FP&L: Benefits to Vero Beach $14 million in first year alone
“It’s everything they promised me they would do, it’s 100 percent of what they told me and more,” said Vero Beach Councilwoman Tracy Carroll after hearing the news that Florida Power and Light offered to buy the Vero Electric Utility for $100 million.
Carroll and her compatriots on the new Vero Beach City Council ushered in by Operation Clean Sweep in November 2010 have been derided for pushing what critics call the “sell baby, sell” agenda to get Vero out of the electric business.
Now there’s an offer on the table that keeps electric employees in jobs for at least two years with a shot at getting permanent gigs with FP&L; that ditches the city’s $11.3 million pension liability for those employees; that gives the city enough to pay off its $58 million in bonds with cash left over to invest; and that will bring in an estimated $1.7 million annually in new property taxes on utility assets.
Will it be enough for the stalwarts who want to hold on to Vero Beach electric?
Will the advocates of the status quo – or those who want to retreat but keep providing electricity to customers within the city limits – cry foul and demand much more?
“There have been some naysayers in the community who have said that FP&L would never be interested in buying the electric utility, that they would never give us the same rates,” Carroll said. “This is my feeling: the people who say this offer is not enough need to think of the value of all these things, not just the $100 million.”
Utility activists Dr. Stephen Faherty and CPA Glenn Heran have plugged numerous offers into their financial model and were just waiting for the day the offer came and there were so-called “real numbers” to consider. Within minutes of reading the details of the offer, Heran had calculated what he estimates as the overall benefit to the community of the offer.
The Heran-Faherty model, which has yet to be shot down by Vero staff, county staff or FP&L executives, calculates that Vero’s 17,000 residents will be $4.1 million better off per year, even after any increase in property taxes. County residents, according to Heran, will be $7.2 million better off and Indian River Shores residents will be $1.4 million better off each year.
One of the big questions would be whether or not Vero would still need the $5.6 million now transferred into the general fund from the electric utility.
“Personally, I think they should go for smaller government and get expenses under control so they won’t need that money,” Heran said. “But even with the $5.6 million added in, which is the worst-case scenario, property taxes would go up by $2.1 million but the rate savings would be $4.8 million. So that’s a $2.7 million savings net of taxes just for Vero Beach residents.”
The balance of the benefit to Vero taxpayers is gleaned in the form of investment income from the proceeds of the sale.
Those benefits, added to the property taxes FP&L will be paying on the assets of the electric transmission system and the Big Blue power plant, which it will keep during the transition and eventually pay to dismantle, amount to more than $14 million per year, net of any tax increase.
“This is a vindication; anyone who said that FP&L was not going to offer fair market value or who said that FP&L was going to charge a surcharge and not give Vero customers FP&L rates, this is proof that they were wrong,” Heran said. “This bears out everything the model said would happen.”
Former Vero Beach City Councilman Charlie Wilson, who first invited FP&L External Affairs Manager Amy Brunjes to a City Council meeting in late 2009, said he was elated when he heard the news about the offer.
“All the things we said were true turned out to be true, and all the things opponents said were true turned out to be false,” Wilson said.
Vice Mayor Pilar Turner Monday evening had not read the offer, but had heard about it and read initial media reports.
She commented specifically on two aspects of the offer – FP&L rates for her constituents and the fact that the loss of the $5.6 million transfer into the general fund will force some of the fiscal issues she’s been trying to push.
“I’m delighted that FP&L has come forward with an offer, a serious offer. I think that the rates were a critical part because there was a debate going on that we would not get FP&L rates,” Turner said. “Now that the cash cow of the city will be gone, this will force some of the things we’ve been trying to do, the efforts to reform and to get costs down.”