City of Gainesville violates rationale for public ownership of GRU

GRU’s debt increased significantly when the biomass plant was built. Photo credit: Alachua Chronicle



The City of Gainesville’s mismanagement and abuse of Gainesville Regional Utilities (GRU) violates the entire premise of public ownership. The economic rationale for a publicly-owned utility is that knowledge of the firm’s costs should lead to lower rates than a regulated, privately-owned utility. Instead, Gainesville has used GRU as a money printing press, driving residential rates to the highest of all municipal utilities in the state and transferring the “evil” profits to fund the City’s utopian schemes.

An economics lesson is necessary for those misled by the previous mayor, who claimed to teach economics.

GRU is what economists call a natural monopoly. A monopoly is a single supplier in a market. Unregulated monopolies are inefficient from an economic perspective because they produce lower output at a higher price than you would get in a competitive, free market. Most monopolies exist by government license (e.g., patents and copyrights) because society has decided that the added product diversity and technological innovation are worth some loss of market efficiency. These types of monopolies are not regulated except by the length of their licenses.

A natural monopoly is different because the nature of the market makes it more cost-effective for a single firm to supply the market rather than multiple firms. Utility companies fall into this category because of the extensive infrastructure required to provide the service (gas, electric, water, cable, etc.). That means the government license is essentially unlimited in duration, so regulation is needed to mitigate the market inefficiency.

However, mandating a price low enough to completely eliminate the inefficiency of a natural monopoly would drive the firm out of business.* The government would have to provide a subsidy, but voters don’t like seeing privately-owned firms get subsidized by government. Mandating a price between the unregulated price and the efficient price is problematic because government regulators do not know the firm’s true costs.

The textbook solution to this problem is to have public ownership of the natural monopoly. This way the government knows the firm’s costs exactly and can set the efficient price while subsidizing the firm through general taxes–and people don’t complain because they get lower utility prices than they would with a regulated, unsubsidized privately-owned monopoly.

What we’ve seen at GRU turns this rationale on its head. Rather than subsidizing the public utility to ensure economically-efficient pricing, the city has operated GRU like a privately-owned, unregulated monopoly, setting higher prices to make monopoly profits and then transferring those profits to the City. They have also purposely driven up GRU’s costs by allowing political priorities for unnecessary green energy initiatives to override sound business practices.

If you pay attention to the City’s stated goals, you’ve heard them say they did all of this for our own good. They are not raising prices simply to increase profits but to make Gainesville a “world-class city.” They need to raise prices to provide renewable energy and save the planet. The resulting profit is just a bonus to pay for all the other utopian schemes like translation services, pedestrian-friendly roads, affordable housing, GRACE Marketplace, etc. According to them, we should be thankful that our self-declared betters are looking out for us.

This is why C.S. Lewis once wrote, “Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

The City has abused the purpose and benefits of public ownership of a utility company. They got hooked on the “free” (from the politician’s perspective) money, and like any junkie, they need more to sustain the high. The credit downgrades should have been a warning, but as long as the money flowed from GRU to the City coffers, there was no reason to change anything.

When the Joint Legislative Audit Committee (JLAC) said that if the City doesn’t take urgent action to reduce GRU’s debt, the commissioners could face removal from office or a reduction in state funding, that was the first real wake-up call because it threatened the politicians themselves. If that wasn’t enough to scare these modern-day robber barons straight, the bill proposed by Rep. Chuck Clemons to establish a governor-appointed board to govern GRU definitely got their attention because it will end the money train.

Last week, we finally saw some action from the City to sharply reduce the general fund transfer from GRU. (“General fund transfer” is a euphemism for the City fleecing all of GRU’s customers.) Like most politicians who don’t really plan to change anything, however, they have a 10-year plan, much longer than any of their terms in office. That plan will only reduce the debt-to-capitalization ratio for GRU from 87% to 70%; the average ratio for electric utility companies is 50%.

In that meeting, the commissioners were lamenting the lack of property tax and electric franchise fees, as if that’s an excuse to take money from GRU. If the City wants those fees, let GRU go private and treat them like a privately-owned, regulated utility. Instead, the City wants to keep public ownership so they can avoid regulators and set prices higher to keep funding the government on the backs of GRU customers. They also want to continue to push politically-motivated investments, even if they bankrupt GRU.

Ideally, the solution to GRU’s problems would not require a governor-appointed board. The real solution is for Gainesville citizens to elect rational politicians who know the proper role of a municipal government rather than a bunch of activists looking to fundamentally transform our entire society. Unfortunately, Thomas Jefferson was correct when he said, “The government you elect is the government you deserve.”

*A natural monopoly has a decreasing marginal cost curve that is always below the average cost curve. Setting price equal to marginal cost results in negative profit. The proof is left to the reader, or you can refer to your favorite economics textbook… a real one that actually uses math.

  • I’m glad to see you address Commissioner Eastman’s comments about wanting franchise fees. Your thoughts on this mirror my initial thoughts. He is just looking for a way to get around the GFT or whatever they want to call it now. They have abused the GRU customers for too long.

  • Nice letter Len. Even with the common sense explanation you provide, there will still be some who will toot a different horn.

  • Liked” The Government Wokesville has Elected is the Government you deserve . In case that did not sink in “The Government Wokesville has Elected is the Government you deserve “

    • Except for those of us smart enough to vote for the ones who did not win because they didn’t have a “D” behind their name.

  • You are very right, however, sadly I guess people thought they were voting for people who cared about them rather than the money. Unfortunately there have many that have become homeless due to this, and then some that do not get to vote for the city officials who have the authority over GRU right now.
    I would much rather the people who are suppose to be running it run it right but I guess they can’t do right.

  • They obviously fired Bielarski for political reasons, for not being woke enough to want to fire his unvaccinated employees. Now they have a timid yes-man who is less competent. They make bad decisions over and over. I’d be surprised if the solar deal didn’t turn out to be a bad one, just based on who made it.

  • Too many business-uneducated people enter politics. Utilities are a monopoly, and too important for politicians to run. That’s why a board of a *diverse* group of apolitical decision makers must take over.

    • True…for some, because they cannot get a job, THIS becomes their primary source of income. Craig Lowe quit his job when he was elected.

  • The City owns and operates the utility. Elected commissioners run the utility. Voters have reaffirmed the arrangement via their votes. Vote them out if you disagree. Appointed boards take our voices away. Strange that “libertarians” push for more unaccountable governance and takings from afar.
    The heavy handed Big brother government power grab isn’t a solution —it is a power play, slightly dressed up as for the “ratepayers” I liken it to putting lipstick on a pig. You know it too. The means do not justify the ends.
    Stanford graduated or not.
    “You should decide whether something makes sense by its content, not by the letters after the name of the person who says it. And the idea that you’re supposed to have special qualifications to talk about things that are common sense, that’s just another scam—it’s another way to try to marginalize people, and you shouldn’t fall for it.”
    Noam Chomsky, Understanding Power: The Indispensable Chomsky

    • You total wrong 40% of GUR customers live outside of the city and can’t vote in city elections and don’t have a say in how it’s ran me being one of them. I can assure you that I would not have voted for any of the current idiots on the city council. I support the state taking over 100% or let the ones outside of the city get their electricity from another company hell clay electric has a place on 39th less than 1/4 mile from my house

      • Dude, you won’t have a say as an FPL or Duke customer unless you buy stock.

      • I live in the city and did not vote for any of these losers in office. The ones I voted had common sense and lost in this demo/libtard town. It is 70% demonrats and 30% Republicans approx. We will never win.

    • But the commissioners have told us GRU is owned by the people it serves. The commission is owned by kids, many of whom don’t think they should have to pay back the school loans they signed up for. It’s NOT strange that liberals can’t understand that.

      You’re another…

    • How about County residents who are under the GRU monopoly. They have no effective input, complaint or appeal rights, yet are subject to the rate whims, surcharges and fees imposed. While they have no options but GRU, they are also accessed a “fee” for the privilege of being a GRU customer.

      Try to get a mistake corrected on an erroneous meter reading, or some other mistake.

      GRU customers outside the city need PSC oversight and regulation.

    • I think you mean the ends do not justify the means, professor. Voters did not want a board hand-picked by the commission who could not be voted out by citizens. That’s what they voted against. You can try to reframe that, but it won’t work this time.

    • In theory, I agree with you; however, it just doesn’t work and we going to hell in a handbasket. Moreover, many served by GRU have zero say so their ‘board of directors.’

    • For the 40% of GRU forced-customers who can’t vote for the city commission, the “transfer” amounts to taxation without presentation. A whole war was fought on that premise a few hundred years ago.

      We’ve complained about it for decades and the complaints have fallen on deaf ears. If they’d listened before, they might not be losing control of their slush fund now. FAFO.

      • People in the city tried to explain the issues to the commissioners but they would ignore any input that didn’t benefit their pet projects and their paid trips to Europe, etc…

    • Imagine typing all this ignorance out and clicking submit. Imagine ignoring 40% of GRU’s customers, you know, the people who have ZERO say in any of the city’s doings. Lipstick on a pig indeed.

      • I really wish the 40% out side jurisdictions had an equal right to vote on anything involving GRU because the very small % of us that been trying to vote these clown out always failed because we are out number by Dems.

    • Good post HomeRule. The hypocrisy of “conservatives” trying – but failing – to justify taking power away from the voters, and in this case their property as well, is huge. Given that it is a hostile takeover by those who wouldn’t get elected dog catcher in Gainesville only serves to underline that hypocrisy. If Gainesville voters want to fund D,E, and I officers along with round-abouts and bike lanes, that’s their business and Newberry where Clemons is from can do what it wants. Guess which place gets more visitors.

      • Nothing in this going to take property away or take power away from the voters or ownership from the citizen. Just read the bill, it explains everything.

      • Still a knucklehead. City and county have already taken away some of our property rights unless they get the “tax rights.” Keep braying.

  • It’s way beyond just GRU. This mind virus has infected the local
    utility, city & county govt, public schools, police, sheriff, elections office, court system, university, etc etc.
    What are the odds that all of these local services are a sick, running joke now?
    Regardless of the issue or circumstances nobody seems to vote locally. But they’ll damn sure vote every four years when the TV tells them to.

    • Well you gotta love the Sheriff down in Marion County. He doesn’t stand by this gun grab by the demonrats.

  • Plus one. Those “credit downgrades” mean GRU must offer more money to investors to entice them to buy its downgraded bonds. That extra payoff to bondholders is paid by every GRU user through higher utility bills.


    • The problem Johnny is Clemons is trying to take over somebody else’s municipality. I’m sure he can get a seat on the Newberry City Commission when he’s term limited out of the Fl House.

      • No, the problem is 40% of GRU’s customers are paying for a freakshow they have no say in. We can only hope Clemons continues to help us overlooked deal with tyrants such as you.

      • Read the bill, city municipalities belong to the state and the bill clearly states this it is not taking it from citizens. Read the BIL!

        • Lyn, that’s like saying I’m going to drive your car and live in your house, but hey, you’ll still own it, so whats the problem?

          • No, that would be the “deals” current leaders and some fortunate property owners have made. Homeowner/property owner lives in the house/gets use of the property with conservation protections but no longer liable for the accompanying taxes.

            Thanks for playing.

  • Where has the Republican Party or for that matter any other political party been in putting a candidate forward to change the course of these liberal POS?

  • I’m thankful to have Clay Electric as our utility, and it seems to me that anyone who doesn’t have a vote in the Gainesville City Commission elections should never have been subject to the whims of the City Commission’s GRU influence. The difference between GRU and Clay Electric is stark – utilities can be provided at reasonable rates, as long as the main goal is providing utilities at reasonable rates. The City Commission has not had that goal for GRU, at least not for a long time. Thank you, Len for another helpful article!


    Look up the salaries of all government employees. YOU will be surprised!

  • The Doctors of Evil, Mayors and Commissioners past and present ,chickens have come home to roost. Leave it to them to turn a Golden Goose into an Albatross . They have no examples of success to present to crawl out of the financial hole they have created with all their LaLa Land “What if’s” .The more discoveries and research that comes out it seems to lead towards suggesting “Reparation’s” may be in order to all GRU County Customers as a requirement for their upcoming Exit Strategy on the horizon which is bleak . Is total disregard for financial consequences by this group a Crime?

  • Ownership is 9/10s of the law and the city owns GRU, not the state, Chuckie Clemons, or you if you don’t live in Gainesville. If the citizens want to divest themselves of it they can, just like I can sell my business if I want and there’s a buyer. In the meantime, GRU and I can use profits how we wish. If you’re a GRU customer and not in the city sue them, file a complaint, or move. Keep in mind that Duke and FPL don’t ask customers what to charge.

    You ended with:

    “Ideally, the solution to GRU’s problems would not require a governor-appointed board. The real solution is for Gainesville citizens to elect rational politicians who know the proper role of a municipal government rather than a bunch of activists looking to fundamentally transform our entire society. Unfortunately, Thomas Jefferson was correct when he said, “The government you elect is the government you deserve.”

    OK, obviously Gainesville – and every government in a democracy – gets the government they deserve and nothing Jefferson said indicates he favored the hostile takeover you prefer.

    • You’ve been here long enough to know both the city and county commissions handpick people to fill any vacancies on any board. Those individuals fall in lockstep with those who appoint them and prescreen any proposed local governance.
      ~See Charter Commission

      If it makes you feel better though…https://youtu.be/-9nXBGn9pDQ

      • Not sure of your point and how it is in response to my post, but having served on some boards, many to most of those who apply for advisory boards are not necessarily known to the commissioners and the boards quite often do not endorse staff positions.

    • Jazzman: ‘Ownership is 9/10s of the law…’

      There is no such law. The city is not immune from state legislative action on behalf of the residents’ and states’ interest. The state constitution is very clear on that.

      Jazzman: “If you’re a GRU customer and not in the city sue them, file a complaint, or move.”

      Under Florida law, the city enjoys sovereign immunity from personal lawsuits even under RULE 9.130’s appellate reviews which are not directly injury related. It’s a good law protecting city – taxpayer – coffers from extended litigations.

      So, successfully suing the city in re GRU – that is, legal recourse – is not an option.

      County residents do not have a vote in city council races. There is a representation issue there.

      Complaints have been filed (cited by JLAC) and presented to the City Council in open session. No change has been made.

      ‘Move?’ Is this option suggesting only people who can afford the high GRU bills live in Alachua County? Gentrification is a solution to high GRU bills?

      Jazzman: ‘….and nothing Jefferson said indicates he favored the hostile takeover you prefer.’

      The Founders did not contemplate the corporate world today, but Jefferson did lobby for the Bill of Rights to include “restriction against monopolies.” Nothing Jefferson said….ok, let’s stop it right there. What anyone doesn’t say is evidence of nothing.

      Instead of all that which goes nowhere except keeping things as they are, fixing the GRU debt-to-capitalization ratio within existing statewide standards with more aggressive paydown and city budget austerity is both a reasonable and beneficial solution to all GRU customers regardless of their political philosophies.

      • It’s “possession” is nine-tenths of the law. That means you get in trouble if the gun is found in your locker or the dead body is found in your basement, etc. Jazzman is making things up as he goes along.

        • I thought “ownership” meant it belonged to the “owner”? Quite comparable to “servitude” one could argue.
          In either case, most of us know who “owns” Jazzman.

      • Sorry 2by, but when I was in school the post-modernist relativism you are preaching here wasn’t a thing, so forgive me for not following your argument. In this case there is of course more than possession of GRU by the city, and while the state does have power to bulldoze localities along with the will of it’s people and for the 1st time in modern history, Florida has a Governor and a lapdog legislature who loves to disenfranchise voters, in past times respect for localities and even private businesses kept this worst impulses of bully’s like DeSantis in check. He’s even trying to take over the direction of private businesses – and the most successful in Florida history and the reason Orlando is known further away than Valdosta for something more than orange juice – when he hasn’t run a business since he sold chocolate bars for his HS baseball team.

        So somehow you find this not only OK, but recommended, and I assume like most here consider yourself conservative – am I wrong and does that explain it? Hate to use the overused term fascist, but by MW that ” stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.” That sounds closer to what you are advocating based on the complaints of utility customers – gee, that’s a 1st and I’m sure never heard anywhere else in Florida or the nation. I was going to say, can’t we agree that like the Tennessee House expelling representatives who got rowdy but not physical, taking over possession and control of an entity – no, not the Tampa DA’s office, not Disney, not local school boards, not the state university system, not New College – because some customers think they are paying too much and because obviously the citizens of Newberry have such deep concern for their brethren in Gainesville is an over reaction hiding other motives? No, I doubt you will agree to that, even though that is what this is and surely you do know that.

    • The annual kickbacks of late has far exceeded any so called GRU profits. The City scheme has been exposed. Not sure if what they have done is legal, but they are done with any authority over GRU and its wallet real soon, thank goodness . These guys are so far over their head in managing anything. They could not even manage a Parking Garage. Cookie Jar is closed

    • “Ownership is 9/10s of the law”

      That phrase right there is something my very uneducated father likes to say. You know what? He’s wrong and so are you. I’m glad you were nice enough to oust yourself.

  • There is a certain degree of political bigotry which promotes the perception the ‘other party’ never acts in the voters’ interest.

    While it is not a politically wise tactic to attack voters (remember the ‘intolerables?’), it is helpful to place the costs of voters’ choices against those being considered by the ‘other party.’

    That doesn’t mean one must drink red or blue kool aid, but it does mean a clear and present abuse of GRU-City financial relationships – at great cost to customers – needs surgical attention.

    Ironically, the high GRU bills should unite voters to that end rather than give the mayor and council any support for the status quo. Consider the utility bills for half of the term of a 20-year mortgage and the interest rate on that city debt. That interest is being passed on to the GRU customer.

    Resistance to state action is akin to refusing conservative fire department help with a burning house. The city, as Len points out, is happy to keep the GRU/City debt fire burning for 10 more years with no plan for reformed structure other than claiming they are in compliance with JLAC.

    Does all this resemble the governance of a ‘world class city’ or a facade of a political piggy bank funding the generation of fear of the ‘other party?’

    The politicians run for office every few years. The GRU bills come every month.

    • 2by, you understand that the fire department leaves eventually, right? I mean maybe a “conservative fire department” doesn’t but you’ll have to explain that.

  • Oh man, Len. You nailed it, but the wailing shrieking Democrat social justice warrior citizens of Gainesville still do not seem to get it. Here’s hoping the new oversight plan will be put in place over the protestations of our local citizenry.

    • Yeah, Chris I cannot understand either why voters wouldn’t welcome a kangaroo board chosen by guys who couldn’t get elected dog catcher in their town. I think there should be parades and flags to welcome them, you know, like Baghdad in 2003.

  • GRU was being misused to generate poverty for 15 years. Nobody in power noticed because they were elected by 3% of the population, and many campaign donors who are in the poverty industry welcomed a growing demand for their job security. Either intentionally or unwittingly, it’s unacceptable now.

  • Only in Gainesville can a utility advisory board member simultaneously operate a local solar contracting company
    while advising the City, as chairman of the UAB, to increase its solar generation capabilities and solar-related subsidies. I’d understand if he held a non-voting seat on the board…but chairman!? Incestuous government never ends well.

  • This scheme would have never lasted so long if they weren’t dumping so much fluoride in the water supply.

  • Unfortunately, there are too many smart people who believe in debt to fund social welfare programs to correct this train wreck. Just examine the personnel costs compared to total City Revenue. Significantly higher than any other city in Florida.

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