Who is Truly Misinforming? (Part 2)

a FAQs Report sent by the Office of Speaker pro tempore Chuck Clemons. And my commentary. Seriously though How long can the City of Gainesville keep pretending?

I had promised to write part two yesterday, but time got away from me. Here I am a day behind, but, I did promise a part two. So, here it is.

6) Wasn’t this legislation just a ploy to sell GRU’s assets to a private Investor-Owned Utility (IOU)?

Although there was a strong contingency of GRU ratepayers requesting that the legislation vest the new Authority with the ability to sell the utility, no such proposal was ever considered formally, or otherwise, on the part of the Delegation at any step of the process. Any decision to sell GRU can only come to fruition should the City Commission decide to do so, and then only after they have passed a resolution to put the matter before the voters of Gainesville. Specifically, GNV, FL Amended, Art. VII, § 7.03(1)(f) of the Charter amendment, requires any disposing of the assets of the utility to be done in accordance with the existing GNV, FL Amended, Art. V, § 5.04, which references the City Commission’s action and subsequent approval by the Gainesville voters by way of referendum.

That said, one would be hard-pressed to find many interested-takers considering the financial baggage any buyer would incur with such a purchase of the utility. (Office of Speaker Pro Tempore Chuck Clemons)

As the Office of Speaker Pro Tempore Chuck Clemons stated, it would be very hard to find anyone, interested in taking on GRU with the debt that comes with the Utility. Yes, I have heard many speak about wanting to have options, I have heard many say to sell the utility to Clay Electric, I have heard others say sell to FPL, But due to the City charter this can not happen without a referendum by the City Commission. And this Bill further enforces that, if the utility were to be sold, it would be at the hands of the City Commission. I feel very strongly that GRU having been a very strong utility for many years. Depending on when you want to look at the beginning of GRU it would be anywhere from 1887- where people received gas in there homes by private entity, 1891 where people began receiving water in their homes from Boulware Springs, and 1912 where a public owned electric system formed. There is a deep history for the Utility, and from what I understand, managed well, until the rise of the biomass boondoggle.

7) Doesn’t the creation of a Governor-appointed Board take away the voice of the voter?

For the first time, the 40% of the 100,944 customers GRU services (https://fmpa.com/members/) who do not live within the corporate boundaries of the City of Gainesville, will have a voice, and be on an equal footing, with all other ratepayers who live within the city limits.

Those estimated 40,378 customers who currently have no access to the ballot box are responsible for approx. 23% of the budget for the City of Gainesville although they are not residents. (January 2022, City of Gainesville Operational Audit Report No. 2022-087, p. 3).

To date, the only thing that ratepayers outside of Gainesville have been granted is no voice and the highest electric rates in Florida (https://assets.noviams.com/novi-file- uploads/fmea/Rates/2023/2023_march_rates.pdf)

HB1645 creates the means for all ratepayers to have an equal voice by influencing the appointment and removals of the membership of the Authority by the Governor. Additionally, ratepayers will be able to appeal to their Legislative Delegation members to file amendments to the Special Act which created the Authority.

Again, Authority members must reside within GRU’s service area. Because of this, there is little argument that following the implementation of HB1645, a GRU ratepayer will have a greater influence over the Authority that governs their utility than their counterparts who are serviced by Investor Owned Utilities. GRU’s Authority will consists of members who are its customers and who live within its service area, alongside their fellow ratepayers. Meanwhile, IOU’s are governed by the Public ServiceCommission and its membership is comprised of Florida citizens from throughout the state. (Office of Speaker Pro Tempore Chuck Clemons)

While the Board is appointed by the governor, the process still gives us a voice. We will have the ability to nominate and from nominees the Governor will appoint. There will be meetings much like the Gainesville City Commission. The meetings will be open to the public and if I am not mistaken will fall under the Sunshine Law(I am waiting on confirmation)from what I have researched. The citizens will be able to speak, give input, ask questions, and be a part of the fixation. This would truly mean “A UTILITY OWNED BY THE PEOPLE IT SERVES”.

8) Don’t the numbers bear out that GRU is not in dire financial straits and not on the verge of bankruptcy?

GRU, and by extension, the City of Gainesville are unmatched in the negative financial position that has resulted from a long line of ill-advised decisions. This not only comes to light when looking at the plain numbers contained in the City’s operational audit. A comparison of GRU’s finances with other like- utilities, bears this out in short order. Any attempt to downplay or dismiss these clear facts should dissolve the credibility of anyone making such claims.

Nonetheless, there are those who continue to further such narratives with little-to-no sense of embarrassment, and absent any concern as to what further damage is inevitable by ignoring the problem or by begrudgingly professing compliance with cosmetic and ineffective efforts to stave off the detractors.

In Florida, the Auditor General is a constitutional officer appointed by the Joint Legislative Auditing Committee (JLAC) and confirmed by both houses of the Legislature.

As the State's independent external auditor, the Auditor General provides unbiased, timely, and relevant information that the Legislature, Florida's citizens, public entity management, and other stakeholders can use to promote government accountability and stewardship and improve government operations.

Accordingly, at its November 14, 2019 meeting, members of the JLAC directed the Auditor General to conduct an operational audit of the City of Gainesville.

The response from then-Mayor Poe of Gainesville was to claim the audit was “politically motivated” and a thinly veiled attempt to play politics with the residents of Gainesville. In addition, he stated that it was a waste of time and taxpayer dollars. Nonetheless, he stated that he welcomed it in order to put the claims to rest.

https://mycbs4.com/news/local/state-officials-voting-whether-to-audit-city-of-gainesville

Any attempt to smear the undertaking of such an audit by the Auditor General is quickly quashed by the fact that such audits are not unusual or opaque. In 2022 alone, the Auditor General issued 203 reports on such audits of state and local governmental entities and all are conducted using Generally Accepted Accounting Principles (GAAP). Therefore, anyone has the ability to easily contest an audit’s findings and subsequent conclusions.

https://www.accountingtools.com/articles/what-is-gaap.html

The audit was conducted to from April 2020 through October 2021.

The most current numbers that were available at the time of the City of Gainesville’s operational audit noted that as of 2019-2020, GRU’s debt was calculated to be approx. $1.8 Billion (January 2022, City of Gainesville Operational Audit Report No. 2022-087, p. 4).

On its surface, a standalone number of $1.8 billion of debt on looms large. However, that calculation is relative – for some entities, such a number is a dangerous amount of debt; for others, depending on several factors, it might be easily manageable. Therefore, one has to identify several means of gauging just how voluminous of a debt of $1.8 billion is to an entity such as GRU. Among other methods, the Auditor General contrasted the financial health of GRU with comparable Municipally Owned Utilities. (MOUs) To select what MOUs which be used in the analysis, the Auditor General turned to a 2021 report the City had commissioned which was produced by nFront Consulting of Oviedo. The report was an effort to give recommendations to the City on a formulary calculating annual GFTs from GRU. In the course of that exercise, the consultant determined that the City of Lakeland Utilities, the City of Tallahassee Utilities, Jacksonville Electrical Authority, and the Orlando Utilities Commission were all good bases of comparisons with the GRU.

(https://www.gainesville.com/story/news/local/2021/04/05/gainesville-reviewing-plans-could- mean-higher-gainesville-regional-utilities-bills/7038029002/)(January 2022, City of Gainesville Operational Audit Report No. 2022-087, p. 4).

As such, the Auditor General chose these MOUs when comparing the finances of GRU. In so doing, 2019-20 audited financial statements of each entity were reviewed and those findings are incorporated in the chart below. In addition, the chart includes information garnered from the Florida Municipal Electric Association in regard to number of customers and electric rates of each MOU.

(https://fmpa.com/members/)(January 2022, City of Gainesville Operational Audit Report No. 2022-087, p. 4).

A review of GRU’s financial position, particularly when compared with the comparable MOUs, cannot muster any credible argument that GRU is anywhere other than in the aforementioned “dire financial straits.” Among its cohorts, while GRU serves the fewest customers, it carries by far the highest per customer debt, the lowest equity, and the highest debt to equity ratio and rates. In every negative measurement, GRU is an anomaly, far outpacing its counterparts.

Neither the City of Gainesville or GRU have contested any of the audit’s numbers, comparisons, or its conclusions regarding the utility’s massive debt and debt to net-position. Nor, have they expressed any argument with how the utility is an extreme outlier in every negative category amongst its peers. In their formal response to the audit, subsequently engrossed in the final report, the City effectively conceded to all of these facts, stating, “GRU management and the City Commission are well aware of GRU’s high debt level”. Their response then pointed to the large amount of debt incurred by the purchase of the Biomass Plant. (Irrespective of the $750 million biomass by-out, the debt would still be massive and over the $1 billion mark.)

Further, they acknowledged that it was their mounting debt and high leverage that has led bond rating agencies to downgrade them five times between 2012 and 2021.
(January 2022, City of Gainesville Operational Audit Report No. 2022-087, pp. 46-47).

Essentially, the City and GRU stated that their high debt levels are a result of their having incurred a large amount of debt.

The period between the release of Auditor General’s report in January of 2022 and the City’s appearance before members of the JLAC in February 2023, gave the City ample time to supplement their response or contest its findings. For that matter, anyone in the public could have attacked directly the information contained within the report.

No one did, because no one could.

At the February 23, 2023 JLAC meeting, City officials appeared before committee members who anticipated hearing the City’s plan to dig themselves out of the hole of their own making. Following the City’s testimony, the dismay and criticism leveled by committee members was bipartisan. Many were shocked by the lack of urgency and the failure to chart a viable course to address the tenuous financial predicament.

Indeed, following the City’s testimony, Representative Yvonne Hinson stated, “They don’t have a plan to pay down the debt and they didn’t seem concerned about it – that bothers me.” https://thefloridachannel.org/videos/2-23-23-joint-legislative-auditing-committee/

Commissioner Bryan Eastman is one of those that attempts to trick citizens into believing that GRU isn’t bad off. Numbers have been clear with the State Audit. Bryan Eastman seems to be attempting to “Poe-play” the audit. This isn’t surprising since he and Lauren Poe have a political history together, as Eastman Provided campaign management services to Poe’s campaign in, 2019 (campaign Treasure’s report -Itemized expenditures line 45). I also have to wonder if, Bryan Eastman, took 3 accounting classes as stated in a Facebook post response (“Nothing in that JLAC report said our transfer was higher than our spending or anything if the sort, and since you asked I think I took 3 college accounting courses”), wouldn’t he be able to look at the state audit, and audited financial statements on GRU site , and see that there is a huge problem? Clearly, Bryan Eastman, has chosen to either not watch the JLAC meeting, or has decided to ignore what matters most, and continue to “Poe-play” what the JLAC has said.

Stay tuned for part three…