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Kept in the dark
BY LISA ZAHNER - STAFF WRITER (Week of December 3, 2009)

For two years, the ratepayers of the City of Vero Beach Utilities could not scrutinize the $2 billion electric contract with the Orlando Utilities Commission, were told nothing of a $50 million exit penalty in the contract, and may never know whether anyone seriously considered selling, or outsourcing, the electric utility operations.

Repeatedly, city staff and consultants have said this secrecy was at the insistence of the Orlando Utilities Commission and other bidders, and that they got the best deal they could for citizens.

But Vero Beach 32963 learned that when the City of St. Cloud negotiated a similar electricity purchase with the Orlando Utilities Commission a decade ago, it not only got a much better deal, but the contract contained no multi-million-dollar exit penalty and was open to public scrutiny.

So among the unanswered question are: Whose idea was the penalty, which may well keep Vero Beach from extricating itself from this contract — and from selling the utility assets — for more than a decade? What possible justifi cation exists for keeping provisions of the contract secret for more than a year after the contract was signed?

Whose idea was it to keep Vero Beach utility customers and taxpayers in the dark?

OUC contracts with the City of St. Cloud to provide electric services for its 22,500 customers. The agreement between St. Cloud and OUC was not kept from the public for years, and does not contain hefty exit penalties, records and St. Cloud officials confi rmed.

Instead, the contract was made public when it came before the St. Cloud City Council for approval. As for exit penalties, the contract contains a “specific performance” clause related to a breach by either party, and calls for a court to decide what is fair if a breach of contract occurs. No penalty is preagreed if there is such a breach.

Further, says Sandra Ramirez, St. Cloud’s public information offi cer, the city agreed to outsource its utility operations to the OUC.

OUC now handles all the maintenance, billing, collections, customer service, installations, repairs and metering. OUC took St. Cloud’s electric employees into its system, taking the responsibility for salaries, benefi ts and pensions off the City’s expenses. The City of St. Cloud’s electric department had 85 employees at the time and no employees were left without a job after OUC took over management of the St. Cloud plant and utility.

“Eight employees worked at the power plant; the other employees were customer service and lines crews – but, yes, all employees were offered employment by OUC,” Ramirez stated in an email to 32963.

By comparison, the City of Vero Beach employs 113 people, a dozen of which work at the five-unit power plant. The St. Cloud plant, which is currently non-operational, has eight power generation units.

In addition, Vero Finance Director Steve Maillet has said that the Vero electric utility creates the need for three cashiers at the offi ce where customers can pay bills, and places demands on the fi nance, legal and information technology departments, as well as the City Manager’s office.

OUC still has an office at the St. Cloud City Hall where customers can pay bills, but it is staffed with OUC employees. Each year, the City of St. Cloud receives “9.5 percent of the retail electric utility sales that is subject to gross receipt tax” according to the contract and Ramirez. The contract states that this revenue to the city shall be a guaranteed minimum of $2,361,000 per year, paid in equal monthly installments.

In addition, the arrangement did not infringe upon the city’s ownership of its power resource assets. “Orlando Utilities Commission (OUC – The Reliable One) is the management entity of the city’s water and power; City of St. Cloud owns the assets,” Ramirez stated in her email.

Vero Beach takes some $5.9 million in direct transfers and $2.1 million in administrative fees annually into its general fund from the operation, although it costs $110,000 daily to run the utility.

City Councilman Charlie Wilson said he has asked city offi cials to provide him with records showing that as the contract was under negotiation, the city and its consultants researched comparable municipal utilities and their operations.

He has not received that information.

“Why should I be the one going looking for these things?” Wilson said. “These are the kinds of things we should have had our hands on when we made a $2 billion decision. The secrecy certainly did not help us see all the options that were out there, that’s for sure.”

Vero Beach ratepayers learned after Sept. 30 the details of the $2 billion contract that is scheduled to run over 20 years, and includes the enormous exit penalty. In the weeks that followed, only one sitting council member claimed to have read the actual document before voting to move forward on April 15, 2008.

The whole contract is now subject to a grand jury investigation.

Portions of the OUC contract that some members saw had been redacted, and then the document was sealed for two years.

City offi cials have offered a variety of explanations ranging from saying that the confi dentiality was required by the bidders because they feared losing trade secrets, to saying it was required by the consultants.

In regard to the penalty, the city has said that it was mutually agreed upon – even though it is obvious that it had to have been proposed by one party or the other — and included in the contract to protect both parties. The $50 million penalty was redacted, city officials have said, as a trade secret. The embattled Wilson said he was told by Jan Aspuru, Vice President of Power Resources for the Orlando Utilities Commission, that the City of Vero Beach requested the penalty. Aspuru did not return a call from 32963 attempting to confirm this.

“I’m just looking for answers,” Wilson said. “I don’t know why we have a $50 million penalty and I don’t know why all of this is proprietary information. I don’t know how any of this could happen and I don’t know why we’re keeping the electric employees.”

The Vero Beach deal was brokered by three individuals doing the city’s bidding — former Electric Utility Director R.B. Sloan, consultant Sue Hersey and attorney Meabh Purcell.

Sloan resigned and left the city as of Nov. 6, and Hersey and Purcell are back in Boston. Hersey reportedly earned $400 per hour and Purcell $650 per hour to work on behalf of the city, with the taxpayers also picking up the tab for numerous trips back and forth from Boston to Vero Beach.

“Not a soul who negotiated this is still here, but they were under the direction of the City Manager and were attested to by the City Attorney,” Wilson said.

No City Council members were on the negotiating team, nor were any appointed members of the rate-paying public.

“Certainly the needs and wishes of the employees were well represented,” Wilson said. “But the needs and wishes of the ratepayers were not represented. Only the staff point of view was represented, but defi nitely not the point of view of the non-city residents who are customers of the electric utility.”

The question remains whether or not, less than one month before the scheduled “turnover” date of January 1, the ratepayers of the City of Vero Beach Electric have any options.

Voters have already ousted two incumbent City Council members and there are rumblings that a suit may be fi led by a concerned citizen to challenge the contract. Should there be pending litigation on January 1, it could throw a wrench in the transition to the new power provider.

If OUC does not take over provision of electricity to Vero Beach electric customers on January 1, what happens then?

And if the city is stuck with the huge termination fee and locked into a long-term contract, does the public have any recourse against the consultants and attorneys and city staffers who negotiated this secret agreement?

Said Wilson: “There are just more questions than answers.”