New electricity mantra: Show us the numbers
A traveling presentation of the financial benefits of getting Vero Beach out of the electric business has quietly prompted county officials to issue its first salvo to city leaders: Show us the numbers, or we’re pulling our customers.
The interactive financial model being presented by Steve Faherty and Glenn Heran shows the county as a whole is losing somewhere between $23 million and $30 million per year as a result of residents paying higher bills and in lost property taxes from FP&L.
It also boldly concludes that even in a worst-case-scenario of Vero Beach having to pay a penalty to the Orlando Utilities Commission to exit the current contract early, customers still would be better off.
Looking at a third straight year of double-digit budget cuts across the board, the Board of County Commissioners is now listening. Last week, the Indian River Shores Town Council got a taste of Heran’s financial analysis and its members also are eager to see the city’s financial basis for keeping the aging utility.
Both the county and the town have begun looking into what it would take to wrest their territories back from Vero via the Florida Public Service Commission – which is the only way to extricate their customers from bondage to high Vero electric rates.
So far, Vero officials are responding with assertions that they are on the right path toward getting electric rates down. City Manager Jim Gabbard, in response to County Commission Chairman Peter O’Bryan’s invitation to unpack Heran’s model and the city’s own figures in a workshop, sent O’Bryan rate comparisons showing that Vero isn’t as bad as some of Florida’s other 33 municipal utilities, all of which have rates significantly higher than FP&L.
The city has so far declined to bring hard numbers to the discussion.
Councilman Brian Heady attempted to prod the city into scheduling an electric workshop with the county, but his motion died for lack of a second.
Acting Electric Utility Director John Lee discounted the relevance of Heran’s model, saying he’d rather debate with “real numbers” if and when FP&L makes an offer to purchase the city’s power operation.
Councilman Tom White worries the city would need to import consultant Sue Hersey from Boston and former Electric Utility Director R.B. Sloan from his new job in Virginia to compile a model – at a unknown cost to taxpayers -- to match the one devised by Heran, a local CPA, who has done all this work as a volunteer.
Known as Heran’s Model, the multi-page, Excel spreadsheet with more than 100 embedded formulas shows that not only the City of Vero Beach, but also Indian River County, would be better off selling or even giving away the electric utility.
Heran, an accountant, has presented the model to fellow accountants, finance experts, top county staff, homeowner associations and citizen groups. So far, many questions have been raised, but no one has yet to dispute his findings.
The City of Vero Beach has appealed to city residents’ pride of ownership, to their fears about being in the dark after a hurricane, and to worries of higher property taxes that they say would result from lost electric revenue. But, to date, the city has not made a hard appeal with numbers as have Heran and Faherty.
Statements made by City Manager Gabbard about the electric system being worth $200 to $300 million, with $100 million just in underground utility lines, were, according to a memo issued later from Gabbard, not based on any “written documents,” but on estimates by former city staff.
Statements made by retiring Finance Director Steve Maillet that city taxpayers would be “better off” if the city retreated into its borders to serve only city residents were based on no financial data, research or study.
“We look forward to the city producing a comparable analysis which they should have already done in order to be able to justify keeping the electric utility,” Faherty said.
“Glenn has shown RB (Sloan, former city director of utilities) the model and he had no adverse comments that I recall.”
Heran qualified Faherty’s remark slightly, saying the model has been presented at least twice in truncated form to the Vero Beach City Council with Sloan and utilities consultant Hersey present, and adding that they did not take issue with, nor engage him, on the information presented.
“At the county, they asked me if the city had seen the model and I wasn’t quite sure how to answer that,” Heran said.
Heran got a warmer reception last week before the Indian River Shores Town Council, where he and Faherty brought the road show to the leaders of a town whose residents represent about 11 percent of city electric customers. Shores officials asked him the same question about Vero’s opportunity to dig into the model.
Heran said both the Vero Beach City Council and top city staffers have basically ignored what could be very useful information presented in the model. Councilman White and City Attorney Charles Vitunac have also openly accused Heran of being on the FP&L payroll. He and Faherty have both been asked to disclose whether they own stock in FP&L (they do not) and have been jokingly called the “secret agents” for FP&L at City Hall.
“Before the three-minute rule was lifted, I would go up there to the podium and try to present what I could of the model but you had five council members -- five of them -- just sitting up there and looking at me, not saying a word, just hoping I would finish and sit down,” Heran said.
“Then I did an abbreviated version of the model once after Brian and Charlie were elected, but it was still rushed, it felt very rushed, they didn’t see the whole model. They have not seen it to the extent that the county has,” he said.
The issue with Heran’s presentations in late 2009 was that he first predicted that, even after the Orlando Utilities Commission contract kicked in on Jan. 1, it would be impossible to match or beat FP&L rates. We now know that he was absolutely correct.
Heran’s involvement in the issue came at the urging of his father, William Heran, who serves on the city’s Finance Committee, in the Spring of 2008.
“Dad wanted to do something for the public, he wanted to put his financial expertise to use, but I’m better at the accounting part than he is so he asked me to do this,” Heran said.
The senior Heran is a retired engineer, who also holds a master’s degree in finance and corporate experience gained during a career as an executive with Kimberly-Clark. Glenn Heran, 43, is a native of Australia who, following his parents, moved to the Vero Beach area about 20 years ago after attending high school and college in Wisconsin.
He subsequently earned a master’s degree in accounting from Florida State University, did a stint in public accounting and ultimately went to work in the family rental property business. He is married to wife, Jeannie and has three children.
During 2008, Heran estimates he spent about 10 hours per week studying utility issues. In 2009 as electric rates went through the roof and calls for the “Road Show” grew, that time expanded to about 20 hours per week of research, meetings and presentations.
Now that the model has caught fire all over the county, Heran spends between 20 and 30 hours per week away from his family and his family’s business working on utility issues.
There are days, even weeks, when he fights back the frustration over not getting a lot done in his own business in order to shed light on the virtues of getting the City of Vero out of the electric business. But Heran said his family is on board with their commitment to the issue, so they cut him the necessary slack to volunteer his time working with Faherty on the paperwork and presentations.
“The city staff can say anything they want to if they don’t have any financial analysis to back it up,” Faherty told commissioners last week.
Heran’s model came about not from the need to present to an elected board or even to city staff, but from the need -- a need that was not being filled by the city -- to answer questions from local business people, distraught about soaring electric rates last year.
“Norris & Company asked me to make a presentation at their staff meeting about electric because they were getting questions from buyers who were reading the news, hearing all the negative press about Vero Electric and if was beginning to affect sales of homes in the Vero territory,” Heran said.
“One of the agents asked me if property taxes would double if the city got out of the electric business, because that’s what she had heard. I told her that was a fallacy -- I knew it theoretically, but I had no way to prove it.”
A few weeks later, Heran and Faherty were preparing to present to a group of leaders from the Indian River Chamber of Commerce. They were asked to offer insights to local businesspeople concerned about how high utility rates were putting a pinch on their bottom line.
“The night before the presentation at the Chamber, I woke up at 2 a.m. with the idea for the model and I just started writing,” Heran said.
By writing, he means designing the spreadsheet and the information to be contained in it. When it comes to documents, such as Faherty and Heran’s two complaints filed last December with the Florida Public Service Commission, Faherty acts as chief wordsmith.
“I’m a numbers guy and Steve is a words guy,” Heran said.
Faherty and Heran pledge to keep their show going as long as necessary, but they hope to be out of a job very soon – when the city recognizes the aging utility has outlived its usefulness.
“It’s unbelievable that Steve and I have had to do this,” Heran said, shaking his head.
