Left unchecked, Howle, Moss and Sykes could do much harm to the people of Vero Beach

Tax hikes and electric rate increases will also affect businesses

COMMENTARY

Later, if and when it becomes clear the City’s contract obligations will continue to stand as an impediment to selling the remainder of the system, the slick talkers from FPL will be long gone; while the people of Vero Beach, and all the residential and business customer of Vero Electric, will be left with higher taxes and/or higher electric bills. The alternative, of course, would be to layoff still more City employees and gut municipal services.

MARK SCHUMANN

Robert Auwaerter
Robert Auwaerter

As implausible as it may seem, the current chairman of the City of Vero Beach Utilities Commission, Robert Auwaerter, also serves on the governing body of a municipality that sued Vero Beach, and that has asked the Florida Public Service Commission to force Vero Beach to abandon a portion of its service territory.

For the taxpayers of Vero Beach and the customers of Vero Electric the stakes a high. Auwaerter and his fellow Indian River Shores Town Council members are seeking to force a sale of Vero Electric’s Shores customers to Florida Power and Light at a price that is likely to lead to higher taxes and higher electric rates for the City’s remaining customers.

Auwarter has left no doubt where his loyalties lie, and they are clearly not with the people of Vero Beach, or with the customers of Vero Electric. Though he serves on Vero Beach’s Utilities Commission, Autwarter had no reticence in going before the PSC in September to assert that Vero Electric’s rates are excessive, abusive and monopolistic. Auwaerter was, of course, seeking to persuade the PSC to strip Vero Beach of its right to serve within the Shores.

When it became clear to Auwaerter and other Shores leaders that the Town’s PSC challenge would likely fail, they decided to instead get what they want by gaining control of the Vero Beach City Council. Their takeover of Vero Beach’s government did not require an invasion, or even email hacking. Shores leaders simply ran and funded a slate of candidates for the Vero Beach City Council. Those candidates were Laura Moss, Lange Sykes, and Norman Wells, all of whom attended a meeting in the Shores in late September where they were introduced by Shores Mayor Brian Barefoot as members of what he described as “the Shores team.”

Backed by a political action committee funded by Shores residents and by FPL, Moss and Sykes won seats on the Vero Beach City Council. They have now joined Harry Howle in a three-person majority bent on giving their Shores patrons exactly what they want.

Like Auwaerter, Moss and Sykes have left no doubt where their loyalties lie, and they are not with the people of Vero Beach. In late August, while serving on the City’s Utilities Commission, Moss sent an email to the Chairman of the PSC essentially taking the Shores’ side in its dispute with Vero Beach. In addition to being supported by a Shores-FPL funded PAC, Moss received 70% of her campaign contributions from Shores residents. Sykes took in 90% of his campaign funds from the Shores.

At issue is whether Vero Beach should sell its Shores customers to FPL, and if so at what price. Using conservative inflation rate assumptions, Auwaerter developed a financial model justifying a sale price of $30 million. A team of five independent utility experts hired by the City concluded a sale at less that $47 million would lead to higher electric rates and higher taxes, and would leave the City and its taxpayers unprotected from contingent liabilities associated with obligations taken on years ago in order to serve the Shores.

The City’s own professional staff provided data, analysis and input in arriving at the estimated break-even price of $47 million. Through numerous public statements the City’s professional staff made it clear that they concurred in the assessment which is now being rejected by Howle, Moss and Sykes.  Former Councilman Randy Old, a retired banker who lost to Sykes by just 48 votes, has said he believes that to accept just $30 million would be a breach of a council member’s fiduciary responsibility.

The same Shores-FPL funded PAC that supported Moss and Sykes attacked Old for his position. The PAC also promised voters the $30 million in sale proceeds could be used to subsidize electric rates, to pay down pension funds, or even to give every resident of Vero Beach a check for some $1,900.  The Shores-FPL funded promises were outlandish, for bond covenants will require that the money remain within the electric fund to pay down debt, or to make capital improvements.

To be sure, the proposed partial sale of Vero Electric’s Shores customers will not benefit the people of Vero Beach in any of the ways promised by the Shores-FPL funded PAC that supported Moss and Sykes. More importantly, the sale Howle, Moss and Sykes are now dutifully supporting is likely to cost the taxpayers of Vero Beach and the customers of Vero Electric.

In his rosy financial projections supporting a $30 million sale price, Auwaerter assumed Vero Electric’s expenses will go down in proportion to the number of customers it will be selling to FPL — a total of some 3400 meters. The Shores Town Councilman’s assumptions are, at best, simplistic. For starters, because Vero Beach made a significant investment in the 1990s to underground the transmission system within the Shores, that portion of the customer base, approximately 10%, represents far less than 10% of transmission and distribution maintenance expenses. Further, while selling off the Shores customer base will lead to a loss of perhaps $10 million in revenue, reducing expenses proportionally is simply not possible. Power costs will go down, to be sure, but fixed costs, personnel and other operating costs will not. With power running approximately 60% of total expenses, Vero Electric would spend some $6 million less buying power, if it no longer served the Shores. With revenues cut $10 million and expenses $6 million, that would leave the remaining customer of Vero Electric facing an increase, and all to benefit the Shores.

Though the City has yet to calculate exactly how much revenue Shores customers represent, it is known that those customers use approximately 50% more power than the average residential customer. Allowing for the fact that Shores customers are high-volume users, it seems likely the City’s total electric revenue from the Shores is perhaps up to $10 million.  (Shores customers use 8.7% of the power sold by Vero Electric, but because high-volume users pay higher rates on a tired rate structure, Vero Electric’s revenue from Shores customers is more than 8.7% of its total.) Assuming $10 million, 6%, or $600,000, is transferred to the City’s General Fund as a return on investment. Given that the proposed sale price of $30 million must remain in the electric fund, the sale proceeds will do nothing to make up for the loss of some $600,000 to the General Fund. Quite simply, as a result of a partial sale Vero Beach’s municipal services would have to be cut, or taxes would have to be increased to make up the difference.

Electric revenues also help to pay for $1.8 million worth of services the City provides the utility. A portion of the City Manger’s salary, for example, is charged to the utility, as is a portion of the salaries for City Council members, and the Finance Department, and the Legal Department.  With the loss of revenue from Shores customers, another $170,000 or so will have to be made up in higher taxes or higher electric rates.

It is also not clear that the City would actually net $30 million. FPL has already let it be know Vero Beach will have to pay at least some of the cost of partitioning the transmission and distribution system. With Howle, Moss and Sykes having made it clear they have no intention of negotiating the best deal possible for the City and its taxpayers, there is little chance of the City getting a fair deal.

FPL’s latest talking point, which Howle, Moss and Sykes are now parroting, is the claim that the proposed partial sale is somehow “in the context of a full sale.”  What does this really mean? Nothing, absolutely nothing! There is no clear path to a full sale. There just isn’t. This talk of a partial sale for the Shores being “in the context of a full sale” is public relations babble, and is only intended to mollify the people of Vero Beach long enough to get the Shores deal done.

Later, if and when it becomes clear the City’s contract obligations will continue to stand as an impediment to selling the remainder of the system, the slick talkers from FPL will be long gone; while the people of Vero Beach, and all the residential and business customer of Vero Electric, will be left with higher taxes and/or higher electric bills. The alternative, of course, would be to layoff still more City employees and gut municipal services.

Make no mistake about it, Howle, Moss and Sykes all represent Shores’ interests on the Vero Beach City Council. To appease Shores leaders, they are planning to shaft the people of Vero Beach. Before these three Shores puppets can negotiate and sign a contract that will have negative consequences for the City and its residents, concerned residents and taxpayers should consider a recall effort. In the holiday spirit, it might be advisable to wait until the new year, but January 2 would not be a day too soon to begin gathering signatures.

 

3 comments

  1. They COULD do damage – so could a 2 yr old in a shop filled with beautiful glassware and china. I sincerely hope they remember who put them in power–no, not their generous supporters. It was the voters in the City–but not everyone. Perhaps they will remember that IRS and FPL are NOT their bosses. We shall see what happens, and I do not wish to think about all the damage they MIGHT do but rather just be aware that they hold the reins. Negative thoughts occupy my mind but I choose not to let them take over. Keeping watch….

  2. Simply put, Robert A must step down from his position on the VERO BEACH UTILITIES COMMISSION. Do the words” conflict of interest” mean anything to anybody?

  3. Bob Auwater attacked the numbers presented by Shef Write, interestingly they were the same numbers that FPL used to justify their rate increase on the residences of the County and North Indian River Shores, but he didnt say anything about that. There was no professionalism in his presentation, just politics.

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