Bielarski: City must face reality
BY ED BIELARSKI
On Friday, the City of Gainesville issued a press release in response to the Alachua County legislative delegation vote to advance Rep. Chuck Clemons’ local bill in the Florida House. I was surprised by the tone and content of the press release. Municipal press releases are typically factual and informative, not advocacy pieces. This one was a call to retain the status quo. It portrayed Gainesville as a City that was facing a state intent on taking control of GRU, despite City Commissioners and City leaders working diligently in recent weeks to take actions in response to the Joint Legislative Audit Committee (JLAC) guidance discussed at a February 23 meeting. Without any further frame of reference, the press release stated that JLAC members supported those actions, which include hiring freezes and zero-based budgeting.
Well, I’m here to say that the time frame to take responsive action should have begun more than a few weeks ago. In fact, the GRU fiscal crisis began well before February 23, and the City Commission has been less than forthcoming, responsive, or responsible in addressing fiscal concerns going as far back as the turn of the century.
The solution to GRU’s fiscal crisis needs to go well beyond the hiring freeze and imposing zero-based budgeting. GRU already has a pseudo-hiring freeze resulting from a 12%-16% vacancy rate because they can’t hire or retain workers. Zero-based budgeting has been around since I was in college in the ’70s. I oversaw the practice during my entire tenure at GRU. These “actions” taken by City leaders are akin to “offering a sleeve off of your vest to someone.” It’s meaningless. If you’d like to truly understand what GRU’s fiscal crisis is about, let’s start with the history of three of GRU’s key performance indicators (Long-term Debt, Electric Rates, and General Fund Transfer, or GFT).
From 2000 until 2015, GRU’s Long-term Debt quadrupled from less than $500 million to almost $2 billion. The main driver of that increase was the original Biomass Power Purchase Agreement (PPA), which was classified as debt in the form of a $1.1 billion capital lease, despite assurances that it wouldn’t be.
Payments under that PPA totaled $76 million a year whether the plant ran or not, meaning GRU was on the “hook” for $2.3 billion over 30 years with no ownership rights. If the plant ran, GRU was obligated for even higher power payments. When the plant ran, the PPA dictated that there would be no summer period shutdowns, nor would it be asked to operate at lower than 70 MWs. Those conditions necessarily damaged GRU’s existing fleet of power plants due to excessive thermal cycling.
From 2000 until 2015, GRU’s average 1,000 kWh residential electric bills doubled from one of the lowest in the state at $77 a month to the highest at $140 a month. Somewhat under the radar of voters, commercial electric rates tripled during that same period.
General Fund Transfer
Despite GRU’s fiscal crisis, the Commission increased the GFT from $23 million a year in 2000 to $35 million a year in 2015. In those 15 years, the city siphoned off $493 million from GRU’s $468 million in profits. Imagine any business paying its shareholders more than it earned over almost two decades.
This was the situation I faced upon my arrival as GRU’s General Manager in 2015. In the face of such adversity, I was able to breathe new life into the utility when in 2017, I completed the termination of the Biomass PPA and the acquisition of the Biomass plant. The impact was immediate.
Long-term debt fell by over $300 million (as we exchanged $1 billion in contractual capitalized obligations for $680 million in bond debt). GRU’s annual Biomass obligations fell from $75 million to $36 million a year. Electric customers were afforded an 8%-10% rate reduction. Cash Flow savings from the deal were approximately $770 million on the financing alone, and over $1 billion when you included operational cost savings. The buyout was nominated as the Deal of the Year on Wall Street.
By the end of 2021, Long-term Debt had stopped its upward trajectory. The average 1,000 kWh residential electric bills fell from $140 to $123 a month, a 12% reduction. However, the City Commission couldn’t end its addiction to GRU customers’ monies.
From 2016 until 2022, the Commission extracted $220 million in GFT payments from GRU ($76 million more than what GRU actually earned). While the average GFT for the top 5 Florida municipal utilities is between one-third and two-thirds of their earnings, GRU was remitting 100%, up to 2 times their earnings, and I fought against it with the City Commission.
Sadly, after the Biomass buyout, the Commission wanted nothing to do with any meaningful reduction in the GFT. There was no political will to reduce the GFT and increase property taxes, or, God forbid, reduce city spending. From 2016 until 2023, while I was trimming GRU expenses, the City increased general fund spending from $104 million to $154 million a year, some $50 million (two-thirds of the annual cost of the Biomass PPA). In those 8 years, they’ve added almost 300 employees, almost 20% more than the size of the previous workforce.
While City government is out of fiscal control, GRU’s average 1,000 kWh residential electric customer is now paying over $180 a month, triple the bill in 2000, with no reduction in sight.
Worst of all, from 2000 thru Fiscal Year 2023, GRU will have paid the city almost $800 million in GFT payments. If not for these GFT payments and the Biomass PPA, GRU could be a debt-free utility. You read that right. Instead, GRU is so highly leveraged that Fitch needs to see debt reduced by $200 million more over the next 3 years and a total of $400 million over the next 5 to 10 years, or there will be more rating downgrades.
Mayor Ward participated in this irresponsible, reckless, and destructive governing behavior during his six years as a City Commissioner, voting for those unfunded GFTs and excessive city spending. His only claim to fiscal responsibility is his vote in 2021 to reduce the GFT by $2 million a year. However, the reality is that in the face of $1.7 billion of debt, that plan would take almost 150 years to pay down GRU’s debt.
Despite Mayor Ward’s complicity in GRU’s fiscal crisis, he stunningly gaslights the community with his quotes in the press release:
- Ward’s comment: “Political appointees would deny Gainesville voters the right to elect members of GRU’s governing body.”
- My response: GRU’s failed governance has led to the need for appointees from another responsible body in order to protect the rights of all utility customers. This is not a unilateral action without cause. The 40% of GRU customers outside the city have no method of grievance and no voting rights and are thus disenfranchised, ironically, by a city that holds equity and fairness as its guiding principles.
- Statement from the City’s press release: “In addition to decisions on utility budgets, rates and operations, local control of GRU enables municipal leaders to reinvest utility revenues to support infrastructure, maintenance, grid resilience and storm hardening measures.”
- My response: Local control in GRU’s case has led to budgets that include GFTs greater than what the utility can afford, electric rates that are the highest in the state, and operations that subsidize City services. That’s wrong. What’s even worse is that local control of municipal leaders has resulted in GRU owning 5 power plants that are over 50 years of age. This is inexcusable.
The real question is, “What’s the plan going forward?” Here are my suggestions:
The city ought to substantially reduce GRU’s GFT payments over the next three (3) years to what the utility can afford. For example, a $17 million annual reduction over the next 3 years will net $51 million toward the $200 million debt reduction requirement. Unfortunately, it only gets you a quarter of the way to the goal. A full $34 million annual reduction a year over the next three years will net $102 million toward the $200 million debt reduction requirement. That gets you half the way there. There’s a strong likelihood that a longer period of reduction will be required, maybe forever. Whether it’s a $17 million or $34 million reduction, more is needed.
GRU needs to look at expanding its transmission interconnections to access more low-cost power. Ultimately, there needs to be a plan to exit the power generation business, given the burden of replacing 5 power plants over 50 years of age. With almost 2 million MWh of electric load annually, every $1 reduction in the per-MWh cost of generation equates to $2 million saved. It needs to happen. The City is in no position to continue acting on the “Net Zero by 2045 goal,” which is pegged at a cost of $3.6 billion, over 7,000 acres of land for solar farms, and another biomass plant.
Operating under an independent board would remove the burdensome requirements of serving a commission that regularly uses the utility to subsidize the City. Hiring practices, procurement, and IT services could be streamlined. An independent board would allow GRU to operate more like a business. Thousands of man-hours would be removed from commission meetings, both public and private.
A big caveat here: The City cannot fully swap the loss of the GFT with increased property taxes.
There must be a critical analysis of the annual $50 million increase in City spending over the past eight years, along with adding almost 300 employees. That will mean layoffs and an evaluation of the richness of the City’s defined-benefit pensions.
Without a plan from the City Commission with these goals, I will support Clemons’ GRU Customer Relief Bill. You should, too.
“That will mean layoffs and an evaluation of the richness of the City’s defined-benefit pensions.” Exactly! Start by ditching all “woke” objectives and fire all “diversity, equity and inclusion” flunkies who are bleeding the city dry. Return to merit-based employment and stop all the fraudulent virtue signaling claptrap surrounding the hiring of overpaid nitwits who are there to guarantee the hiring of other overpaid nitwits with a chip on their shoulder who have nothing to offer which the public would willingly pay for.
Very well said.
Additionally, the city commission only needs 5 members, each of whom are responsible to the voters in their districts. Get rid of the two at-large positions.
I hope Mr. Bielarski and Nathan Skop will be asked to serve on this board when the bill becomes law. They have so much knowledge and understanding of these issues and the history that had brought us to this place we find ourselves in, and have the wisdom and motivation to do what is right for the community (rather than a radical political agenda) to solve this mess.
A. Paco Liptz; : well said! you got my vote if you ran for mayor! I wish Desantis would appoint you to the new GNV CC!
“Virtue signaling claptrap”…I love it!!! 😆….you made my day!😀 I love it when it’s true & funny.
“…..and an evaluation of the richness of the City’s defined-benefit pensions.”
Will retirees lose their pensions or is he suggesting that future employees will not be offered a pension?
Sounds like where the employee loses the most, is the option they’ll go with. Considering how many can collect their retirement as they walk out the door today, the loss of knowledge should certainly help the situation.
The buyout was nominated as the Deal of the Year on Wall Street. For Who , Ed? For Who?
Your comments and observations are very revealing. Maybe a few years late, but none the less revealing. It’s a little late to trim Gainesville’s Dependency Problem, that Golden egg is gone forever. Where would be if the City Commissioner’s and the Likes of Mayor Craig Lowe and the Biomass 8 had been drug tested like all other City Employees, with consequences . With true consequences. Maybe the Gainesville Commissioner’s would have left LaLa Land back in 2003. The GRU Kickback to G’ville will be more than trimmed. You can kiss that Goodbye. That woke regime still remains entwined in Gainesville and the well deserved downward spiral has just begun. But Hey , Springs County might be funded with the repreations owed County GRU Customers and Schools may be right around the corner. Look at what Alachua pays for power.
Mayor Craig Lowe might possibly have failed a drug test back then…..just sayin’
Mr. Bielarski – you sir are a patriot, thank you for speaking out !
Bielarski says Gainesville must face reality. Forget it. They have no contact with reality. Most Gainesville politicians are “woke.” Woke is a cult religion composed of delusional fanatics who cannot succeed in the real world so they raise mediocrity to the status of a sacred cow which they worship to justify their existence as third rate parasites feeding off the public teat. They turn everything they touch into trash because they are envious wrecking balls who destroy everything of value around them.
Again, you are spot on.
Paco: right on!!! 🔥
For most part I agree with you however the GFT should be zero until the debit is payed down it’s time to lose the woke ideology of the city commission get rid of all the wasted money they spend on market place, climate control, any employee not essential to run the city, reduce the commissions salary to about 12,000 a year it’s meant to be a part-time job, get rid of the idea of the solar farm
Aren’t most municipal utilities not for profit? I guess that became un-workable when the biomass plant was financed on a “rent-to-own” basis…
Reduce the commission’s salaries in half then reevaluate the recent quarter million dollar salaries and the retained dead weight senior employees. You know who you are!
Ward and his ilk are truly incompetent, and the reason his ilk enter politics — to blame others and steal from them via taxes and fees. The climate doomsday cult religion is for gaslighting of the voters and customers, to “justify” political regulations which increases costs.
Politics, politicians and lawyers are destroying Gainesville. But it’s the same in many other Dem cities and nationally thanks to the Dem media getting Brandon elected. Our whole country is like one giant Gainesville 🤡👹🤬🥺
The answer for making up the funds the city has been taking is always raise the property taxes. Twenty years ago when my house was worth $200,000 I paid more in property taxes than my sister living in Nashville, TN who’s house was worth well north of $1,000,000! How about cut spending like real people have to do.
Say it Bielarski: Go back to the very very very beginning…How did we get into this situation? …you need to go back to square one.—It was former Mayor Pigeen Hanrahan that F’d GRU and the ratepayers going biomass to stop climate change. Democrat leadership has been a disaster for the city & GRU…where’s Hanrahan now? Why isn’t she defending her Kyoto proto boondoggle? 🎵 crickets 🎵
ED: so how should we fuel electric generation? Buy surplus, clean coal, natural gas, nuclear? What’s the solution? Biomass & solar & net zero are not feasible….the city should get out of the electrical generating biz & leave it to experts regulated by the PSC.
Can the city still pay its debt obligations or are we going under like that woke Silicon Valley bank?
“Ultimately, there needs to be a plan to exit the power generation business,”
There it is…..in plain sight.
“Ultimately, there needs to be a plan to sell to FPL ….”
This is the exact same stuff FPL pulled in Jacksonville – swore up and down JEA was going bankrupt in just a few years and we must sell it. Corruption set in, trials started, and no sale. Guess what ? JEA is still functioning.
It’s all BS and a set up to sell GRU.
Not exactly. Our democrat Mayor at the time implemented United Nations Kyoto protocol and Agenda 21. They decided to go cave man wood tree burning biomass for a
BS future need…put us in a bankrupting Usurious 30 year purchase agreement that was unsustainable and then we did the “deal of the century” buying the junker. We need experts running our utility. The GNV CC needs to focus on essential services and make government smaller…Democrat leadership has ruined the city with vagrants, they can’t agree on open container, they castrated the police dept K-9 unit…
Trying to comply with climate change & DEI crashed the city & GRU… for every action, there’s an equal and opposite reaction. I hope FPL buys GRU because they’re great. I have no problems with FPL because they’re regulated by the PSC.
Only problem, this was the plan for GRU before Ed was hired. Kathy Veigh and John Stanton were all giggles talking about it a RUC meeting back when Veigh was Interim GM. Maybe that’s why Pegeen installed a guy from FP&L in GRU to ‘guide’ the GREC project.
Well said. And those of you who suggest Bielarski run for mayor, where were you last year??
Unfortunately I live in the county and don’t have a say with the city or GRU but rest assured if i could have voted I would voted for ED
Thanks again Ed, you obviously put a lot of time and effort into this enlightening article. As for jacking up my property taxes to feul the City commission’s profligate spending habits and repayment of massive debt for its very poor decisions, I’m not sticking around to foot the bill for that…and folks think rents are unaffordable NOW? Just want until landlords get hit with much steeper property taxes and have to dramatically raise their rents!
Ed: organize a protest in front of city hall this Tuesday! Show them what a great Mayor you’d be and deSantis will appoint you Mayor,..a coud de tat…
Yeah, let DeSatan install another person who WAS NOT elected to run things. If the will of the people is against you, just pull a legislative trick to shove your choice down their collective throats. No thank you.
Not buying it: Desantis was elected by the people of the state of Florida…the people have spoken. Gillum who got caught naked in the hotel room doing meth with the stripper would have been a disaster. Didn’t Gillum get charged for kickbacks while in Tallahassee? Nobody can beat Desantis. Best Governor ever. You do buy the face diaper though to keep your sh!t for brains in…Now put your face diaper on and go to your safe place.
Biekarski must face reality: The voters rejected him.
LOL. Me thinks you miss the point. The city’s future takes leadership that goes beyond partisan politics. It will require courage and skill – something that doesn’t house itself at City hall right now,
Then let the voters choose the leaders and the course and face the consequences, you know, like in a democracy. You don’t seriously think that anything Clemons and the Governor do will not be partisan?
Jazzhole: Desantis was elected to the governors office by the people of the state of Florida…he’s the top guy…all the local governments answer to him. He has to step in because the leadership in GNV ruined the utility and put us on unsustainable debt. Democrat leadership has been a disaster and the top man has to come in and bail us out.
Sorry Putrid Floyd, all local governments don’t answer to the governor by law, though that seems what you “small government” Republicans want.
By the way, the “top man has to come in and bail us out” sounds like what Biden has been doing since 2020. Where do you think the money for the various goodies DeSantis hands out to the small town rubes – see broadband for instance – as if he came up with it, not to mention emergencies like hurricanes and condo crashes, comes from? That’s right, from the guy who DeSantis spends everyday personally attacking, as if that’s what governors who represent all Floridians are supposed to do – that is between having to say “Thanks for bailing us out (fill in the blank) Mr President”.
In Florida , Desantis is the top man…He was elected by the people. He has the authority to step in because the city has made some bad decisions with the utility and ruined it….GNV CC & the Alachua County CC need to focus on essential services.
There will be a Utility Authority or a privatization of GRU…it’s ok because it will be better service & cheaper….they will be answerable to the Public Service Commission. Let the experts run the utility, let Local govt provide police, fire, parks, roads…sorry,
No spending on frivolities like rainbows 🌈 in downtown intersections…No woke social justice murals, no giving out free face masks, no tampons in mens rooms…jeez….we are having a “crime, vagrant, drug, panhandling, open container, & utility crisis”….democrat leadership has been a disaster.
They merely demonstrated the power of stupid people in large numbers.
The city commission is learning that you can ignore reality, but you can’t ignore the consequences of ignoring reality.
Well put, applies to a lot of folks through out life, I’m guessing.
“Hiring practices, procurement, and IT services could be streamlined. An independent board would allow GRU to operate more like a business. Thousands of man-hours would be removed from commission meetings, both public and private.”
Comment: Take advantage of what GRU to FMPA to support with Procurement processes, Subcontract any IT implementation, IT customer service, maintenance.
“GRU needs to look at expanding its transmission interconnections to access more low-cost power. Ultimately, there needs to be a plan to exit the power generation business, given the burden of replacing 5 power plants over 50 years of age.”
Comment: Let’s employees that can retire, take a “window(early) retirement”, transfer engineers, techs that are re-hireable and trainable to work in the T&D operations, such engineering techs, project managers, project controls, designers, etc.
GRU needs to chase and make it easier for big business come to COG and get power from GRU. Right now, all those business are going to Ocala.
If reducing the GFT practically to zero, the only way the City could start getting some additional GFT is through new stream of revenues with new big customers or new business. Remember, any new big customer connecting to the grid, will need at least 2-4 years for GRU recover the investment through the revenues.
I would recommend let all city employees vested in the pension keep it and everyone else joins the state ran FRS pension or 401k that the county and other state agencies use.
As much as I admire Ed Bielarski, I think his support for taking GRU away from the local community is flawed.
If only the City Commission had listened to Jo Beaty instead of those slick salesmen who persuaded them to switch to a biomass plant, we would not be in this mess today.
In the 1980’s, when a City Commissioner was paid about the same as a half time worker at McDonalds, the transfer was calculated based on what a privately owned plant would pay in taxes and wheeling charges, not on what the Commission would like to spend on “pet” projects.
Many GRU customers live beyond the City boundary and work all day in the City, which provides them with police, fire, roads and other municipals services, but they do not pay a penny for those services. The money transfer from GRU attempts to compensate for this give-away to some degree. Without that transfer, City property taxes paid will have to increase so much that we will soon see foreclosures for our poorer residents.
If the Legislature takes GRU away from the City, how will they compensate for the lost revenue considering that well over 50% of the City property is off the tax rolls because of our two universities, circuit courts, state government offices, schools and churches, etc. City taxpayers spend over one million dollars a year supplying fire services to UF, but receive nothing in return from the Sate of Florida. If those properties were army bases, the Federal Government would pay “in lieu of taxes” to the City every year!
I am sad that our Legislative delegation is falling for the simplistic idea of privatizing GRU, when they should be trying to consolidate the City and County under one governing board, which would run Gainesville, Alachua County and GRU.
Jean Chalmers: how will the city compensate for lost revenue? They can lease the transmission lines to FPL.
Loud; Brilliant, and Jean: if only Pegeen Hanrahan didn’t try to implement United Nations Kyoto Protocol climate change crap locally…
Hanrahan and democrat leadership got us into the mess we’re in today. Bielarski’s reasoning is not flawed and he was the GM of GRU…he’s a lot smarter than you when it comes to utilities. Democrat leadership has been a disaster since the biomass queen pigeen ruined the city sticking us with the caveman tree burner and that 30 year, worst deal ever, power purchase agreement…what an unmitigated disaster this has been and you want to make things worse by making the problem bigger by consolidating with those idiots on the Alachua County Commission? good grief you’re an idiot.
Jean, that drivel made me throw up a little…are you wearing a face diaper too?
I am one of the ones who lives out side of the city that’s stuck with Gainesville’s piggy bank. I don’t work in Gainesville or Alaucha County for that matter so your statement means nothing to me. I totally support the state taking over GRU as far as the city it’s time they start cutting some of their left wing ideas, get rid of the zero carbon idea it’s like every other democrat city.
Let try understand what you’re saying according to you those of us who live outside of Gainesville and are being raped by GRU should feel good about it because when we go in to Gainesville we have police and fire protection.
1.The business we buy from pay taxs for police and fire
2. How about the thousands who come to football, basketball, baseball, drag racing that don’t have GRU should they have to pay some sort tax? They get the same protection
3. What do you think would happen if the 40% of us quit shopping in Gainesville
Well said, and if Gainesville didn’t exist, Newberry would be Fort White or Wellborn. Unified government and services makes the most sense and I voted to join the city when it was offered. Farming is unfortunately almost done in Alachua County and towns like Newberry are primarily bedroom communities now. Pretending otherwise may be a pleasant delusion, but Gainesville is the straw that stirs the drink.
GRU debt will triple if they keep their course and will sink like the Titanic. You are so blind you don’t see the tip of the iceberg sticking out…it’s everyone on deck and man the life boats. Only navy man Desantis can save all the passengers & the ship now.
Ha, yeah…the GNV CC can’t even stop panhandlers in medians and are stalemated on open container. They can make a logical decision between the bunch of them except for painting rainbows in crosswalks downtown & tampons in mens rooms.
They can’t, nor can. Typo
Not can, can’t.
Ed, how will the city be able to function without the “Director of the Department of Doing” and the new “Chief Climate Officer”. Can we survive as a city without them like we did for a 100 years?
Yeah, how will we survive indeed. The same question goes for the 300 employees added to general government during the same time GRU was trimming their staff. To answer your question, in the words of Gloria Gayner, “We will survive! At first I was afraid, I was petrified. Kept thinking’ I could never live without you by my side….”
City commissioners demonstrate their inability to manage the city in two major ways: (1) the budget, both GRU and the unnecessary hires; and (2) the high turnover of charter officers, compared to other places. Perhaps the underlying problem is that commissioners once elected gain an expansive view of their abilities. (One of my favorite examples is Lauren Poe, a decent fellow, expounding on the meaning of a gospel pronoun in a Sun column when he knows neither Aramaic nor classical Greek.) Having modest ability running a business themselves, commissioners hire expensive people with the right skills, then micro-manage them and insist they endorse the party line and do so enthusiastically. Not surprisingly, that doesn’t work and many of them quit or are fired. The commissioners use city funds for propaganda, and insist on toeing the party line, instead of encouraging open and thoughtful discussion. Among the abilities they gain when ordained by the voters is knowing the future, instead of having to plan for contingencies.
No where in the bill does it say anything about rate-setting, managing the debt or any aspect of the financial management of GRU. It also does not allow for local control (other than one seat of the 5 member board) would be required to be a city resident and GRU customer. The other four seats could -and likely would- be appointees from outside Alachua County, or even Florida. Local ratepayers can’t elect the members. There is no provision for Sunshine Lw so it would the proverbial “smoke-filled backroom wheelers and dealers” operation. ero accountability.The bill does not give ratepayers a voice and it does not protect ratepayers’ interests. It is a HUGE leap in logic that the bill would do anything other than tee-up GRU to be sold to FPL or to any other IOU. And if you think the PSC would do good by our ratepayers, I suggest you google the research Integrity Florida did on the PSC in October 2017 titled: “Florida’s “Public Service” Commission?
A Captured Regulatory Agency”. It will enlighten readers on the myth that they have local utility customers’ interests at heart. http://www.integrityflorida.org