As we embark on a new year filled with promise, many in Vero Beach remain focused on what has become the neverending story of our utility system. The good news is we have an opportunity to close at least one chapter of that story very soon.
I was elected, in part, because of my steadfast belief that a full sale of our city’s electric system to Florida Power & Light can and should move forward. The proposed partial sale of our system in Indian River Shores is an important first step in that process, and I want to make it very clear to my constituents in the city, and to all who are served by our electric system, why I believe a partial sale is in our collective best interest.
First, FPL’s cash offer of $30 million would provide an immediate and substantial amount of revenue for our city. Anti-sale activists who shout that these funds are restricted to electric utility purposes miss the point. Investing this money in our electric system, paying off debt and making necessary improvements, is a good thing. It helps our overall bottom line.
If you owned a three-bedroom home and an RV, and had the opportunity to sell the RV for a price that far exceeds your remaining home mortgage debt, would you turn it down? Of course not. You’d seriously consider selling the RV and use the proceeds to pay off your home, get rid of your mortgage payment, free up revenue to spend elsewhere, and generally improve your overall financial well-being.
The same is true in our city. For instance, by selling only 8.7 percent of our electric system for $30 million, we can generate revenue that more than covers the total debt obligation of our entire system, which, according to our finance department, is approximately $26 million.
Revenue could fulfill ongoing debt service obligations (which rates are designed to cover) and still leave a balance of well above $3 million after the debt is retired.
We also could use partial sale revenue to cover the anticipated cost of new electric system upgrades, instead of issuing new debt (and paying for bond attorneys and consultants) that would put upward pressure on electric rates. Our electric system is estimated to need $28 million in new capital investment through 2021. You don’t need to be a math major to see that $30 million would more than cover that investment.
There are some who now say $30 million is below the “assessed value” for the system. That’s simply false. The anti-sale activists aren’t touting an assessed value, but an estimate produced by Florida Municipal Power Agency-approved consultants who artificially inflated the costs our city would incur by selling. One example: they estimated sales growth at just 0.5 percent while expenses grew at 3 percent. This one accounting trick alone helped to generate an artificial “cost of sale” much higher than FPL’s offer. According to our Comprehensive Annual Financial Report, the total value of all electric utility capital assets is $111.9 million. FPL is offering to pay nearly 30 percent of that value for less than 10 percent of our system. Keep that in mind the next time you hear complaints from the anti-sale minority.
The bottom line for me is simple. A partial sale provides immediate benefits to our city. It provides long-term benefits for our remaining electric utility customers, and it puts us on a path toward the full sale of the system that voters have overwhelmingly supported.
It’s time to stop the arguing and move forward with a plan that benefits the people of this great community.
Harry Howle III is vice mayor of the city of Vero Beach.