VERO BEACH — Vice Mayor Tracy Carroll on Tuesday said there is a lot of misinformation being spread about deep cuts being made to police and parks if the electric system is sold, although the council has proposed no such action.
Councilman Jay Kramer, however, indicated the problem is more a lack of information about what might happen to city services in the wake of the electric system sale to Florida Power & Light Co.
A week before next Tuesday’s referendum on the sale, council members heard from Finance Commission Chairman Peter Gorry on his analysis of the sale’s possible impact.
The city could net about $33.3 million from the sale once it settles all its obligations, according to Gorry’s numbers. However, Vero Beach will have to contend with the annual loss of more than $7 million in electric utility revenue that now supports other city services.
Gorry contends the budget shortfall can be trimmed to about $3 million, partly by adding a franchise fee along with a utility tax. City Planning and Zoning Board member Mark Mucher opposes that idea.
Gorry’s worst-case scenario had city taxes rising about 40 percent after the sale, a figure endorsed by Councilman Dick Winger.
Winger noted city taxes make up only about 12.5 percent of the total tax bill. Even with a 40 percent city tax increase, he contends 90 percent of customers would make out better financially because of FPL’s lower electric rates.
Kramer thinks the impact could be worse, while Utility Commission Chairman Scott Stradley contends the city can save more money to reduce expenses.
Mayor Craig Fletcher has proposed the city could look at making cuts of 5 percent a year over three years to help balance the budget — or about $3 million. Gorry and Winger think that might be too severe and are looking at cuts of about $500,000 a year.
FPL is proposing to pay $111.9 million in cash and other considerations for the city’s electric system.
FPL representatives, however, have said the total value of the deal is $179 million, which includes paying $1.5 million to lease the power plant land for three years, and taking over the pension liabilities of the city’s electric workers.
However, the entire $179 million wouldn’t end up in Vero Beach’s coffers.
For instance, $30 million of that total is what FPL estimates it will have to pay over its normal costs for three years to temporarily buy power that Orlando Utilities Commission is taking over from Vero Beach.
Nearly $16 million will be spent to make transmission upgrades and to relocate a substation after the company takes over the city’s system.
The city would benefit from the company hiring its electric workers for a minimum of two years and taking on those employees’ pension obligations. FPL estimates that expense would be about $16.4 million.
As Gorry and union leaders have noted, the final amount could change depending on how long a deal takes and how many of the employees retire instead of going to FPL. The more employees who retire before a sale takes place, the greater percentage of pension liability stays with the city.
Gorry’s model uses City Manager Jim O’Connor’s estimate that about 10 percent of the workers will retire before the proposed sale.