Council moves ahead with partial sale

Electric rates and taxes likely to rise

COMMENTARY

MARK SCHUMANN

By a vote of 3-2, the Vero Beach City Council yesterday accepted Florida Power and Light’s letter of intent to buy the Indian River Shores portion of the City’s electric utility for $30 million.

Rather than pushing ahead with a sale of the full electric system, the new Council majority of Harry Howle, Laura Moss and Lange Sykes has set in motion a downsizing of Vero Electric that is sure to result in higher rates and higher taxes. In explaining their support for the partial sale, each member of the Council’s new troika claimed, falsely, that the public has wanted “this” since 2009.

In truth, the “this” Vero Beach voters have supported is a sale of the full system. Such a sale would, in a single move, bring rate relieve to all 35,000 customers of Vero Electric. Vero Beach voters have never been asked if they would be willing to pay higher rates and higher taxes in order to bring lower rates to the residents of Indian River Shores.

Richard Winger and Tony Young opposed accepting FPL’s letter of intent before the Utilities and Finance Commissions review it. Both councilmen raised questions about provisions in FPL’s proposal that will require the City to pay perhaps millions of dollars to partition the existing transmission and distribution system.

Howle, Moss and Sykes all agued that Winger and Young were “nitpicking.” At one point, Young said he intends to “make damn sure” the public is aware of the full consequences of the proposed deal.

Winger and Young have both publically supported a sale of the full electric system, while raising questions about the likely negative impacts of carving up the system piece by piece. The previous Council, of which Winger was a member, hired a team of five independent utility experts to determine the price at which the City would need to sell the Shores portion of the electric system without the move leading to higher rates and higher taxes. That team concluded the sale should be at $47 million, not $30 million.

One thing is clear from yesterday’s vote. As a result of the proposed partitioning and downsizing of Vero Electric, the remaining customers should brace for higher rates, and the residents of Vero Beach should expect cuts in municipal services, or an increase in property taxes. (It may not be long for the City’s police, whose union supported Sykes, will wonder what in the world they were thinking. Sykes is prepared to surrender existing revenue, while at the same time insisting there is room to cut taxes. If Sykes gets his way, there will be no money left to keep any promises he may have made to the police. It also may not be long before the new troika will, as did the Council majority of Tracy Carroll, Craig Fletcher and Pilar Turner, impose pay freezes draconian cuts in services, including reducing lifeguard hours.)

Because Shores residents use an average of 50 percent more power than the typical residential electric customer, those 3500 customers represent a disproportionately high percentage of Vero Electric’s total revenue. Further, by surrendering this revenue without being able to make corresponding cuts in fixed costs, Vero Electric’s rates, which have been steadily declining, will inevitably rise.

According to one source familiar with the numbers, by selling its Shores customers, Vero Electric will lose an estimated $10 million in revenue, but will only see its expenses go down $6 million. The remaining $4 million will have to be made up in higher rates for the remaining customers. That will amounts to a rate increase of some 5 percent.

On the approximately $10 million in revenue from Shores customers, the City also transfers 6 percent to the general fund. This loss of $600,000 will have to be made up in budget cuts or in higher taxes.

So, while the Shores-FPL-funded misinformation machine that supported Moss and Sykes in the recent municipal election promised a $30 million windfall to the City, the truth is that the proposed partial sale will hurt the remaining customers of Vero Electric and the residents of Vero Beach.

It is hard to see “Landslide” Howle, who won his seat by some 50 votes, Moss, and “Landslide” Sykes, who won his seat by just 48 votes, as anything other than puppets of Shores interests and FPL. Watching them, with straight faces, take an oath to protect the interests of the City of Vero Beach and its residents was a wonder to behold.

For his part, Howle promised voters a year ago that he had a five-point plan to sell the full electric system, a move which would have brought rate relieve to all customers of Vero Electric. Now Howle, apparently controlled by Shores interests, is determined to sell the Shores portion of the City’s electric utility. Howle seems content to appease wealthy Shores residents, while shafting the residents of Vero Beach and the remaining customers of Vero Electric.

Anyone who still harbors the illusion that council members loyal to the people of Vero Beach govern the City need only watch the first 45 minutes of yesterday’s Council meeting. The video of that meeting is available online at: watch video

A note to our readers: Because of what appears to be a news blackout by the Shores-centric weekly, Vero Beach 32963, and by the Press Journal, whose publisher is married to a key executive at FPL, many residents of Vero Beach are unaware that their city government is now controlled by outside interests. The people of Vero Beach have also not been informed about the recent misinformation campaign funded by Shores residents and by FPL. A functioning democracy depends on an informed public. Unfortunately, the people of Vero Beach are victims of media malpractice. In this age of alternative media, you can make a difference. At the bottom of each InsideVero story, you will see options for sharing our reporting on Twitter, Facebook, and Linkedin. You can also email our stories directly to specific recipients.

Editor’s note: As candidates for the City Council, Harry Howle, Laura Moss and Lange Sykes were each heavily supported by Indian River Shores residents and by political action committees funded by Florida Power and Light. In the most recent municipal election, Moss received 70 percent of her campaign contributions from Shores residents. Sykes took in 90 percent of his funds from the Shores.

Both Moss and Sykes were also supported by a political action committee funded entirely by contributions from Shores residents and from FPL The Shores-FPL-funded PAC placed newspaper advertising, paid for robo calls, and mailed out tens of thousands of flyers promising the people of Vero Beach a sale of Vero Electric’s Indian River Shores customers would net the City of Vero Beach $30 million. Based on FPL’s letter of intent, the City stands to receive far less than $30 million from the proposed sale, as Vero Beach will be required to pay perhaps millions of dollars to partition the transmission and distribution system.

Further, the Shores-FPL-funded PAC misled the public with false promises of how the money could be used. It is now clear existing bond covenants require that any proceeds from a partial sale must remain in the electric utility, and can only be used for debt service or for capital improvements. The sale proceeds cannot be used to subsidize electric rates, to pay down the City’s pension obligations, or to give every resident of Vero Beach a check for $1,900, all unrealistic promises that made up the Shores-FPL-funded misinformation campaign that swept Moss and Sykes into office.

4 comments

  1. I find it hard to understand how the City Manager, who is supposed to do what is best for the city and make recommendations to the council as to the best interests of the City, has remained silent on this issue. He is getting big bucks to do what is best for the city. In my opinion, he has failed this time.

  2. I have no seen any information on how or if the partial sale is impacted by existing bond covenants. I’m surprised if bond holders have no recourse to object to a partial sale of the assets pledged to those bonds. Or is that explained by your comment regarding retention of the $30M within the utility?

    Thanks for staying on this.

    Bob Swift

  3. Exactly what was intended! Or was it just stupidity? Of course FPL does not now have to come up with all those millions. ($185) any excuse will due! Fall back position places the COVB in a bind.

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