Gainesville City Commission reluctantly approves GRU financial transactions

BY JENNIFER CABRERA

GAINESVILLE, Fla. – During the evening session of the February 19 meeting, the Gainesville City Commission reluctantly adopted a resolution authorizing a series of financial transactions that were also approved by the GRU Authority on February 18.

Resolution authorizing GRU financial transactions

Mayor Harvey Ward, who said in the afternoon session that he “fully intend[ed] to poke the bear this evening,” introduced the agenda item by saying it was “a fairly straightforward transaction. It is exactly the same sort of thing that the City Commission used to do when the City Commission was running the utility. There’s nothing out of the ordinary with this. You’re refinancing some debt, getting some new debt to build new things that are good for the people of Gainesville, as I understand it, and that is a fairly common thing.”

Ward said, however, that it was “also true that several months last year were spent talking about how much debt had been paid down, when… it’s almost exactly that same level of debt once these transactions are finished… And that’s frustrating, because that is not what the rhetoric has been.”

Mayor Ward: “Calling tens of thousands of Gainesville voters and elected officials ‘insurrectionists’ and accusing us of revolt and rebellion in front of a state appeals court is not a business-like way to approach things.”

Referring to the recent oral argument before the 1st District Court of Appeals over the validity of a ballot referendum to return control of GRU to the City, Ward added, “Calling tens of thousands of Gainesville voters and elected officials ‘insurrectionists’ and accusing us of revolt and rebellion in front of a state appeals court is not a business-like way to approach things… I’m not going to let that affect how I vote on this, because it’s good for the people of Gainesville to move forward with this… [We need to] get to a place where we can act like business folks, where we can send each other letters and answer those letters as boards… I am hopeful we can start leaving rhetoric and name-calling aside and move forward with some level of business-like decorum until the courts sort this out.”

Dual approval reassures the bond markets

City Attorney Daniel Nee said that the City’s Charter grants the power to issue debt to the GRU Authority, and the Authority approved the same resolution on February 18 and requested that the City Commission approve a concurring resolution “verifying that that power is appropriate and verifying that the issuance of these financial transactions is not contested and is, in fact, authorized by the City Commission, as well.”

Commissioner Bryan Eastman thanked GRU staff for sitting down with individual Commissioners to explain the transactions and added, “It’s incredibly important to this Commission that the credit-worthiness of GRU is maintained at the highest level.” He asked about the $150 million in new debt that was included in the transactions.

GRU Director of Accounting & Finance Mark Benton said the new money will replenish the utility’s capital funds and will be used over the next few years for a list of projects from GRU’s Capital Improvement Plan. He said, “A good portion of these projects are related to our water and wastewater system, our Main Street plant. It will enhance the capacity of the plant, improve treatment, and upgrade some aging infrastructure.” Benton showed the projects on the overhead, and screenshots can be found at the bottom of this article.

In response to a question from Commissioner Casey Willits, Benton said the $150 million in new money will cover the utility for about three years, and the last time they issued new money was in 2023; he said the utility also uses just over $40 million a year from its Utility Plan Improvement Fund and additional grant money to pay for capital projects. Benton said the goal is to have a 50/50 split between debt and equity for capital projects, but “it’s a little bit less than that because the [cost of the] Main Street plant has moved up a little bit over several years.”

A 50/50 split between debt and equity was one of the assumptions in the City Commission’s 2023 debt reduction plan for GRU; click here to read more about that plan.

Commissioner Willits: “Was the GRU Authority negligent in rate-setting the past two years, and that’s why the GRU Authority doesn’t have enough funds to maintain the system with the 50/50 split?… Sorry, that was a rhetorical question. I take it back.”

Willits asked whether the $30 million shortfall in getting to a 50/50 split was whether “the GRU Authority [was] negligent in rate-setting the past two years, and that’s why the GRU Authority doesn’t have enough funds to maintain the system with the 50/50 split?” When Benton started to respond, Willits interrupted, “Sorry, that was a rhetorical question. I take it back.”

Benton said, “Since you went on the record, let me go on the record. The GRU Authority was not negligent in its rate-setting the past three years.” In a response to a subsequent question about the amount of new debt approved by the City Commission in 2023, Benton said it was $151 million.

Commissioner Ed Book said, “Doing this is really in the best interest of Gainesville ratepayers, Gainesville citizens, both organizations, and so that’s where my vote always will lie, doing that.”

Mayor Ward: “I don’t want anybody thinking that we’re up here just trying to see what rocks we can throw into the system. That’s not what I’m doing. It’s that we are borrowing half a billion dollars, and we ought to take it very seriously and ask whatever questions we can think of.”

Ward said he wanted to draw attention to the fact that the utilities are owned by the City of Gainesville, and “that means the people of Gainesville are on the hook of $1 of borrowing or $550 million or so of borrowing, and that means that there has to be approval by somebody who represents the people of Gainesville, and that’s us… I take $1 seriously or half a billion dollars seriously, and I don’t want anybody to miss the fact that we’re talking about half a billion dollars… I don’t want anybody thinking that we’re up here just trying to see what rocks we can throw into the system. That’s not what I’m doing. It’s that we are borrowing half a billion dollars, and we ought to take it very seriously and ask whatever questions we can think of.”

GRU Director of Accounting & Finance Mark Benton: “For the folks who are out there listening, I want to make it clear, there is $150 million in new money… The other issuances are simply taking old debt off the books and replacing it with new debt. We’re not increasing GRU’s outstanding debt by half a billion dollars.”

Benton said the debt issuance includes the refinancing of “somewhere on the order of $430 million” in existing debt plus $150 million in new money: “We’ve used the term ‘$500 billion of debt.’ For the folks who are out there listening, I want to make it clear, there is $150 million in new money… The other issuances are simply taking old debt off the books and replacing it with new debt. We’re not increasing GRU’s outstanding debt by half a billion dollars.”

Ward interrupted, “I am not trying to insinuate that we’re borrowing all that new money.”

Benton emphasized again that this sort of financial transaction is “straightforward GRU business,… done by prior [City] Commissions, done by GRUA… The new money issuance was contemplated in the original Net Debt Reduction Plan that the City Commission approved back in 2023… We will be back in the markets in another three years, and those recurring new issuances are included in that debt reduction plan and the analysis that we put together [in 2023]… for reducing debt over a long-term period.”

After Chuck Ross and Jim Konish spoke during public comment, Ward said, “That is wild, that there are two speakers on a half a billion dollars’ worth of debt.”

Commissioner Eastman: “I’ll point out that the debt that we have at GRU is primarily because of, I would say, undisciplined long-term energy planning. I mean we had an Integrated Resource Plan that had us go a certain direction — sort of went off, did a biomass plant, that was expensive.”

Eastman said, “I’ll point out that the debt that we have at GRU is primarily because of, I would say, undisciplined long-term energy planning. I mean we had an Integrated Resource Plan that had us go a certain direction — sort of went off, did a biomass plant, that was expensive.” He went through the list of GRU plants that are scheduled to be retired over the next 10 years and said, “That has just been kind of lingering out there — How do we pay down the debt? How do we make sure that we can produce enough electricity?” He said he was concerned that only about 10% of the $150 million was going to electric energy production, “and that’s just extending out Deerhaven 1 by a couple of years… Is there a plan at some point to get back to standard resource planning in the future?”

Benton said, “I will tell you that our electric system folks, from our officers to our Chief Operating Officer to our CEO, take their jobs very seriously. They look at it from a very professional aspect. So I would be surprised if we were not following acceptable standards for our energy planning. I’m not an energy planner, so I’m not going to stand up here and defend it, but I feel pretty comfortable that yes, those things are being followed.”

Commissioner Eastman: “That leaves me in a place where I either, you know, vote no on it, and then you guys don’t have the money, which is a doomsday scenario that we can’t be in, or I vote yes on it, and I’m putting my name to a series of capital projects that I think are very financially harmful to the utility.”

Eastman said he “would love to see real hard thinking as to — how does GRU intend to produce inexpensive electricity for our ratepayers for the next 20 or 30 years?… I feel weird putting my name to a series of capital improvements that… is coming out of an integrated resource planning process that I don’t think is disciplined or thoughtful… That leaves me in a place where I either, you know, vote no on it, and then you guys don’t have the money, which is a doomsday scenario that we can’t be in, or I vote yes on it, and I’m putting my name to a series of capital projects that I think are very financially harmful to the utility.”

Motion

Book made a motion to adopt the resolution, and Commissioner Cynthia Chestnut seconded the motion. 

Willits said he shared Eastman’s discomfort with the integrated resource planning process, but “a big chunk of this is for wastewater, you know, Main Street. So some of this is just the normal — we have a very big utility. It’s not all electric, right?” He said that extending the life of the existing plants is “kicking the can down the road… We do it all the time… Now everyone is rapidly doing IRPs to understand whether electricity is going to be there in the new world of increased usage, more variability, data centers. I don’t think we’re going to have a data center. I’m sure GRU is not expecting a data center to come and suck up a lot of power.”

Commissioner Ingle: “I heard local representatives and pro-Authority folks and eventual members of the Authority constantly talking trash about the City Commission and its individual Commissioners about how they would raise electrical rates”

Commissioner James Ingle said he shared the other Commissioners’ belief that the GRU Authority is “not doing anywhere near enough to address the fact that we are not going to be having reliable power, going forward.” He said “local representatives and pro-Authority folks and eventual members of the Authority” had been “constantly talking trash about the City Commission and its individual Commissioners, about how they would raise electrical rates, about how they would take on more debt, and I cannot think of anything that was more sadly predictable than the GRU Authority raising the cost of electricity and taking on more debt.”

[Editor’s note: The only increase in electrical base rates since the Authority took over in 2023 has been an increase of an average of $5.52 per month in FY2025 for the top 17% in electricity users, with all other users paying the same or less because the rates for usage between 850 kWh and 1,000 kWh dropped by 25% (see the table below for the changes at various usage levels). The City Commission passed a resolution in 2021 that is still active and would have increased electrical rates by 3% per year through 2027.] 

Ingle continued, “I think that whether or not we vote for this, they’re going to move forward with generally the same plan… I think that us not signing onto this brings a lot more risk,… and risk means higher cost, when you’re looking at bonds. So while in my heart I would love to go tell them to just kick rocks, I don’t feel that it is right for the ratepayers at GRU or the people in the city of Gainesville to put this extra burden on them.”

Ingle continued, “But again, I think this money is being misused. And I think the sad predictability of people talking about how it was mismanaged, not understanding how utilities work, stepping in and mismanaging it, was just what was obviously going to happen with this, and I think that is one of the many reasons this community has been consistently against the idea of this unqualified independent Authority running our utilities. So I’m a yes on this, despite that.”

Ward again emphasized that the capital projects are more on the water/wastewater side than the electric side, “and I am consistently more concerned about our water and our wastewater system than I am about our electricity… With all that said, I don’t think we have a lot of options here… I know some folks are not going to be pleased with us voting affirmatively on this, but I believe this is the thing that keeps our water and our wastewater flowing the way they’re supposed to flow, and the power coming on when you flip the light switch and the natural gas working, etc., etc.”

The motion passed 6-0, with Commissioner Desmon Duncan-Walker absent.

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Slides showing the planned capital projects: