Shores electric lawsuit: About home rule – or money?
Attorneys representing Vero Beach, Indian River Shores and Indian River County will meet again a week from Friday, this time to discuss how Vero could – or could not – be able to offer its electric customers Florida Power and Light rates so the city and the Shores might put the pending lawsuit between them to bed.
Neither side seems hopeful for a breakthrough to avoid litigation, and both sides continue to hone their strategies in anticipation of a big legal fight.
Indian River Shores lead attorney Bruce May says he’s dismayed by the way the Town’s lawsuit has been characterized by city officials as an assault on the sanctity of the utility franchise agreement.
May, who heads up Holland and Knight’s Utilities Division, argues the exact opposite. The suit, he said, aims to affirm the legal concept of a franchise agreement and the Town’s right to enter into franchise agreements. The Town in no way wants to do away with franchise agreements, as those long-term contracts are tools used by municipalities to exert home rule and to provide essential services.
What the lawsuit is about, May said, is reclaiming the fundamental rights that the Town had from the moment it was incorporated. It’s about home rule in the public interest, not monopoly utility rule to the public detriment.
“The Town has a right to provide electric service to its residents,” May said, citing Florida Statute 366.11(2), and he added, “And nothing shall limit that right.”
A municipality has not only a right, but also a corresponding responsibility to provide the citizens within its political boundary with certain services – in this case, utilities. Florida law says the municipality may choose how to provide those services, either by doing it themselves or by contracting with an outside provider of the service. But the intent remains that the Town be in charge of providing that service for the good of the public.
The statute says, “Nothing herein shall restrict the police power of municipalities over their streets, highways, and public places or the power to maintain or require the maintenance thereof or the right of a municipality to levy taxes on public services under s. 166.231 or affect the right of any municipality to continue to receive revenue from any public utility as is now provided or as may be hereafter provided in any franchise.”
The statute protects cities and towns in that it ensures their right to collect and receive franchise fees as compensation for the use of public rights of way. For clarification, a “public utility” under Florida law is an investor-owned or publicly-traded utility such as Florida Power and Light. Vero electric is not a public utility, but a municipal utility.
When the Shores signed a franchise agreement allowing Vero to provide electric service within the Town, May says the elected officials simply assigned or temporarily gave over their rights for a period of 30 years.
Along with that, the Town gave Vero permission to use its right-of-ways for utility infrastructure for that same 30 years. The reason why franchise agreements are typically 30 years and not five or 10 years is so the service provider has time to recoup its initial investment over the course of the contract.
And if there’s no franchise agreement in place, as will be the case after Nov. 6, 2016, and the Town no longer wants Vero electric within its borders, May says the law prohibits Vero from encroaching upon the Town’s borders without permission.
Over the past 28 years, Vero had a chance to provide the Shores with electric service in a way that honors its agreement with the town – an agreement which requires Vero to charge reasonable rates and prudently manage its utility, for the public good.
Whether you’re talking water, sewer or electric service, Vero and its many pricey consultants over the years have vehemently argued that the city has a “permanent service territory” that trumps any franchise agreement, and that its customers outside the city limits can go pound sand if they want to get out.
If May’s argument is correct, a so-called “permanent” territory violates the Town’s rights as a bona fide municipality to provide services to its residents in the interest of the public good. May cited the City of Winter Park as an example. Winter Park, after a long legal battle, bought back its utility from Progress Energy after voters in 2003 by more than a 2 to 1 margin opted to boot the investor-owned utility, Progress Energy, out of the city.
The Shores case puts the Florida Municipal Power Agency electric co-op in a precarious position. The FMPA and its lobbying wing, the Florida Municipal Electric Association, are staunch advocates for “public power” and the right of municipalities to provide electricity to their residents.
By opposing the Shores’ position, the FMPA might be standing up for its member city, Vero. But it would also be trampling on the rights of a city like Winter Park.
If it wasn’t for the millions of dollars in profits that cities all across Florida skim off their utility customers – nearly 40 percent of whom live outside the city limits of their electric providers – the argument would be one of home rule. But it’s not. It’s all about money.
The argument is not truly about what rights a city or town has in the State of Florida. It’s about maintaining the status quo at all costs.
It’s about protecting territory and about preserving a business model that on a monthly basis shakes down non-resident customers to fund city services and keep property taxes low. Vero asserts that it has a right to a “reasonable return on investment” because the city owns the utility.
But does Vero really own its utility? That’s a fair question, since it’s been blocked from selling it. The more pertinent question is, who really has the most skin in the Vero electric game?
Every single one of the 34,000 households, shops, factories, restaurants, hotels, churches, schools and government offices – not just city residents – pay through their rates every dollar that it costs to install, maintain and replace the equipment and to operate Big Blue and keep the facility in compliance with state and federal regulations.
All the ratepayers make the payments on Vero electric’s debt. All the ratepayers fund the salaries and benefits and pensions for utility workers. They even help pay the salaries of the legal, financial, clerical, technical and custodial support staff at City Hall because so much time and energy is spent on managing the endless drama that is running an electric utility.
Rewarding Vero Beach with another 30-year deal when it hasn’t handled the past 28 years so well, Shores officials say, would be abrogating their fiduciary duty to the Town’s citizens.
The Shores wants FPL rates, plus a refund of what Vero has overcharged Shores customers since 2008 and proportional representation on a Vero Electric Utility Authority that actually has some teeth. If that cannot be achieved through mediation and negotiation by January, Vero and the Shores will be plunged into an all-out legal battle, the cost of which is certain to soar into the millions of dollars.
“We would like them to see the light,” May said, acknowledging the pun with a wry smile.