GRU memo says Mayor Ward delayed bond issuance, costing ratepayers $2.9 million

BY JENNIFER CABRERA

GAINESVILLE, Fla. – An internal Gainesville Regional Utilities (GRU) memo states that, contrary to statements made at a recent Gainesville City Commission meeting, a request from Mayor Harvey Ward was the real reason for a delay in a recent bond issuance that cost ratepayers an extra $2.9 million.

The memo, obtained through a public records request, was sent to GRU General Manager Tony Cunningham by a member of his executive team on May 11 and states, “On March 15, 2023, GRU was directed by Mayor Ward to hold the request for approval for the debt issuance until after the State Legislative session ended on May 5th, and to bring the new money debt issuance to the Commission in June 2023.”

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. However, GRU Director of Accounting and Finance Mark Benton told the City Commission on June 15 that “GRU was asked to delay the bond issue” until after June 1.

The May 11 memo states that the delay in issuing the bonds, which were originally scheduled to be approved in April, “allowed for multiple public comments by elected officials which may have jeopardized GRU’s ability to obtain funding.” As evidence, the memo quoted a March 15 article from MainStreet Daily News that said, “[Rep. Chuck] Clemons has said GRU is headed for bankruptcy and that an independent board could help resolve the financial ‘mess’ created by various city commissions” and also quoted a letter from Ward to Clemons: “[T]his bill…will cause a downgrading of our current investment grade bond ratings for both the utilities and the city’s general government operations”.

According to the memo, GRU Finance met with each member of the City Commission either on or around March 15 and “communicated clearly that GRU would need funds for capital infrastructure by the end of the fiscal year, if not sooner, and that the costs may increase.”

The memo states that Barclays submitted due diligence questions to GRU on May 8, “specifically referencing the statements made by Representative Clemons and Mayor Ward” and informed GRU on May 10 that the bank might withdraw its offer. On May 11, Barclays notified GRU that the bank was unwilling to close before June 30 but proposed a closing around July 10, “after the proposed legislation becomes effective.”

During the June 15 City Commission discussion leading up to the approval of the bond issuance, GRU staff and City Commissioners squarely placed the blame for the cost increase on “ambiguity” in the bill regarding the authority of the City Commission to issue bonds after the bill’s effective date, July 1, and Barclays’ unwillingness to close on the bonds before June 30. However, the memo shows that Ward delayed the issuance of the bonds two months before Barclays informed the City on May 11 that the bank had concerns about issuing bonds in the days before July 1. If Ward had not delayed the approval of the bonds, the transaction would probably have closed as scheduled in April.

Ward told Alachua Chronicle by email, “It’s important to know that I am one of seven members of the commission. It is not in the authority of my office to ‘direct’ such a thing, nor did I. With each issuance of debt, staff generally presents the idea to each member of the commission for feedback, which is what they did in this respect as far as I know. I advised them that while we were in the midst of a great deal of legislative uncertainty, I thought it best for all involved that we wait until we all had more clarity – after the legislative session – before processing a debt issuance.”

Former GRU General Manager Ed Bielarski told Alachua Chronicle, “I learned in my almost seven years as the General Manager that when the Mayor advises against bringing an item to a commission meeting, you’d best heed his advice, unless you are prepared to be on the losing side of a commission vote.” He also noted, “While a Mayor can’t direct a Charter Officer individually, a Mayor or Commissioner can call for a vote to terminate a Charter Officer at any time.”

The day after the City Commission approved the issuance of bonds for $2.9 million more than Barclays had offered, Commissioner Bryan Eastman posted on Facebook, “Yesterday the GRU Takeover bill cost GRU rate payers another $3 million, and it’s not even signed yet. The bank we used to do our bond swaps pulled out due ‘uncertainty’ of how poorly written and vague the law is, and we had to go with a much more expensive backup option that will cost our rate payers another $1 million per year.”

Clemons told Alachua Chronicle, “Nothing that I, nor any other member of the Legislature, has stated about GRU’s poor financial health is unknown to the financial markets. However, it was Mayor Ward’s directive to hold off on the issuance of debt, in unison with his steady stream of dire predictions and his committed resistance to an orderly transition, that has had the intended effect of further punishing the ratepayers.”

Clemons continued, “This memo is further evidence that the governance of GRU by the Mayor and the City Commission has demonstrated their nonexistent concern for the well-being of the utility and the ratepayers. They opt for making decisions detrimental to the future of the utility in order to manufacture some fabricated blame on those of us who stand at the ready to rescue it.”

Referring to yesterday’s allocation of $250,000 to hire outside counsel to challenge Clemons’ bill, Clemons said, “In the midst of all of this, the City Commission somehow managed to find an additional $250,000 in order to explore filing suit to block the Authority from taking control of the utility. When and if that legal maneuver comes to fruition, by way of depositions, discovery, and subpoenas, citizens will finally get the answers that they have been entitled to.”