Florida Gov. Ron DeSantis on Wednesday signed the much-debated bill that will take operational control of Gainesville Regional Utilities (GRU) away from the City Commission and give it to a soon-to-be-created authority appointed by the governor.
DeSantis will now begin the appointment process for the five members of the independent authority who will start their terms on Oct. 1.
The bill cuts the City Commission out of the decision-making process, placing GRU General Manager Tony Cunningham under the authority’s purview. The authority will also set rates, issue bonds and chart future energy plans for more than 93,000 customers.
“This is the first step in stabilizing our local utility in order for it to be viable for the next 100 years,” state Rep. Chuck Clemons, R-Newberry, the bill’s author, said in a text message to Mainstreet Daily News. “This is the first time in history that 100% of GRU customers will be represented by the decision makers of GRU, and it is satisfying.”
Gainesville Mayor Harvey Ward called Wednesday, “a controversial milestone,” but pointed to what will not change with HB 1645.
“The first thing to know is that the new law does not change who owns GRU,” Ward said in a text statement to Mainstreet Daily News. “The utility is still owned by the residents of the City of Gainesville. The second thing is that we are proud of GRU’s record of providing excellent service. It is my hope this will continue for all gas, electric, water and wastewater, and GRUcom customers throughout this transition.”
The governor’s signature comes after months of local debate for and against HB 1645. Clemons argued the authority can guide GRU more objectively than city commissioners, who, as the heads of the utility, have an inherent conflict of interest between managing Gainesville for residents and managing the utility for city residents and customers living outside city limits.
Gainesville commissioners, GRU’s Utility Advisory Board and state Rep. Yvonne Hayes Hinson, D-Gainesville, have opposed the bill at every turn. Arguments ranged from how the bill entered the 2023 legislative session to confusion over how to separate a city department from its overlap with other parts of Gainesville government.
On Wednesday, Ward pledged to make the transition a smooth one for the people of Gainesville.
“I am — and I trust my City Commission colleagues are — working to develop a better understanding of the way this new board will operate, the decisions it is likely to make and the actions our commission will need to take to ensure a proper and dependable transition. More information will help us move through these uncharted waters,” he said.
Local citizens also formed Gainesville Residents United in May, raising more than $60,000 and hiring a Jacksonville law firm to sue the state and stop the bill.
Potential lawsuits by the city could also leave a question mark over who will manage GRU in the interim. Hinson advised the City Commission in April to ready its opposition.
The bill allows DeSantis to select five members for the authority, all from Alachua County. One must be a residential customer living outside the city, one must be a commercial customer, and three must be city customers with expertise in a related field, such as law, finance or energy.
“Now that this new inclusive governing board is going to be a reality, we should focus on coming together as a community to get the best qualified applicants for the governor to consider,” Clemons said. “If you know of someone who meets the requirements and is willing to be considered, please nominate them. Self-nominations will also be accepted.”
Clemons first announced the bill in early March. He said a recent audit by the state’s Joint Legislative Audit Committee showed mismanagement of GRU by the City Commission and a utility on the financial brink. State Sen. Keith Perry, R-Gainesville, supported Clemons and also pointed to financial woes.
GRU has $1.7 billion in debt with only 14% equity left. Electricity rates for residential customers topped the state on average in 2022, and lawmakers called the annual money transfer from GRU to the general government budget excessive—reaching a high of $38 million in 2019.
A majority of that debt came from the City Commission moving forward on the Deerhaven Renewable Generating Station, or biomass plant. The city bought out the facility in 2017, aiming to saving money in the long run, even though it came with a $750 million price tag.
Clemons said the City Commission has used GRU to transfer profits and support city programs while leaving the utility in poor shape and without a way to cut back debt. Those decisions, Clemons said, resulted in high utility rates that impact Alachua County citizens who have no voting control over the City Commission. Between 30% and 40% of GRU customers live outside city limits depending on the utility service.
City leaders have pushed back hard. Mayor Harvey Ward said GRU remained an investment-grade utility, according to bond rating agencies, despite the high debt. He said the city would make plans to follow the audit committee’s instructions to take bold action to reduce debt and said the city already cut $200 million in debt since 2017.
Commissioners argued that the local bill had never been discussed in Alachua County for citizens to comment. Clemons said the audit committee’s February meeting spurred the late bill so that he couldn’t present an early draft at the legislative delegation’s January meeting, when local bills typically come forward.
Commissioners also say city residents already decided the issue in a ballot referendum in 2018, when over 60% of voters disapproved of a change that would direct the City Commission to appoint an independent board to run GRU.
“At this point Rep. Clemons is on his own,” Commissioner Bryan Eastman wrote on Facebook in April. “This is his biomass plant, and the ramifications of his decision will be his forever. I just hope we can do something to alleviate the pain it will cause on our residents.”
The 2018 referendum also came after a local bill sponsored by Clemons and Perry. A 2016 bill passed the Legislature and would have given Gainesville residents the ability to vote in a self-governing GRU board that would be independent of the City Commission, but then-Gov. Rick Scott vetoed the legislation. The 2016 bill would have created a salaried GRU utility advisory board, but Scott said he didn’t see a need for a salaried board when other Florida regulatory groups didn’t pay their board members.
After the February audit meeting, the City Commission said it would comply and take bold action to reduce GRU debt. Legislators from both parties said the city was in a serious position, with four times the debt load of comparable utilities according to the state audit.
On April 13, the city revealed its plan to tackle debt, aiming for a $315 million reduction in net debt over the next 10 years. GRU selected that number because it will reduce the utility’s capitalization rate to 70%, a number approved by bond rating agencies.
That goal will involve a 55%, or $16.9 million, cut to the money transfer between GRU and the general government budget. The transfer has supported around 20% of the general government budget in past years, and city staff is still working through how to fill the gap in next year’s budget.
The city came to the 55% reduction by following another concern from the state audit. The commission never set a formula to determine how much money to transfer each year from GRU. The state auditor said transfers from municipal and investor-owned utilities are common, but a formula typically dictates the amount, allowing the utility and city to predict incomes.
Using a formula based on a 5% electricity franchise fee and taxable assets, the city approved the formula. GRU will save $120 million in the next 10 years by not transferring the money to the city.
Editor’s Note: This story has been updated to include comments from Gainesville Mayor Harvey Ward.