Harmon’s Notes on the News – December 16, 2019

OPINION

BY EDWARD HARMON

GRU Issue

It is abundantly clear that the management, structure, finances, decision-making processes, priorities, and costs of GRU services have been, and will be, a continuing source of controversy in Alachua County. GRU has substantially higher utility rates than those of the municipally-owned utilities in each of Starke, Newberry, Jacksonville Beach, Jacksonville, and many other like utilities in Florida. GRU rates are even much higher than privately owned, and tax paying, Florida Power & Light. 

Are we proud? Are we satisfied with the economic burden GRU’s rates impose on our most vulnerable citizens and owners of small businesses? It is abundantly clear that this sad state of affairs, for those forced to use GRU, has been caused by horribly flawed, possibly corrupt and ideologically-driven incompetence by the  City, the local environmental extremists, their fellow travelers, and their chosen representatives. 

This sorry state of affairs will continue to burden economic growth and prosperity here unless something is changed. Let’s be radical. Let’s show some guts and recognize that if you do the same thing, over and over again, and expect a different result, you must be an idiot, a believer in the Sun’s journalistic integrity, or a Tesla-driving rich environmental extremist subsidized by the working class taxpayers. We can easily do better for all of our citizens, especially the poor and disadvantaged, whom the liberals pretend to care about and bleed for at election times but otherwise, by their actions, destroy with a crushing burden of grotesque and complicated utility pricing and taxes. 

Change is tough to swallow, but we can change this situation in a number of respects if we have the courage to change and stand up to the ire of the entrenched power, no pun intended, structure.

The most obvious and realistic first step would be to admit the horrible mistakes of the past and look for a solution that would provide clarity, fiscal transparency, and better management while providing for all the citizens of this area, who now are forced to use GRU, cost effective and competitive utility services.

We need to hire investment bankers with experience in this field  and get an honest assessment of the sale value of GRU. GRU is profitable—and more, it has a stable market and a monopoly position. With lower competitive rates, a well-managed utility, maybe Florida Power & Light or Duke Energy (which sells to the University of Florida), could increase its revenues, especially if companies that now avoid this area or leave, due to non-competitive utility rates, would come or stay. 

The investment bankers would advise as to that value and run an auction process, and the City should sell the issued and outstanding capital stock of GRU to the highest bidder. I do not care if they are diverse, honor Corrine Brown, support LGBTQ rights, give to the Southern Poverty Law Center or Antifa or the Salvation Army or donate to the Trump campaign. The City should sell GRU to the highest responsible bidder, and if it is a purely cash sale, the highest cash bidder gets to buy. End of auction. Done. 

If the bankers recommend a combination of stock and cash consideration, the prospective future value of the stock and the dividends that utilities normally pay would need to be evaluated. This happens every day and is very common. It is not brain surgery; it just calls for some judgment and guts to make the call. 

There are a lot of utilities in Florida, the ones that are publicly owned pay reliable cash dividends, and they may have an interest. 

Duke Energy, as one obvious example, presently selling electricity to the University of Florida and millions of others, may be one of them, and they pay a dividend rate of 4.29%, while Florida Power & Light’s parent company, Next Era Energy, pays a dividend of  2.13%. All of the utilities are state regulated, and their motivations are different. 

GRU dances to an ideological drummer, the City of Gainesville, and needs to charge higher rates than would otherwise be the case so they can pay the “transfer” fee to the City. This allows the City to not charge its citizens for the services it renders by hiding, those clever rascals, those costs in the utility bills. The higher GRU rates go, the happier the folks running the City would be, if they were being honest, because it avoids requiring them to raise taxes to the full extent they would otherwise need to or establishing priorities that really matter to the citizens. It seems that the maintenance of roads, a decent mass transit system, really helping East Gainesville (and I do not mean buying over-valued properties from City officials), and public safety are always sacrificed to other goals like bike paths, diversity coordinators, or other “causes” near and dear to the commission and the local media.

If the proceeds are in cash, the City could decide to use the proceeds to fund critical needs and/or invest them to benefit City taxpayers. If any of the sale consideration is paid in stock of the buyer, the dividends on those shares would accrue to the City.  

In addition, the local physical assets would be taxable, and that would result in a continuing windfall to the City, which could be used to help fund City operations or cut taxes.

The transfer of funds by GRU to the City would end. The non-residents of Gainesville, who now have no voice at all—taxation without representation, in the shadows—would be free of this burden, although they would, of course, benefit, as would the City residents, from potentially lower utility rates, which Florida Power & Light now charges (and they are much, much, lower), and the City of Gainesville would need to accurately and honestly reflect the costs of its services through taxes and levies, as do the great mass of cities.

Surely our City government is at least as capable of doing that as are other cities in Florida. If they are not, I am sure they could hire a consultant to show them how a real city government functions—an ex-manager from Tallahassee, for example. Maybe ex-Mayor Andrew Gillum, now that the corruption allegations have been proven and he has paid a fine, would be available, as he is not doing much now other than complaining about being cheated out of the governorship by the voters.  

Ask him why Tallahassee taxes are lower, when taking into account that Gainesville has far higher taxes on electricity and water. Tallahassee, like Gainesville, has substantial non-taxable real property on the rolls, as they are home to FSU and numerous state office buildings and the like. If residents wanted to fund the City and its priorities from tax revenues, which would need to be the case if GRU were sold, that would and should be their choice, and there may be higher taxes, depending on the levels of spending and the investment of income from the GRU sale. If City voters wanted lower taxes, the City would need to cut costs. Not a radical idea.

GRU would cease to be a political football, and the taxpayers of the City would no longer be responsible for the contingent and other liabilities that may arise out of GRU’s operations. If you think those are remote or small, ask how PG&E is handling its liabilities in California; they have gone bankrupt. Those risks would be borne by the owners, the shareholders, of the buyer. Utility services now provided by GRU would be provided by professionals who know what they are doing, and they would be accountable not to political hacks and charlatans who know less about managing a utility than my dog Flash, but to their shareholders. If they performed poorly, they would be replaced. Cruel but true, and Gainesville and its environs would, over time, become economically competitive in the utility area and a far better place to live and invest.

Fired for Doing Your Job

I serve on the audit committees of the Board of Directors of two large and profitable private companies. The firing of Carlos Holt should be a clarion call for change in Gainesville. The very notion that an auditor, whose competence and professionalism were never challenged, could be fired by the City for doing his job—unearthing financial improprieties and reporting deficiencies—is hard to believe. 

The City should be honest. Either do not have the expense and bother of an auditor (after all, if he/she/it will be fired for doing the job, why have one, and why would any competent party want the job?) or follow a different model, which is the norm in the private enterprise system . Ask around if you doubt me.  

What should be done is to find a “disinterested” party, one not beholden to the elected representatives or burdened by a conflict, or a committee of them, and I know of people who could well serve, would choose the auditor. The auditor would be paid by the City but report only to them; the City and its employees would cooperate fully with the auditor; and the committee would accept, review, and make public his or her reports on an annual basis, together with any recommendations. 

All the citizens would see the reports, all of them, and the “sunshine” would come in. I am sure the Sun and the “good government” types would support this long-overdue change in structure. Also, those who do not want to be audited are generally the ones who have the most to fear. Gainesville has a choice, and we now all know what the political hacks will do to an auditor, under the present structure, who does the job. He or she or it, or whatever, will be humiliated and fired. Want the job?