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Moody’s Investors Service report discusses potential ramifications of HB 1645 to City’s credit rating

Gainesville City Commission discusses the FY24 budget at a May 17 workshop | From broadcast of May 17 workshop

BY JENNIFER CABRERA

GAINESVILLE, Fla. – An “issuer comment” released by Moody’s Investors Service states that the governor-appointed Authority that will govern Gainesville Regional Utilities (GRU) beginning October 1 “would be credit negative for City; mixed impact for GRU.”

The report states that the legislation “is credit negative for the City of Gainesville (Aa3 stable) because it may reduce annual transfer to the City’s general fund from the GRU. For GRU, a change in governance would bring a degree of uncertainty concerning future rate-setting, though money retained by the utility system through reduced transfers could be used to pay down debt.”

The report points out that the current system, in which the City Commission approves the budgets for both the City and GRU, “can sometimes create a conflict of interest for any city commission, which could take actions that favor the city over the utility. Under the new legislation, this potential conflict is mitigated by a state-appointed board.”

During fiscal years 2019-2021, the annual transfer from GRU to the City’s General Government budget averaged $37.6 million, representing around 22% of Gainesville’s governmental revenue. Last month, the City Commission approved a new formula for the transfers that promised to reduce the transfer by about $16.7 million in FY24; the report notes that “Any further reduction in transfers beyond those already planned… could further curb the City’s financial flexibility.”

Property tax increase is likely

The report points out that the City’s tax rate of 5.5 mills is “well under its 10-mill cap, and the rate has not increased since fiscal 2021” and says that a millage increase is likely, along with “identification of potential new sources of non ad valorem revenue.”

The report concludes, “uncertainties remain that could affect future credit quality, including the autonomy of the board, its ability to govern a system that offers multiple products, future policy and strategic direction, and its willingness to adjust rates to maintain sound financial metrics.” HB 1645, however, requires the Authority to make decisions only considering “Appropriate pecuniary factors and utility industry best practices… which solely further the fiscal and financial benefit of the utility system and customers.”

Florida House Speaker Pro Tem Chuck Clemons told us, “Moody’s assessment today makes it clear that the impediment to a strong utility has been the City of Gainesville’s mismanagement of the system. Lower transfers to the City of Gainesville and a Governance Authority that is not conflicted about funding pet projects will lead to a stronger utility. When the dust settles, the long-term benefits will be felt by the City, the utility, and, most importantly, the ratepayers who have thus far shouldered the financial transfer burden with the highest rates in the state.”

Clemons also noted, “The City of Gainesville would face these credit uncertainties with or without a new GRU governing board because they have already committed to a major reduction in the transfer to the City’s general fund.” 

Former Florida Public Service Commisisoner Nathan A. Skop stated, “The Moody’s comment reflects the economic reality that the Gainesville City Commisison continues to ignore–specifically, that the City of Gainesville is going to have to tighten its belt and live within its means instead of using GRU as a piggy bank to fund their insatiable spending addiction with ratepayer money.”

Skop added, “The GRU / City proposal to reduce the debt from 87% to 70% is not a solution to the GRU debt crisis, would significantly increase already unaffordable GRU electric rates by an unspecified amount over the next ten years, and still leaves GRU highly leveraged.”

Former GRU General Manager Ed Bielarski said, “There have been five credit downgrades over the past ten years, and the commission doesn’t change a thing. Now, Moody’s offers a soft opinion that Clemons’ bill could be credit-negative for the City–not GRU–and there is a collective hand-wringing. It’s so predictable.”

Bielarski added, “All the city commission needs to do in response to a lower fund transfer is reduce its expenses. How can they do that? They can start by reversing over $50 million in annual expenses they have added over the past decade, mostly with new employees filling the suites above City Hall. The commission needs to distinguish between what is needed and what is nice to have and make decisions on behalf of the people they serve.”

  • Paging Dr Poe Poe, Paging Dr Poe Poe. We have an epidemic and virus you developed and created. Guess the only vaccine is a money diet. We all know who owns the Cities Debts. No more Cake!

    • Former Mayor Harrahan spearheaded the disastrous decision to buy a 30-year biomass PPA and City Commissioner, at the time, Mr Poe, happily voted for it. Him and his lackeys then took spending to obscene levels in his two terms as Mayor. This situation is self created and finally seized upon by elected STATE officials for corrective action. Reversing spending NOW to previous levels (2014?) and better stewardship are what the Dr has prescribed. Note that on my last day in office as City Auditor, I stepped to the podium early in the day and pointed out the nearly 25% rise in city spending in the few years I was City Auditor. Later that evening, I was of course fired primarily for pointing out in an audit report financial mismanagement at Reichert House (that was later echoed by the State Auditor General.) The facts speak for themselves. Elections matter!

      • I agree elections matter.

        The problem is people don’t vote on issues or incumbent performance; they vote party, gender, race, and so forth even to the voters’ everyday financial disadvantage.

        There is no other explanation for the recent city poll results.

        It is an error, IMO, to run a calculus on what past spending levels should be modeled after because the debt, and interest on it, and inflation factors are far and above anything imagined.

        Commissions, unlike utilities, error in making short-sighted, long term decisions based upon ‘if everything remains the same.’

        It never does.

        This may be a time and place for Gainesville to consider a balanced budget rule targeted at a reasonable future year – 4years? – as an enteric coating for the bitter tax bills and fees residents are going to eventually face.

        Yes, this situation is ‘self-created’ and to expect those responsible to provide the solution is, of course, asking for another helping of problems.

        That’s why the State’s intervention was necessary.

        • There’s also more democrats than republicans in Alachua county..

          • True. For Democrats this issue may be a problem choosing between what they are shown and what they can smell.

  • Duh. Of course it’s credit negative for the city. The city will no longer have access to GRU as a funding source. When any entity goes from a surplus of available funds to a deficit that’s the only conclusion that can be made.

    About time someone took the trough away from lard arse. Maybe if he has to tighten that belt it’ll pop that blood vessel in his skull.

  • So now everybody will see if the supposedly community-minded city pols will raise taxes and fees, to represent Moody’s — or not raise them, to represent the people.
    Let’s see what our “progressive” dear leaders do, in response.

    • They’ll raise taxes and in doing so, the homeless population as well.

      It’s the DemoRats way of doing things that’s counterproductive for the population.

      People actually vote for their own demise…stupid people do anyway.

  • City still doesn’t accept that it has a spending problem, not an income problem.

    • Or a crime problem, a homeless problem, a parking problem, a leadership problem…

      • Good points.

        When Gainesville started trying to be a bigger city than it was [is] it started having big city problems small city government is incapable of solving.

        The city has nowhere else to expand except vertically; project housing and the problems coming with it.

        The only revenue sources are new fees and taxes.

        • Gainesville Democrat politicians have been too busy trying to emulate or even out do their role models (LA, SFran, NYC, Portland and Seattle). As a result, we are ending up with their same headaches: high crime, high cost of living, bums and panhandlers all over town, not enough police to enforce the law and political cowardice to punish criminals.

  • Context.

    Moody’s downgraded Gainesville (city) from an Aa3 credit rating, one notch down from Aa2 last January.

    Already in a debt spiral using GRU to stop the bleeding, the State moved in via Clemons’ et al over the transfer rate from GRU to the city.

    With HB 1645 on the books (not yet signed), Moody’s issued an ‘issuer comment’ which is normal when a downgraded CR undergoes a management/ownership change. It alerts investors and affects credit interest rates.

    The IC itself is not a political position on HB 1645.

    However, Moody’s IC can be a leverage point for a possible sale of GRU. This has serious consequences for the city’s spending and revenue/debt ratio which, then, goes to the 4.5-mill tax flex before reaching the 10-mill cap.

    Nathan Skop and Ed Bielarski probably have it wrong in their optimism; belt tightening isn’t going to do much to offset the 17% debt reduction goal without substantial tax increases in the 3+ mill range and customer energy fee increases.

    • Agreed. Everything is also going up everywhere. The dollar and our economy were ruined by shutting down commerce by the WEF & WHO and the printing of money…
      It’s global. We should have maintained our sovereignty and never tried to flatten the curve…the forces that be want that “great reset” for their perceived fascist Marxist commie new world order one world government totalitarian common good.

    • The only reason the City Commission is making any noise about cutting any costs or lowering transfer sums from GRU is because the State entity that came in regarding the audit threatened to remove the members of the Commission. Clemons’ bill takes care of the GRU but doesn’t take care of the City’s top heavy bureacracy and overspending. Now, if DeSantis will get off his ass and sign the bill, it would be great.

      • I don’t think the governor has received the bill for signature yet but when he does he has 7-days to sign or veto it. If he does nothing, the bill becomes law. Short of an unlikely veto HB 1645 will be law.

        Yes, I agree the City Commission tried giving a believable performance after HB 1645 passed the House but they still tried to appeal to voters – not GRU customers – to be activists against the GRU board decision.

        That the mayor and commission fail to understand is it is the customers who are being represented by the State.

        • Given he’s announcing the Presidential run next week – I think he will be given the bill and will run out the clock – letting it become law without signing..

  • Wow!!!. Great comments by Clemons, Skop, & Bielarski!!!!! Moody’s statement is BS gobbledegook…it does not even sound logical with what we know of the situation…

    • The state needs to do a deep dive into her personal accounts going 2 years prior to her leaving office to current. Then hold her both responsible and accountable for any and all ill-gotten gains.

  • FPL just announced they are reducing electric rates in July due to natural gas prices coming down. If FPL can manage a rate cut for their customers why not ‘sell’ (at a loss no doubt) GRU to FPL if they will absorb the boondoggle debt our commissioners have gotten us into?

  • And come next election cycle the liberal lemmings will again vote for the same incompetence.

    • That’s because we are surrounded by people who want free sh!t. No personal responsibility.

  • Gainesville’s credit rating is slipping and likely falls further. Means that the growing city must pay more interest on municipal bonds it issues for necessary projects. Which means the public is taxed more to pay off those bonds.

    The value of money never occurs to Democrats. Leftists feel, never think. They have long felt that money is free, that their causes are just, that money keeps coming. The governing board — hopefully — teaches them how to use money in the best real interests of the public that pays it.

    • It’s how they fund their own ability to exist. The clown commissioners couldn’t afford to live in the mess of their own doing, hence their vote to increase their own salaries.
      The elitists are going to make sure they have theirs and will do whatever they can to get yours too – just ask the prior residents in around Seminary Lane and along W University Ave.

      Some things in life just can’t be explained…the universe, God, and why those idiot voters keep electing these types of commissioners.

    • I wonder if there has ever been a city that has had a permanently (or extended) assigned oversight board?
      When G’ville defaults seems to me that’s the best way forward at least during reorganization.

  • Gee, hard to imagine something going wrong with an unaccountable new board appointed by a governor who’s never gotten a pay check that wasn’t from the government, let alone ever had to make payroll. Anyone supporting this is guided by politics, power, and revenge, not wise stewardship, belief in democracy, or respect for who actually owns GRU. It’s not the governor, his GOP hacks Clemons and Perry who have stayed in office by avoiding the voters of Gainesville ( who do own it), or disgruntled ex employees, and gadflies who hate the city.

    • At least you’re the first idiot to step up.

      Must suck to be you and know you’ve continued to vote for the incompetent commission. What’s been guiding your voting habits? What keeps you braying in support of the commission of clowns? Before you answer, wipe that stuff off your chin.

    • The voters of Gainesville own it? You’re telling us the voters decided to increase their utility rates +5%, +3%, +3%…for the next 7 years? Voted to almost double the salaries of leadership? I didn’t.
      They’ve sure got you brainwashed. You must have been hitting your head with that hammer rather than nails over the years.

      • Decisions about GRU are made by the city commissioners, elected by the citizens of gainesville. That’s how democracy works. Clemons and Perry and DeSantis couldn’t get elected dog catcher in the city and will now appoint an unaccountable board to run something that doesn’t belong to them. If you think I’m wrong, spell out how.

        • Funny thing happened on the way to the polls. Clemons and Perry were elected by a majority within the districts they represent. You seem to have a problem with “democracy” when it doesn’t suit your far left progressive idiocy. That must be one of the reasons you don’t want single member districts, it would “dilute” the far left Gainesville voting base the current commissioners rely on to maintain their control. One more thing, if the board will be comprised of GRU users, why doesn’t it belong to them?
          That spell it out for you?

          • The districts Clemons and Perry represent don’t represent Gainesville and have even dumped Alachua County voters in the last redistricting because they lose there in a fair election too. As to single member districts, do you know that most Florida counties are not single member districts, but only our blue one was picked out by the GOP state legislature to get a vote on the ballot. Then with typical Jones/ Clemons/Perry dirty tricks, won by a wisker by blanketing the area with a big lie about who supported it. These guys are sleaze balls and traitors to the county and city of Gainesville.

            Tell me how I’m wrong.

          • Then why do you keep whining? Oh wait, they don’t fall in line with your political ideologies. That’s why they don’t represent Gainesville to your liking. Sounds like, like, Alachua County and Gainesville Commissioners don’t you think? Most of the people I talked with around one of the polling areas felt their voices weren’t being heard and hoped single districts would pass. Those who didn’t are probably waiting for that reparations panel to be formed. I can pretty much guess who will be on that.

            Maybe those reps truly represent the voters of the district…all of them. Then again, using your logic, the majority of counties in Florida are red. Pretty sure most readers here would call you a traitor to this state and nation or at least somebody’s really, really close friend.

            Boy, you need to give it a rest.

        • A very large number of people who get their power from GRU are not able to vote in Gainesville City Elections and therefor do not have representation at the ballot.

          • Guess what. No one will be able to vote to fire the unaccountable board members, nor are Duke and FPL customers able to vote for the people who run it. Rep Hinson offered an amendment to allow county residents to opt out of GRU, but like everything else, the lemming GOP reps did what they were told.

          • Sounds like the Black Caucus don’t you think?

        • The state of Florida has a surplus of revenue. The dump of Gainesville due to incompetent leftist degenerates hasn’t had a surplus in years! You leftists will figure out one day that you have to spend within your means instead of constantly raising taxes to pay for your wasteful stupidity!!

          • The State of Florida is swimming in Covid and hurricane bucks dumped on us by Biden, then the governor hands it out like he collected it.

    • So you already know who’s on the new board? The Bill I read said it would have Business Minded people. Most likely ones that have made a payroll. A lot of people in denial of failure can’t comprehend simple news clips. It seem Gainesville is the City of Hate on Democracy. Leading by reckless financial decisions, lawlessness, and overstaffing DC gets away with does not work in Clueless Gainesville Government.

    • Jazzman, you like to remind us we are owners, but I don’t feel like an “owner.” Right now, GRU owns me. I’m a hard working (RN) single mother, and its getting harder everyday to afford living here. I have a budget and I live conservatively. I turn my thermostat to 80 when I go to work, and only lower it to 78 when I get home. I am judicious with water usage, and I do not use heat in the winter. The more I conserve, the higher my bills rise. As an owner, shouldn’t I have a say in how “my” utility is run? Yes, I voted, but unfortunately my vote didn’t seem to have much of an impact. And for the record, my vote had nothing to do with political party lines. This is well beyond party lines. The fact is that the city is being run by incompetents, and that needs to change. It’s time for the mismanagement to end. Perhaps if I had the privilege of voting myself a pay raise to keep up with the rising costs of living in Gainesville, I’d feel differently.

      • Workingmom, of course like everyone else, your vote is one of many, but nothing prevents you from aligning with and convincing others to vote the bums out of that’s what you want. You have that power now regarding those who control GRU, but will not if the proposed new board takes power, nor do you have any assurance it will cut utility bills, or have any recourse for whatever it does. The governor, who had no business experience, has a penchant for appointing party hacks and religious nuts to the boards of other hostile takeovers he’s instituted – see Disney and New College for examples.

    • Jazz your right about the voters own it now if you could get the city and it’s voters to stop GRU at the city limits and cut off the 40% of us who can’t vote for the idiots running the city I would be very happy but right now I am being tax without representation and with support totally the state take over

  • It’s all part of the plan to make the City’s relationship with GRU to become irrevocably damaged and force the sale of GRU to FPL.
    Same plan in Jacksonville and JEA.

    • The City’s relationship with GRU and GRU Customers and Tax Slaves was sealed with the Biomass 8 regime that has lasted for 2 decades. Lies and Myths have consequences. Sounds like you and azz man own it a long with them. Most of us do not care what happens to Gainesville’s self induced financial folly’s. Reap what has been sown by the Gville Political agenda. Enjoy your tax hike and Crime wave King Poe gave birth to.

  • Missing from this poorly written report which only quotes enemies of the City of Gainesville:

    From today’s Gainesville Sun – “The municipal utility in 2022 reported having roughly 102,000 customers with an operating revenue of $525 million. Currently, GRU and the city of Gainesville has a top-tier AA3 grade from Moody’s, higher than Jacksonville, Florida Power and Light and Duke Energy…..

    • and: “This is exactly the reason we oppose Rep. [Chuck] Clemons’ GRU bill,’ said Mayor Harvey Ward. ‘It introduces uncertainty into a previously stable economic outlook for our city organization with no benefit to the people of Gainesville.'”

      • How exactly has his having the keys to the piggy bank benefited the people of Gainesville? They’ve raised utility rates, voted to raise their salaries, increased the size of local government, cut law enforcement, haven’t done anything for city owned roadways other than paint them the colors of a rainbow, can’t get traffic signals synched properly…
        Maybe you’re one of the beneficiaries but the majority of Gainesville voters aren’t.

        You probably play a tuba pretty well.

      • He’s a poor babbling fool, probably repeating what Poe told him to say. The people would be better off without any of these jokers and without disGRACE. No weekly concerts, no month of Junteenth or other BS, just useful roads, low crime, and affordable utilities.

    • You still get news from that mullet wrapper? There’s part of your problem.

    • If they have that kind of money then why haven’t they paid down their debt also why do they have the highest rates in the state

  • The 3% who elected them will demand taxes be raise. Increased poverty and crime maintains their own job security, their way of life among those voters and donors alike.

  • Cut all nonessential services and projects.

    We don’t need trilingual bathroom signs, colored crosswalks, $35k travel funds, theatre renovations, more basketball courts/sports complexes, etc.

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