to simply walk away from these commitments. In addition to not being legal, walking away from contractual obligations would not be fair to the FMPA’s other member cities, and it certainly would not be fair to bond holders. Because the FMPA’s power projects were financed with tax-exempt revenue bonds, a for-profit, investor owned utility, such as FPL, cannot step in for Vero Beach. The IRS will not allow it. The Orlando Utilities Commission had agreed to assume Vero Beach’s place in these contracts, but later backed out from the deal. To date, no other qualified buyer has stepped forward.
If you are in a 30 foot deep hole with a 10 foot ladder, and someone lowers you a 10 foot rope, you are not going to make it out, despite your best efforts. Pointing to the unbridgeable gap does not mean you want to remain in the hole. It’s simply an indication you are facing reality. In a similar way, those who have been skeptical of the Faherty-Heran models, and who have raised concerns about the City’s contractual obligations are not in favor of higher electric rates, or of bloated government. They are simply acknowledging that for as long as the power sale cannot go forward, City leaders have every obligation to do what can be done to reduce electric rates. (Currently, Vero Electric’s rate for 1000 kWh is $117.84, and FPL’s rate is $94.91, a difference of 19 percent, down from 28 percent in 2009. Vero Beach is taking steps to further lower rates, while FPL is seeking Florida Public Service Commission approval for a $1.3 billion rate increase.)
Given these realities, I am left wondering what Faherty meant when he recently labeled three Vero Beach City Council candidates “pro-sale,” and three “anti-sale.” Such simplicity may play well in a time when the public has little interest in details, and even less interest in hearing more about the power sale issue. But the fact is Faherty’s labels mean absolutely nothing. Given that none of the candidates, if elected, are going to be in a position to move the power sale forward, and given that some of them are claiming otherwise, you have to wonder what their promises really mean. Maybe it is more useful and relevant to determine which candidates are committed to standing up for the interests of the people of Vero Beach and the customers of Vero Electric.