Gainesville City Commissioners delay approval of resolution giving GRU Authority the ability to renew and extend lines of credit

BY JENNIFER CABRERA

GAINESVILLE, Fla. – Today the Gainesville City Commission named Cynthia Chestnut as Mayor Pro Tem for 2024, approved a contract for new City Auditor Stephen Mhere with a salary of $160,000, and pushed back on several items requested by the GRU Authority before eventually delaying one of them and approving the other.

The City Auditor contract was on the consent agenda and was not discussed; the employment contract was not posted in the agenda backup, but a note said that the base salary would be $160,000. Mhere’s start date will be February 6, 2024. The range for the position was $145k to $188k, with the consultant recommending a salary between $150k and $160k.

Mayor Pro Tem

Mayor Harvey Ward said the tradition is that the commissioner with the most seniority, who has not served as Mayor Pro Tem, should become the Mayor Pro Tem. Commissioner Bryan Eastman moved to nominate Chestnut, and the vote was unanimous, with Commissioners Desmon Duncan-Walker and Reina Saco absent.

GRU Authority Resolution for Extension of Liquidity Facilities

The Commission also took up a request from the GRU Authority that the City Commission adopt a resolution to authorize GRU to enter into certain liquidity and credit facilities so GRU can renew and extend lines of credit. Under the City’s charter and Florida statutes, the City Commission is the body that has the authority to approve such resolutions on behalf of the Authority, and the City’s charter holds that “The City and the Authority shall perform all acts necessary and proper to effectuate an orderly transition of the governance, operation, management, and control of all utility systems, properties, and assets held in the possession of GRU as of January 1, 2023, to the Authority, including, but not limited to, the creation of such instruments as are necessary for the Authority to function in accordance with this article.” City staff recommended that the City Commission adopt the resolution.

City Attorney Daniel Nee said that the resolution interprets language in the original bond resolution to make it clear that references to the GRU General Manager in the original resolution apply to the position that is now referred to as the CEO/GM of GRU; Nee said the resolution did not give any new authority to the CEO/GM.

GRU Director of Accounting & Finance Mark Benton said that Barclays had requested clarity about whether the Authority has the ability to operate under the existing bond resolution, so “this language is going to address, specifically, Barclays; it also will hopefully address any other issues that might come up from counterparties wanting clarity as to how the law has impacted the Authority’s responsibilities.” Benton said that approving the resolution would mean that GRU didn’t have to keep coming back to make the same request for every future transaction.

Inability to renew liquidity facility could lead to credit downgrades

Benton also said that GRU needed to start the RFP process this month for a liquidity facility that is expiring in May 2024. He said the downsides of not being able to renew or replace liquidity facilities would be “significant… [If] we can’t get them renewed, we are going to have to come up with $105 million in cash by May of 2024.” Benton said if they had to do that, “it’s very likely that we will be downgraded by all three [credit] rating agencies.”

Eastman said a GRU credit downgrade would also affect the City’s ability to borrow funds and added that his concern had to do with a clause in the resolution that said the GRU Authority “is delegated all authority to take all actions on behalf of the City under the bond resolution.” He said it “seems like a much broader delegation of authority.”

Benton said it is intended to cover other financial transactions, as well, “but basically… our counterparties are looking for assurances that the Board has the ability and it has the authority to operate under the terms of the resolution.”

Banks question whether the Authority can comply with bond resolution requirements

Mike Wiener from Holland and Knight, GRU’s bond counsel, said Barclays had “repeatedly” asked whether the Authority has the powers to comply with the requirements of the existing bond resolution. 

Eastman said he was still uncomfortable with how broad the resolution was: “I just want us all to be thoughtful about what kind of precedent we’re creating in this.”

Commissioner Casey Willits asked Nee, “Is it your opinion… of this resolution that it does not violate the provisions of the amendment that provides the Authority ‘shall be free from direction and control of the City Commission’?”

Nee said, “Yes, and that’s why we brought it forward… in order to facilitate this, you know, this effectuation of this transfer of governing structure, which was provided for in Section 16 of the Master Bond Resolution.” In response to a question about whether the approval is within the role of the City Commission, he said, “The City Commission, I think, can feel safe that [the resolution] has been specifically requested by the Authority in order to help facilitate this change on behalf of the City.” He said the charter “now instructs that ‘the City shall do all things necessary… to facilitate the change in governance,’ and this is the City Commission trying to assist in that role at [the Authority’s] request.”

Chestnut proposes delaying the vote until January

Chestnut said, “Usually people would come and meet with us and discuss these issues. I have a family matter I have to deal with at 2:00. I would prefer not to vote on this today. What is your absolute drop-dead date? And don’t tell me it’s today or tomorrow.”

Benton said if it couldn’t be done today, it would need to be done at the first meeting in January. 

Ward said this transaction is something the Commission would have done if they were still running the utility. He asked Chestnut if she would like to take a 15-minute recess to privately talk to Nee, but she declined. Ward said he would be “a lot more comfortable getting this done sooner,” but he couldn’t make a motion as the Mayor.

Eastman said he was “incredibly uncomfortable” with the “broad delegation of authority” in the resolution and preferred voting in January. 

Willits: “A little shocked… that no one from GRU reached out to me”

Willits said he was also “a little shocked that no one from GRU Authority or GRU staff requested to meet with me… I’m a little surprised, on something that sounds like, from the language, is so vitally important that no one from GRU reached out to me, as a voting member who needs to pass this resolution… If it wasn’t urgent enough to speak to me… then I don’t see why this can’t wait until the first meeting in January.”

Eastman said it was possible that someone from GRU could convince him that the broad delegation of authority is “really important… But I need to sit down and hear that from someone before I’m comfortable doing that.”

Chestnut: “I am quite insulted”

Chestnut said, “Perhaps someone from GRU will have the time to come and sit down and go through this with us [before the first meeting in January], but I am quite insulted – quite insulted – that no one thought it was significant enough to come and sit down with the City of Gainesville and its 140,000 citizens and explain to us what this is about. So I don’t want to do this before Christmas. No, let’s do it in January.”

Commissioner Ed Book asked whether the broad language could be removed, and Nee said, “I will tell you that the intent of the entire resolution is to effectuate the transfer of governance provided for in the prior bond resolutions, as required by the amendment to the charter… I think that delegation… is something that needs to be done.”

Book added, “I can’t speak for my colleagues, but nobody up here is attempting to do anything that would thwart anything from HB 1645. So that’s very important… But we also need to make sure that we’re not doing more than we’re supposed to.”

“I don’t think we want to have every debt action taken by the GRU Authority be approved by this board, as well, going forward. And if we do want that, then that’s probably going to spook some of the lenders because that’s multiple levels of things that could go wrong.” – Mayor Harvey Ward

Ward said, “This [resolution] is exactly what I thought we would be getting–one action on our part that helps make it a smooth process for the GRU Authority and their CEO/GM to be able to continue to do business as usual… I don’t think we want to have every debt action taken by the GRU Authority be approved by this board, as well, going forward. And if we do want that, then that’s probably going to spook some of the lenders because that’s multiple levels of things that could go wrong.”

Ward asked whether anyone from the public wanted to comment, but nobody wanted to speak.

Willits said he didn’t have Eastman’s “trepidation about the individual language… but I’m still a little confused on the urgency… I’m very confused why the CEO of GRU Authority or board members or other staff assigned by the CEO didn’t reach out to me to see if I had any questions… It is just a little weird.”

Chestnut: “Perhaps someone will have the time to meet with us”

Chestnut said Nee’s answers to their questions were “not very clarifying… I just think we need to put a motion on the floor to hear this in January… And during that time, perhaps someone will have the time to meet with us to go through it.”

Motion to table the resolution until early January

Eastman made a motion to “table the resolution to early January, pending further discussion, with a review from our City Attorney to bring an option that removes the broad delegation of authority above and beyond what is necessary for the approval of the May expiration of liquidity facilities.” Chestnut seconded the motion.

The motion passed 4-1, with Ward in dissent and Duncan-Walker and Saco absent.

The resolution is currently scheduled to come back on January 4. 

Nee: There is no confusion about what needs to be done

After the vote, Nee said, “I regret if there was anything that I conveyed that led you to believe that there was any confusion of it. This resolution is designed to effectuate the transfer of authority required by the legislative charter and contemplated by the bond resolutions passed by the City Commission, prior to that amendment to the charter… I understand that the Commission wants to and has decided to delay consideration of this resolution, but I hope it’s not out of concern that there’s confusion between our office and that of the utility or bond counsel as to what needs to be done to effectuate the fulfillment of the charter requirements, the bond resolution requirements, and the demands of the debt portfolio. Again, I understand that they desire further education and interaction more directly with members from the utility system, and I will do everything we can to facilitate that.”

Estoppel agreement for sale of Trunked Radio System

Eastman had also asked to pull from the consent agenda an estoppel agreement regarding the sale of the Trunked Radio System to Alachua County. Although Nee has consistently held that the system is not subject to the charter provision that requires a voter referendum before utility assets can be sold and Eastman and other commissioners have previously voted to move forward with the sale, Eastman today asked if approving this now would “set a certain precedent that could be used in case of a sale of other portions of Gainesville Regional Utilities… that would then mean that it would not have to go onto a ballot.”

Nee repeated his opinion that the Trunked Radio System is “not an integral part” of the telecommunications system and thus doesn’t require a referendum. He also said he did not think it set “any sort of precedent.” He said the estoppel had been requested by the County to certify that “the Commission itself is not going to take any action to undo the sale.” He said the estoppel agreement is a condition to the actual purchase and sale agreement, which will be coming before the Commission in the near future. 

Eastman: sale of Trunked Radio System is “a gray area”

Eastman said he thought it was “a gray area that our City Attorney has interpreted in a specific way. In hindsight, my preference would probably be that it should go to the ballot, just because I think we’re in a very different place now.” He said the sale, however, is “financially good for the utility system [and] the City of Gainesville.”

Nee said the Use Agreement for the City’s use of the Trunked Radio System after it is owned by the County would also be coming before the Commission. However, GRU Chief Operating Officer Brett Goodman said it needed to be in place before the sale, which they hope to close on December 29. 

City Manager Cynthia Curry said she could execute the Use Agreement if the Commission would delegate that authority to her. 

Motions

Willits made a motion to approve the estoppel agreement, and Eastman seconded it. The motion passed unanimously.

Eastman made a motion to give the City Manager the authority to execute the Use Agreement, and the motion passed unanimously.