Concern about HB 1645 leads GRU to spend an extra $2.9 million on bond issuance
BY JENNIFER CABRERA
GAINESVILLE, Fla. – The Gainesville City Commission approved a bond issuance at their June 15 meeting that cost an extra $2.9 million over three years because the top-ranked bank wanted to wait until HB 1645 is effective on July 1 and GRU wanted to issue the bonds before July 1.
Mark Benton, Gainesville Regional Utilities Director of Accounting and Finance, told the commission that GRU needs to issue $155 million in bonds to fund capital projects and that the resolution before the commission also authorized GRU to draw from an existing $150 million line of credit if the bonds don’t go through for any reason. Benton said, “This is simply business as usual; we’re at the end of the construction funds cycle. We’re low on construction funds; the proposed bond issue is to replenish those funds.” Benton said the new debt was included in GRU’s Debt Reduction Plan, which promises to reduce GRU’s debt by $315 million over the next ten years.
Benton said GRU’s financial advisor, PFM Financial Advisors, solicited proposals for $155 million in bonds from 15 banks in January, and seven banks responded; the intent at that time was to bring the bond issuance to the City Commission and close the transaction in April.
Barclays Capital had the top-ranked proposal; however, Benton said, “On a parallel track, the governance bill was moving through the Florida Legislature and created a great deal of uncertainty about GRU’s future governance. As a result of that, GRU was asked to delay the bond issue soon after June 1.”
However, on May 11, Barclays notified GRU by email that the bank was not willing to close before June 30: “We would propose a tentative pricing/closing timeframe of the week of July 10th after the proposed legislation becomes effective. We have concerns about the potential reaction of the future Authority if the new money bonds are closed right before its formal adoption.”
Benton said GRU needed the transaction to be completed before June 30 because it is running low on construction funds, the swap underlying the bonds has an effective date of July 1, and “there remains an absence of clarity regarding aspects of GRU governance between the effective date of the pending legislation on July 1 and the installation of the board on October 1.”
GRU decided that Barclays was “no longer a viable option” and selected TD Bank from the proposals shown below, at an additional cost of $2.93 million over three years.
Benton said GRU often gets questions about why they issue variable-rate debt, so he explained that the effective borrowing rate of this bond issuance, taking into account the net effects of the swap, is about 3.08%. He said that if GRU issued fixed-rate bonds right now, the interest rate would be close to 4.3%, which would cost another $1.8 million.
In response to a question from Commissioner Bryan Eastman, Benton clarified that the ambiguity that drove the decision to use TD Bank was “ambiguity as to who is authorized to approve a bond issue between the time period of July 1, the effective date of the bill, and October 4, when the proposed board would be installed.” Benton also said the extra $2.9 million will be paid by GRU ratepayers.
Eastman made a motion to approve the staff recommendation to approve the issuance of the bonds, authorize GRU to draw on the line of credit if necessary, and amend a previous swap with Wells Fargo for tax purposes; Commissioner Desmon Duncan-Walker seconded the motion. The vote to approve the motion was unanimous.
Running low on construction funds or need more money to fund the city
Why in the hell would they take 15 million from GRU for city use if they were low on funds can’t wait until the state takes over and gets a good look at their finances
Great reporting. However, the question still remains; who asked GRU to delay the debt issuance scheduled for April. That delay is what placed the debt issuance in the window of uncertainty.
Appears less than 50% of banks were willing to accept the risks. That tells us about all we need to know about Gainesville leadership and it’s use of funds.
Getting close to junk bond ratings it appears. Hope you liberal voters appreciate that. Then again why wouldn’t you? Many of you think the federal government should forgive your debt. Wacko Saco, talking to you.
Think the liberal knuckleheads care about people? How’s this sound? Benton also said “the extra $2.9 million will be paid by GRU ratepayers.”
Well, well, well, Mr. Bryan Eastman had us thinking that Barclays pulled out of the deal, when here it sounds like GRU or the city couldn’t get what they wanted when they wanted it so they in turn pulled out. AND what is the construction fund for? Is GRU constructing something now, I mean the solar plant will be the solar company not GRU, is it constructing general government projects… oh the questions!
Damn! That “pulled out” thing again. If only that would have happened years ago.
GRU has a massive amount of industrial assets which require refurbishment and upgrading. That occurred in accordance with their 5 year capital plan. There is nothing secret about it. Nothing nefarious. It’s part of a prudent electric, water, and natural gas practices.
The GCC will gladly use any event to obfuscate the fact that decades long incompetence of that body is 100% the cause of the financial difficulty city and GRU now experience.
Nobody would care about any of this if they had not bought the Biomass BS and had run GRU like a valuable community asset and not a golden goose.
Read the facts. He, the GRU analyst, made a financially sound decision, total cost call, in a void of government decisiveness and in the midst of typical general government dysfunction, to avoid another 1.8 m. bill to we the consumers. Don’t loop him in with the general government. He indeed stated facts, not preferences, that we the consumers will pay the bill. This hardly makes him a patsy or part of the left that infects this government. Relative to construction, newsflash, our existing power gen facilities are ancient. Anytime a repair or replacement is needed, reengineering must enter the equation that often entails construction and at a higher cost than that of new construction. We need a new plant, not more bandaids, to charge all the fancy electric cars coming to so many rundown homes. Solar will only go so far. Fedlibs are driving up natural gas prices, there’s no hydropower near, leaving coal and wind to make up the difference. Think the movie City of Ember, enter the current Mayor as the Bill Murray’s Ember City Mayor.
Another spitefully move by the existing regime. Another glaring example of hurry up financial recklessness. Add comrade Benton to the list of inept leadership at the City of Gainesville that need to be fired. They should all be held personally liable for all decisions since 1/02/23.
The Hate and spite at GRU needs to be purged immediately.
There’s a lot more than hate and spite needs to be purged.
Intentional, fraudulent waste of taxpayer money is a common theme with the Gainesville City Commission.
How many times have we seen the taxpayers put on the hook for MILLIONS of dollars because the GCC changed their mind, couldn’t get their act together on time, etc.?
Worst of all they show zero remorse about the wasted millions. Don’t ever believe for a second that these “woke” losers care about anyone but themselves–the way they purposefully burn cash proves they don’t care.
Construction funds? What are you building?
Tower of Babel
No one seems to notice that it will cost an extra $1 million a year by not waiting. Has a $155 million expenditure been presented to the public as part of the Sunshine Law? The interest will be $4.8 million/yr instead of $3.8 million. That is money that will be added to GRU bills.
Running the city into bankruptcy.
Once again, GRU debt reduction strategy is to add the cost to the ratepayer’s bill
Did anyone get a balance foward due from GRU even though your previous months bill was paid 100%? Asking for a freind. GRU Monkey Math is still alive and deceitful.