GRU Authority selects search firm for GM/CEO, hears public comment on reducing general fund transfer

BY JENNIFER CABRERA

GAINESVILLE, Fla. – At the January 3 GRU Authority meeting, the board heard public comment on reducing the general fund transfer but did not make any decisions on it, heard a presentation on GRU’s debt, selected a search firm for a new GM/CEO, and decided against a joint meeting with the Gainesville City Commission.

Carter addresses rumors, says general fund transfer is not on the agenda

At the beginning of the meeting, Chair Craig Carter said he wanted to do “rumor control” on several topics. He said, “The University of Florida does not get free electricity, and they don’t get free water. They’re one of our largest customers at approximately $36 million a year for electricity… Also, I met with some of the union members today… We’re told a lot of our employees are listening, and we just want to assure our employees… [that] we love and respect you. We know there’s some uncertainty, and we’re trying to get certainty as soon as possible… to make sure that you have your pension in place, that you have your job, that we can’t do this without you.”

“[W]e understand that you’re passionate about certain organizations and certain things. That’s not one of the things that we take into consideration.” – Chair Craig Carter

Carter also noted the number of people in the room and said, “You were told we were going to be discussing the general fund transfer, and we’re not tonight. That’s not on the agenda. And also, we understand that you’re passionate about certain organizations and certain things. That’s not one of the things that we take into consideration. Quite frankly, we run this as a business. That’s something the City does. We don’t collaborate on projects outside of the utility, quite frankly… So I just wanted to clear the air about it because there was an email that went out, and it told people how to write letters, and that’s why I got so many of the same emails.”

Carter said the emails stated that he and Member Eric Lawson are “the pushovers.” He said Member Robert Karow is “not a pushover at all,” and Member James Coats is “gonna have to be worked on a little harder.” He added, “I’m gonna have to be tougher now, I just found out.”

General public comment

During general public comment, Jim Konish urged the Authority to immediately “cut off the direct transfer, to recover the full cost of the services you provide to the City of Gainesville – immediately – and the $250 [thousand] for Akerman and the cost of the bond validation and [City Attorney Daniel] Nee’s $228,000 salary, apportioned out to ratepayers, to have this board thwarted.”

Debbie Martinez said, “It appears the City is threatening the GRU Authority that if they cut their general fund transfer, they will have to cut funding for police and fire services. There’s plenty of fat in the City budgets to cut, between the charter officers and City executives receiving San Francisco-style wages and seven years of expanding City government for things they want but cannot afford without having to cut funding for police and fire. It’s not your job to bail out the City Commission.”

Kim Popejoy said, “Jesus, and others, teach us that we’re to care for those that are disadvantaged, those that are the least amongst us. The citizens of Gainesville, through their elected representatives, have practiced this principle for decades… Our GRU–it’s owned by the City–has contributed to the practice of those principles by taking some of their net positive cash flow and providing it to the General Services Contribution.” He said the “one goal and one goal only” of HB 1645 was to “make GRU cheap.”

Janice Garry, President of the League of Women Voters of Alachua County, warned that fire and police services and road maintenance are “paid for in part by the GRU General Fund Transfer” and said the League has been concerned about the creation of the Authority and “now the sitting of an incomplete board with members who do not live in Gainesville, are all breaches of democratic process, respect for the intent of laws, and home rule… We ask that you respect part of the purpose of a municipal utility and not further reduce the financial contributions by the utility for City services.”

Robert Mounts said, “Over the past year, Mayor Ward, in particular, has gone out of his way to reach out and try to make this process work, even though it’s flawed… Serious cuts were made last year by the City Commission… We have to try to live together, work together, make the process work in a nonpartisan way, and cut the blame game.” He said the City has “gone more than halfway” by cutting expenses, “and I hope you will meet them there.”

Jane Kupfer, Director of Shelter Services at GRACE Marketplace, said if the general fund transfer is cut, “significant services would be lost… What GRACE Marketplace does is for the most vulnerable in our community. People experiencing homelessness is an essential service… We would probably have to make some major cuts and kind of revisit some of the work that GRACE is doing–and it is amazing work.”

Sarah Younger from the Suwannee-St. Johns Sierra Club asked the board “to commit tonight to not cut the Government Services Contribution to the City of Gainesville, as it is an unsettling proposition to both the residents, businesses, community organizations, all that rely on this transfer… The consequences will be dire for both the City staff and the citizens of Gainesville… Resolving the GRU debt by reducing the City budget and reducing services to the citizens of Gainesville is a dreadful way to resolve this concern.”

Bob Chewning said, “GRU has been used as a piggy bank for the City for decades, and you, this board, was created to fix that. You’re not the people to come to and say, you know, ‘Keep sending us money.’ That’s not your responsibility.”

Tyler Foerst said, “Police and fire make up over half of the City’s budget, and they were largely spared the first time; it’s hard to see that happening again, should you choose to cut the GSC. Have no doubt, you will be responsible for cuts that are made after that.”

A woman who introduced herself as Natalie also urged the Authority to maintain the level of the GSC, saying, “I urge you to think about GRU’s role in the larger Gainesville community, and I hope you will keep all of Gainesville’s best interests, all of our citizens in mind, as you make further decisions regarding this funds transfer.”

Following public comment, Carter offered the other board members the opportunity to make comments since the general fund transfer was not on the agenda. Carter said that under the law creating the Authority, “our job was not to look into that, it was to run this utility as a company.” He said he has volunteered at GRACE Marketplace, but “we can’t put our compassionate hat on here, unfortunately… We are in a very bad situation, we’re three times over our debt. So what we’re trying to do is get this ship righted… For right now, we have to pay our debt… What the City does with whatever transfers we send to them, that is their business. We are charged with reducing debt as much as we can.” Carter agreed that Mayor Ward had been “great” so far.

GM/CEO remarks

Following the adoption of the agenda, GRU GM/CEO Tony Cunningham said Scott Walker, the board’s interim attorney, was sitting at the dais with the rest of the board and that a contract will soon be in place with his law firm; a Request For Proposal (RFP) for ongoing independent attorney services has been issued, and responses will be evaluated in February. Cunningham said an RFP has also been issued for liquidity facilities, following the City Commission’s Special Meeting to approve the necessary bond resolution. A third piece of good news, he said, was that the sale of the Trunked Radio System to Alachua County closed at the end of December.

Cunningham said the board will get an introduction to the Integrated Resource Plan, which will identify future power generation options for the utility, on January 17 and February 7. He said his staff will also be bringing the board several different options for the Government Services Contribution on January 17, “with a recommendation of reducing the Government Services Contribution for those services that are not being directly provided… So the next couple of meetings are going to be very consequential and very important for this year, as well as the years to come, for the utility.”

“We need to make a decision sooner than later about whether or not we’re going to stop or curtail [the Government Services Contribution]” – Member Robert Karow

Member Robert Karow said, “We need to make a decision sooner than later about whether or not we’re going to stop or curtail that; we can make a decision, perhaps later, about clawing back if we so desire. But, you know, I lean towards not waiting about making a decision about that.” He said the topic needs to be on the agenda at the next meeting. Karow said his term is only for a year, and he’s already four months into that. Cunningham said his staff would be ready on January 17 to bring recommendations to the Authority.

Karow asked how often utility rates can be changed, and Cunningham said changes have traditionally been made at the beginning of the fiscal year, “but I don’t think there’s anything that restricts us from doing it more often.” However, Cunningham cautioned that the Authority would need to “look at our overall financial picture” before reducing rates.

About 30% of GRU’s budget goes to debt

During a presentation about GRU’s debt portfolio,  Director of Accounting & Finance Mark Benton said that GRU has $1.813 billion in debt, and the combination of debt service and debt defeasance makes up almost 30% of GRU’s budget. Benton said, “Those are figures that are not in line with other municipal utilities.” Benton said GRU’s debt-to-revenue ratio is about 4-to-1, while most municipal utilities are somewhere between 1.5-to-1 and 2-to-1. The topic was informational-only, so no motions were made.

Selection of search firm for GM/CEO

The next agenda item was about the search for a permanent GM/CEO of GRU, and Carter said he wanted Member Eric Lawson to lead the search but gave him time to “percolate” on that before making a decision. Yvette Carter, Chief Inclusion Officer at GRU, said the board could use Baker Tilly, a search firm that already has a contract with the City; GRU’s procurement office could hire a different firm; or GRU could issue a Request For Qualifications or Request For Proposal, which would take a few weeks longer. The first two options are expected to take about five to seven months. 

Craig Carter thought it made the most sense to select Baker Tilly “if we’re going for speed,” but Yvette Carter said the first two options have a similar time frame. Coats asked whether Baker Tilly had selected the City’s current charter officers, but nobody had an answer for that question. 

After more discussion about the options and the search firms that could be hired without an RFP, Coats made a motion to move forward with Mycoff Fry Partners, which specializes in executive searches for utilities and has previously been used by GRU. Karow seconded the motion.

During public comment on the motion, Jim Konish suggested that the Authority create a “Blue Ribbon Utility Advisory Board” to take advantage of expertise in the community. He also suggested appointing an interim GM/CEO “so you don’t have to rush to find people that are not going to falsify official records, conceal the amount of the transfer, and intimidate the executive team.”

Nancy Deren said it would be a “grave mistake to act with haste to start a national search for a new General Manager” and that the Authority should give Cunningham the year Carter had mentioned in a previous meeting. She said stability through the budget season was important to maintain GRU’s credit ratings. Jeffrey Shapiro said he seconded everything Deren said, and Sarah Younger warned the board that GRU is a “complex entity.”

Before taking the vote, Coats amended his motion to put a cap of $50,000 on the search. The motion passed unanimously.

Joint meeting between Authority and City Commission

The next agenda item was a proposal from Coats to have a joint meeting between the Gainesville City Commission and the Authority, but Coats said his questions had been answered since he put the item on the agenda and he wanted to pull it from the agenda.

Carter [all remaining references to Carter in this article will refer to Craig Carter] agreed, saying, “Our charge wasn’t to go sit with the City and figure out what works best for them. It’s what works best for the utility. So that’s why I personally wasn’t in favor of that.” He added that Authority members can meet with individual City Commissioners at any time. 

Karow agreed, “We run the utility now, and they don’t, so they have their business, and we have ours.”

Member comment

During member comment, Coats said he would support an advisory board to “bring on some professionals that want to volunteer,… true professionals that know what they’re doing… The more input that we have from credible sources, I think we’ll be able to make better business decisions.”

Karow said his “gut feeling” was that they can each reach out to anyone that may be able to help, but he didn’t support an advisory board. Carter agreed that he wasn’t sure they’re ready for an advisory board yet. 

Coats also said he was interested in liquidating the property in the Power District to pay off some debt. Cunningham said one option is to divide it into parcels, and a second is to put it on the market as one piece of property; he said GRU staff intends to bring the options before the board in “one of the next couple of meetings.”

Lawson selected to chair GM/CEO search

Carter remembered at that point that despite the discussion about Lawson chairing the search committee for a new GM/CEO, the board had not taken a vote on it. Karow made the motion, and Coats seconded it. Lawson said he was willing to take that role. The motion passed unanimously.

“I think it took a decade and a half for our utility to get in this position, and we’re not going to turn the ship overnight” – Member Eric Lawson

Continuing member comment, Lawson said he appreciated the meeting because “there were no surprises. I prefer meetings where we have plenty of time for things on the agenda, we have time to study and prepare so that we can make better decisions. I think it took a decade and a half for our utility to get in this position, and we’re not going to turn the ship overnight… I think we’re all going in the right direction.” He said his top priority is always how any decision will affect GRU’s customers.

The next GRU Authority meeting will be on January 17.