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Vero electric value put at $185 million

STORY BY LISA ZAHNER, (Week of September 1, 2011)
Photo: The Vero Beach power plant

A consultant has valued the City of Vero Beach electric utility at $184.9 million and the Vero water-sewer utility at $105 million, buoying those who want the city to stay in the utility business and baffling those who want it to get out.

For both utilities, GAI Consultants used a combination of valuation methods, including replacement costs minus depreciation, income and finally, comparable sales.

Although it will take a while for all interested parties to sift through the thick valuation reports, initial reactions reveal a growing cynicism about the "due diligence" process on the part of those who would like to see water-sewer regionalization and a sale to Florida Power and Light at least get a fair shake.

"This is pretty much what we expected with GAI in the driver's seat and the City Council allowing them to steer this process," said utility activist and CPA Glenn Heran. "What those hugely inflated numbers don't take into account is the value of off-loading the utilities and streamlining government, and they don't take into account the substantially lower utility rates Vero customers would get."

"The values are unrealistic – no one would pay those prices. The county won't pay $105 million for the water-sewer utility and FPL won't pay $185 million for the electric system," Heran said. "In fact, FPL can't pay that much for the electric system because it would financially harm their existing customers."

On the flip side of the issue, die-hard opponents of the sale offer a steady drumbeat of all the reasons why a sale is not in the best interests of the city

Even former City Attorney Charles Vitunac, who retired just before he was officially fired by the City Council in March, has re-emerged as the defender of the status quo.

Former City Council and County Commission candidate-turned-blogger Bea Gardner, who has become the self-appointed spokeswoman for the anti-sale crowd, posted a comment that "the truth hurts" when the water-sewer appraisal was released last week.

"Congratulations to the City of Vero Beach elected officials for having the foresight to hire GAI to do these studies. Bring it on," Gardner wrote in a recent blog post on her website.

Hindsight and regret might accurately describe what Vero Beach City Council members could be feeling now that the "due diligence" process has come home to roost.

The appraisals leave the wave of Council members elected with a mandate to regionalize the water-sewer utility and to sell the electric utility to FPL in a very tough spot.

Councilwoman Tracy Carroll, who was considered to be the one-woman referendum on getting Vero out of the utility business – expressed skepticism GAI would offer objective advice and data to the council. She even pushed to get them off the payroll a couple of months ago.

"I'm not surprised that the numbers came in high," Carroll said. With regard to GAI, she said that she feels it's not in the firm’s own best interests to get Vero out of the utility business.

"The water-sewer report recommended that they (GAI) come back and do an analysis year after year. In essence they do not want a sale because that cuts off the pipeline of necessity," she said. "They're so ingrained in the culture at the city, I think they assume that we'll keep on using them. We might as well write them in as a line item on the budget for GAI."

Will the $184.9 million appraisal kill hopes of hammering out a deal with FPL that is still financially beneficial to the city? Not necessarily.

"Negotiations have truly not begun. We haven't sat down at a table with them and started discussing this," Carroll said. "If this is a bargaining tool for the city, that could be a good thing. But If FPL chooses to walk based on this, that could be a very bad thing."

As for the referendum, Carroll said she hopes voters will want to empower the City Council to see the negotiations through.

"The concern of the public is that the referendum is giving the City Council the ability to negotiate anything they want.

“That's absurd. This City Council was elected to do a number of things and one of the those things is to negotiate the best deal we can for the city on the electric utility."

"There's no fire sale going on, there's no requirement that we sell at any cost. The word on the street that they, being the City Council, are just out to sell it is absurd."