Skop: City Commission must take immediate action to address GRU debt level crisis
OPINION
BY NATHAN SKOP
Dear Mayor Ward:
Please consider the following recommendations in response to the JLAC direction regarding the need for the Gainesville City Commission to take immediate action to implement a plan to address the GRU debt level crisis.
The recommendations provided herein provide commonsense and fiscally-responsible solutions that would help address the GRU debt level crisis in a constructive manner if adopted by the City Commission.
Saving critical time and money, these recommendations are the same recommendations that would otherwise be provided by any high-priced consulting firm but are once again being provided by a former state utility regulator who has repeatedly asked the City Commission to listen to the prudent advice being offered by citizens over the past decade to avoid the GRU debt level crisis (and related credit rating downgrades) that the City Commission is now being forced to openly acknowledge and address.
At the end of the day, the common goal should be addressing the GRU debt level crisis and providing much-needed rate relief to GRU electric customers who cannot afford their electric bills. Accordingly, the Gainesville City Commission must be willing to accept economic reality, consider all strategic options, and make very difficult financial decisions to address the GRU debt level crisis.
The recommendations that I am respectfully suggesting that the Gainesville City Commission should consider are as follows:
- Suspend the GFT contribution from the GRU Electric System for FY 2024 and subsequent years, which would provide approximately $22.3 million annually (FY 2023 allocation: $22,311,376) that could be restricted by ordinance to help pay off debt and reduce rate pressure on GRU electric system customers.
- Reduce the City General Government budget to offset the $22.3 million GFT reduction from the GRU electric system (a net reduction of approximately $17 million when offset by City property tax revenue growth).
- Consider strategic options for GRUCom (including the sale of the system).
- Consider strategic options for the GRU Electric system (including the sale of the system).
- Consider other strategic debt workouts or debt cram-down alternatives in consultation with JLAC and the Governor’s office (Note: continuing to refinance GRU debt and kicking the growing can of debt further down the road at greater total borrowing cost to GRU customers is NOT a sustainable plan).
- Implement an austerity program that includes a moratorium on the further unnecessary expansion of City government and constrains additional City spending (including repealing the ordinance that recently doubled the salaries of the Gainesville City Commission).
- Suspend the unaffordable 100% renewable energy mandate that the City Commission has imposed on GRU and its customers.
GRU only has approximately 14% of equity left on its balance sheet, making GRU highly leveraged (approximately 86% debt). The magnitude of the $1.7 billion in debt makes solving the GRU debt level crisis extremely challenging even if ALL of the recommendations proposed above were adopted by the Gainesville City Commission.
In summary, the concerns expressed by JLAC are the same concerns that have been repeatedly expressed by citizens (including myself) over the past decade. My OpEd published in the Gainesville Sun on December 1, 2013, “GRU has bright future if we learn from past mistakes” addressed GRU’s debt and downgrade concerns.
The GRU debt level crisis is a basic math problem requiring the Gainesville City Commission to accept economic reality and make difficult financial decisions to avoid decades of financial hardship to GRU customers. Political ideology must be put aside to focus on the common goal of solving the GRU debt level crisis and providing rate relief to GRU electric customers who cannot afford their electric bills. Continuing to raise already-unaffordable GRU electric rates is not a sustainable plan or solution to the problem.
In closing, I look forward to working with the Gainesville City Commission to address the GRU debt level crisis and find “win-win” solutions to help provide rate relief to GRU electric customers who cannot afford their electric bills. As you said on February 16, Mayor Ward, “It’s great to be able to reach across the aisle and work together.”
As always, please feel free to contact me directly should you have any additional questions.
Sincerely,
Nathan A. Skop, Esq.
Former Commissioner
Florida Public Service Commission
Skop’s full letter with detailed recommendations can be read here.
Excellent advice!
They are given in the spirit of what is best for this City and County. As stated in his presentation you can only survive for so long by leveraging the future. Must repeal the double your salary vote. It is a mockery of the financial disaster this City has become.
Repeal the remaining massive salary increases not ju the commissioners.
Eliminate the massive commissioners expense allowances.
These elected people better take this seriously or resign.
Thank you Mr. Skop for all the time and effort that you have put forth over the decades for Gainesville. We need to continue to hold our elected officials responsible and demand the transparency and accountability they all promised. Let’s get to work and make Gainesville liveable again. There are many more issues than just GRU that also must be addressed. Keep this ball rolling Gainesville!
This sounds like very sound advice and their plan should look like this
it’s going to be a very interesting 8 months until Oct 1st in the end I see them being removed from office because they are stuck on their left wing democratic ideals
Harvey Ward, you did see what happened recently to the Reedy Creek district didn’t you?
Here’s hoping the Governor DeSantis does the same to the fiscally incompetent City of Gainesville and it’s idiot leadership who has for years abused and misappropriated funds from GRU.
I’m ok with Desantis appointing Skop to be mayor because he’s knowledgeable about utilities…Skop’s 7 point plan he outlined is a good plan.
Could you imagine if Bilarsky got elected as Mayor? What a disaster that would be. He’s full of
Crap. He was hired by them… He’s one of them….doesn’t know “net 0” is a UN plan…his ignorance amazes me. I like clean coal, natural gas, & nuclear energy.
Let it burn. It’s the only way this will be solved.
‘Let it burn’ is the attitude of those without a dog in the fight….Not a property owner or a taxpayer.
Actually, I am an owner and taxpayer.
As a tax payer you are the one who is not getting what your dollars are worth with GRU and the city.
Is it the city commission’s arrogance or stupidity that is in the way of sound financial decisions?
I read about the initial excuses that the mayor made at the Capital.
Has he learned anything? Will he ask for help? Is he aware that he does not know what he is doing?
Jim, that’s an awful lot of questions.
1. Both
2. No
3. No. He’s too proud to admit he’s wrong.
4. Yes, but see the reason for #4.
Charter officer and other leadership pay is well above what our city can afford or should pay in comparison to comparable cities with comparable budgets. This city is negligent in financial decisions. Check out the Workday project. Review their compensation analyst and the biased worked they’re doing. The HR department is wasteful and highly mismanaged. It goes on and on and on…
In responding from my home very near the biomass plant and in the City of Alachua, not Gainesville, I do agree with Skop’s recommendations. Even the previous manager of GRU indicated in their IPR to the City that an additional biomass would be necessary to meet the goal of being 100% renewable by 2045.
GRU needs to be sold to a cooperative that actually returns an excessive of profits to users….not government.
Nice try once again Mr. Skop, but once again they won’t answer your call. You’ve basically wasted 7 years or so that I know of providing reasonable recommendations, yet I’ve not seen a single one accepted by the know-it-alls in charge. With basically a high-school teacher (teaching history to dual enrollment HS kids) on the throne for 7 years and 2 young lackey commissioners who never had a single professional job in their adult life voting as yes men, there was no reason to listen to those professionals with actual experience until they crashed and burned. It took far too long. Gone are the days when Todd Chase, Craig Carter, Ed Braddy, Harvey Budd, and Helen Warren who actually had real experience doing something, and asked good questions or provided some guidance, and relied on experienced charter officers for daily operations. That all left town in the 2016 election when the HS teacher (sometimes claiming to be an Economics Professor! LOL has no such degree) was elected by the DEC. As the old song says “perhaps they’ll listen now”, nope they won’t and will likely be removed by the end of Sept. Then, maybe the new appointees from the governor will listen to you!
They need to cut their spending, make government smaller, eliminate unneeded DEI positions, give back the raises they voted themselves…they can’t keep raising property taxes on landowners either to bail us out of this mess…where did that 100% renewable energy mandate imposed by the city commission come from? They went hook, line, & sinker for that United Nations climate change BS to regulate CO2 emissions. It was former Mayor Hanrahan who got us into this mess…she wanted to comply with United Nations Kyoto Protocol to reduce CO2 emissions…there was never a need to meet future energy demand either…the mask wearing Marxists on the CC are
for great reset and implementing UN, WEF, & WHO master plan here locally.
They want to bankrupt us, crash the entire world, & reset the planet for the
“Greater good”…the devil is hiding behind the environment with climate change & CO2 regulation…we all want to save the planet, right? What’s the end goal? New world order, one world government, global totalitarianism…” you will own nothing and be happy”….resist vaccine passports, that’s the mark of the beast. Follow the money from when Hanrahan pushed biomass and then start making arrests for whomever lined their pockets and benefited from ruining our utility and putting us into debt.
Thank you for this thoughtful road map to try to solve a terrible, festering, continuing problem.
That Gainesville continues to vote for City Commissioners who exacerbate the debt rather than providing the leadership to improve the City’s fiscal situation is a sad testament to the reality of living with “progressive” priorities.
I hope the City Commission is paying attention to those like Mr. Skop who can help them solve the massive problems that have been years in the making.
It’s not just a financial matter, it’s also the service area’s small size that’s the problem. GRU and other municipal/co-op utilities should merge into one purchasing/producing utility to compete with private for-profit utilities.
The joint legislative committee only deals with finance, but that’s not the root of GRU and GCC’s problem. It’s the service area being too small for a power plant owner, it burdens the small number of customers too much. Increase the size.
You don’t know what you’re talking about. There’s actually times where GRU has to buy power from the grid because it can’t handle the demand.
The city of Gainesville has for many years used GRU as its private piggy bank. Why is this only now becoming an issue. To reach across the aisle and find a solution with the people who are chest deep with creating the problem seems ridiculous
Don’t worry….. Be Happy! say the commissioners. The solution to our debt problem will soon be solved when you see what happens to your GRU bills. Get ready for some ‘shock & awe’ when you see how easily they fixed this, albeit, at our expense.
Nathan : It was that swing vote made at the PSC that got us into the biomess…the city had to go before the PSC to determine if increased electrical capacity was needed for future demand. What do you have to say about that? Was there
actually a future capacity need or did the city & Pegeen fudge the numbers? Who’s vote on the PSC was it that gave this project the go ahead? Hint, it wasn’t me….I got to rough you up a little bit.😅
The Gainesville City Commission alone gave final approval to build the biomass plant. Granting a determination of need based upon statutory requirements is NOT a mandate that cause a plant to built. Determinations of need were granted for four new nuclear power plant that never got built because the utility decides whether to build the plant or not build the plant.
Sorry, but you need to look no further than the vanity driven “signing day” photo with Former Mayor Pegeen Hanrahan, and the Biomass 7 (including none other than Mayor “GREC is our Partner” Poe) to determine exactly who is responsible for the biomass plant and ensuing financial disaster.
Let’s review the actual facts instead of your fictionalized account of history:
Fact: It was former Mayor Pegeen Hanarhan and the Gainesville City Commission (including former Mayor “GREC is our Partner” Poe) who approved and defended the $3.1 billion, 30 year, fiscally irresponsible biomass contract.
Fact: The Florida Public Service Commisison (FPSC) never approved the biomass contract.
Fact: The FPSC merely granted granted a statutory determination of need in accordance with the law of the state of Florida based upon the GRU requsite showing that additional power might be required in 2023. The FPSC routinely grants determinations of need for new power generation as one step in the overall Power Plant Siting Act approval process. A determination of need does not require (or mean) that a power plant will actually get built as that is a financial decision that is left to the utility to approve (just like the Gainesville City Commisison gave the FINAL approval to build the biomass plant). As an illustrative example, the FPSC granted determinations of need for four (4) nuclear generating units, but none of them were ever built by the utilities due to the financial risk.
Fact: The FPSC order clearly warned the City Commission of the substantial risk (see RIsk Mitigation section of FPSC order) associated with the biomass contract and what would happen to electric rates if the City Commission and GRU failed to mitigate that risk.
Fact: The Gainesville City Commission failed to heed these warnings and the City Commission alone gave the FINAL approval to build the plant.
Fact: The City Commission whined about home rule, they got home rule with a stern warning, and then those responsible for approving and defending the biomass contract (including their paid political operatives) try to blame Tallahassee and the FPSC when the fiscally irresponsible biomass contract blew up in their face just as accurately predicted.
Fact: GRU and the Gainesville City Commisison withheld and failed to disclose critical information to the FPSC (original proposal by the developer assumed the risk for selling half the output). This wasn’t known to the public until 2012.
I like everything you said…and I’m not going to beat you up.
Answer this question:
If You had a time machine and knowing hind sight is 20/20, would you vote no or would you vote yes? I think you would vote No.
Another fact:
Without the PSC approved “Determination of Need” the biomass plant would not have been constructed.
Another fact:
Mr. Skop was one of the three (out of five) votes to approve the “Determination of Need”
Opinion:
Mr. Skop was the swing vote.
Opinion:
As it all turned out, Mr. Skop was able to occupy a great deal of his generous free and possible work time on this annd related issues with the city commission for the better part of 10 plus years.
Facts:
Thanks for the concise and straightforward history of the biomass debacle. The city’s situation has been a long time coming.
I certainly agree with getting rid of the GFT, but that doesn’t go nearly far enough. It’s time to get rid of the entire city government. There is no requirement that we have multiple levels of government, and all it really accomplishes is getting more money out of your pocket, especially in socialist Gainesville. So, let’s get rid of it and negotiate with the state for provision of basic services.
The solution is simple, stop spending so much… if you choose to make some good decisions like cut costs, you will be on a path towards balanced budgets and healthy community. But, it is like a heroin addict, just needs to stop but can’t/won’t.
Can’t do that with liberals who think you can tax and spend your way out of debt.
I fully support getting rid of the GFT but it doesn’t go far enough. It’s time to abolish the city government in its entirety. There is no requirement that we must have multiple levels of government. And the fact is more government just means more taxes that incompetent “leaders” will waste. Get rid of it.
You are absolutely correct. The City of Gainesville derives its powers from the state. The state could easily abolish the city of Gainesville and turn it into unincorporated land.
If this city was a private business, it would have been bankrupt years ago. There are WAY too many unneeded management positions. It’s too top heavy. The city has a DEPARTMENT OF DOING. Someone making 100k a year for that.
It’s even worse than that. There is a Compensation Analyst that has had all of the Compensation Analyst duties reassigned to three other employees and an outside consultant. We are paying a $53K salary for an employee who doesn’t perform the job, and then we pay 20-25% special assignment to the three employees that are picking up the slack, and then add an additional couple 100K for an outside consultant to do the rest. On top of that, the City is paying for her to get a PhD and a certification to do the jobs that are being reassigned. Total waste of money and this is only one instance. I can go on and on about the absolute mismanagement of monies. Completely asinine!