New Vero electric deal won't be voted on until after election
With the Florida Municipal Power Agency letting two September deadlines slip by without responding to Florida Power and Light’s Aug. 20 proposal to fast-track the sale of Vero Electric, it now seems all but certain that any vote on an amended contract will come before a post-election city council.
Florida Power and Light still holds out hope that the keys to Big Blue and service to the city’s 34,000 customers will be turned over in 2014, but City Manager Jim O’Connor remains cautious, saying that the deal isn’t done ‘till the money’s in the bank.
Not only do FPL and the Florida Municipal Power Agency need to coalesce around new terms proposed in August, but attorneys need to convert those terms into legal language and generate executable versions of an amended contract.
That document – which some are calling the new deal – would then be subject to an up-or-down vote by the Vero Beach City Council because it’s materially different from what the council approved in the spring.
The two major variants are the fact that the FMPA would absorb Vero’s portion of the co-op’s bulk power that the city now purchases, while Vero would pledge collateral in the form of electric franchise fees and utility taxes to back up the remaining FMPA member cities in the unlikely event that its present supplier, the Orlando Utilities Commission, ever defaults.
The sale cannot move forward to regulatory approvals without the vote of a Council majority, making the stakes as high in November as they were in 2009, 2010, 2011, 2012 and in March of 2013, when voters overwhelmingly voiced their support for the FPL sale at the ballot box.
Regardless of whether proponents of the sale can count to three on this vote, Councilman Jay Kramer, a no vote, said the terms of this new deal could get tossed back to the people in yet another referendum, even though he predicts that “FPL would just buy it at $40 or $50 a vote and the result would be the same.”
The first referendum on lease of the power plant site in November 2011 was approved by 65.86 percent of the voters. The second referendum, approving the terms of the purchase and sale agreement as it stood in March, also sailed through with 63.75 percent.
Still, the vocal one-third of residents opposed to the sale continue to hammer away with objections at council meetings, in guest columns in the daily newspaper and in the proliferation of self-published blogs, some of which attempt to disguise themselves as actual news outlets.
“I won’t call for a third referendum, but I think there will be one,” Kramer said. “I’m pretty sure (Mayor) Craig (Fletcher) will call for one, they will want it as a CYA because voting for this deal is just malfeasance.”
Asked whether or not the city would be in breach of contract if council members voted down the amendments to the sale agreement, trial lawyer Louis B. “Buck” Vocelle said “it depends.” Drawing not on specific knowledge of the FPL deal, but on decades of litigating complex civil cases, Vocelle said contract language likely extends the good-faith provision through various iterations of the contract, fairly standard in contract law.
“Good faith depends on material terms. If the material terms change, what may be good faith in the original contract might not be good faith in a subsequent version,” Vocelle said. “If it becomes so onerous for the city that it’s not a good deal anymore, it would be bad faith not to terminate it.” Though no expert in municipal law, Vocelle agreed council members are akin to corporate board of directors in their fiduciary responsibility to the entity, in this case to the city.
“The more the terms of the deal change, the more likely it is that the city would not be violating the good-faith provision,” he said.
What the City Council absolutely cannot do is put the new deal on ice for political reasons and refuse to vote on it. That, Vocelle said would be a blatant violation of the good-faith clause.
With regard to specific performance – a court forcing the city to follow through with the sale – Vocelle said that’s not black-and-white, either. “Specific performance is an equitable remedy,” he said. “There’s a difference between legal and equitable. In equitable things, the courts are allowed to consider all the factors. It’s about what’s fair.”
Vocelle said that even if the city was found to have breached its contract with FPL, a monetary settlement could possibly be worked out to satisfy all the parties.
Do the city’s transactional attorneys agree with Vocelle that the new council would have some wiggle room in the FPL contract? Igoe confirmed that both the city and FPL “have a duty to act in good faith to comply with their obligations under the existing Purchase Agreement. The Purchase Agreement is in effect and enforceable.”
Yet, according to Igoe, the sale is most definitely not a “done deal.”
“If the current proposal made to FMPA is accepted, the City Council will need to approve an amendment to the Purchase Agreement for a price increase, changes to the agreements with OUC, approval of credit enhancements from the City for the benefit of FMPA, and other documents relating to the proposed revised structure,” Igoe responded to Vero Beach 32963. “As I explained to the City Council if FMPA accepts the current proposal, we will go back to the City Council to ask for approval of new documents and proposed credit enhancements.”
Where are things in the pipeline at the FMPA? They’re working on it.
“FMPA’s CEO, Nick Guarriello, spoke with FPL’s representative on Sept. 19, the day before the response date listed in FPL President Eric Silagy’s letter. Mr. Guarriello reaffirmed our commitment to carefully consider FPL’s proposal, consistent with the needs of our remaining power project members and bondholders,” FMPA Spokesman Mark McCain wrote in an email to Vero Beach 32963 on Monday.
“We discussed with FPL information that we need from them, and we addressed our evaluation and approval process. The conversation was amicable. This is a complex deal with a lot at stake for all parties involved. Therefore, we must perform a careful and thorough analysis, which is going to take time. FMPA is committing time and resources to work on analyzing the proposal,” McCain said.
When asked what information FMPA asked for that they do not have, FPL spokesperson Sarah Gatewood said Monday, “Right now, we don’t believe that FMPA is waiting on anything from FPL. However, from the last conversation that we had, we (FPL) understand that FMPA is continuing to work with its board and members to evaluate the proposal.
“We continue to work together to find a resolution that is fair for all parties, and provides a path for Vero to exit its contractual obligations without negatively impacting FMPA and its members. We are hoping to hear back from FMPA in the next week or two,” Gatewood said.
Does the agreement between FPL and the city bind the votes of the council? Not exactly.
“City Council members have the discretion to vote any way they wish on any proposal, including proposals with material changes to the proposed transaction,” Igoe said. “The City’s obligation to act in good faith under an existing enforceable agreement remains an important consideration and should be taken into account in connection with any proposal for changes in the existing structure or amendments to the Purchase Agreement.”
Vice Mayor Tracy Carroll is the only incumbent who has taken an unequivocal stand that she will work to bring the Vero electric sale to a closing. Challenger Joseph Guffanti has for 30-plus years advocated dragging the power plant across the bridge and dumping it in the ocean as an artificial reef.
Former councilman Brian Heady heartily supports the sale as the only way to get electric rates down, but he won’t commit to a vote on new terms because there’s nothing on paper for him to see yet. Councilman Dick Winger has been squishy on the sale, apparently loath to alienate either the two-thirds of voters who want FPL as their provider or the Old Guard to whom keeping Vero Vero means keeping Big Blue.
Newcomer Amelia Graves sees the sale as a foregone conclusion, and looks past it to offer her vision for maintaining services and quality of life. Former mayor Warren Winchester openly opposed the sale to FPL in his formal campaign statement, but muted his position in public by touting the “done deal” mantra.
Glenn Heran, president of the Taxpayers Association of Indian River County, issued a statement on the group’s website last week to debunk what he says is an attempt to lull voters into apathy about candidates’ positions on the sale.
“Vero Beach voters must identify those candidates who are proactive and committed to the will expressed in the referendum,” Heran wrote. “Contrary to opposition spin, the sale is not a ‘done deal’ and it certainly rests in the hands of a future council.”
City Manager Jim O’Connor has been cautiously optimistic that a closing will occur, but he still is not counting his chickens before they’re hatched.
“There is no doubt that the final details of the sale are in the hands of the third parties such as FMPA, PSC and FERC and those discussions involve primarily FPL with the city trying to control the cost impacts,” O’Connor wrote in an email to Central Beach resident Mark Mucher. “I have said all along that a deal is not complete till their money is in your account.”
Assuming everything runs like clockwork, a sale could take place in 2014, FPL External Affairs Director Amy Brunjes told the Indian River County Commission last month. Brunjes said FPL would need about seven or eight months after regulatory approvals from FPS, FERC and other agencies to “flip the switch,” giving FPL time to change out equipment, build customer accounts and transfer employees. FPL agreed to employ slightly more than 100 city employees dedicated to the electric utility for at least two years.
The city’s $19.4 million general fund budget is now set through Sept. 30, 2014 under the assumption that a sale won’t happen during that period and the city will have the $7 million in direct and administrative transfers to operate with the whole year.
With that seven- or eight-month lag, city officials would have more than enough time to plan the transition. Even if things accelerate and the closing comes prior to Sept. 30, Councilwoman Pilar Turner is confident O’Connor and Finance Director Cindy Lawson would be able to devise a solution.