Tallahassee officials questioned Gainesville Mayor Harvey Ward on Thursday over 18 findings in an operational audit performed by the state, putting pressure on the city to deal with high utility debt.  

Rep. Mike Caruso, R-District 87, helps chair the Joint Legislative Audit Committee (JLAC) and said Gainesville has used Gainesville Regional Utilities (GRU) as its own piggy bank.  

“Right now, GRU is an ongoing concern, and the sustainability of it is at risk,” Caruso said at Thursday’s meeting.  

Rep. Yvonne Hayes Hinson, D-District 21, said GRU’s debt is an immediate problem. She said the city needs to look hard at its finances.  

“This is not a future payment plan,” Hinson said. “You need to find this money now.” 

At a media meeting Friday, Ward said the city expected the questioning and has already looked at the audit findings—released in early 2022. He said the city has finished five of the findings and will complete several more by the summer. 

Some of those findings concerned the internal management of the Reichert House and Gainesville’s late financial audit last year.  

But Thursday’s discussion centered on GRU’s $1.69 billion in debt and 80% debt ratio—four times higher than similar utilities according to a state auditor. In the 2021-2022 financial year, GRU spent $106 million on debt service. 

The majority of the debt came from the city’s biomass buyout. The city bought the Deerhaven Renewable Generating Station for $757 million.  

“Personally, I’m having a hard time seeing you able to be sustained for years to come if you don’t change now,” state Sen. Tracie Davis, D-District 5, said. “What we haven’t really heard is how do you get rid of this debt.” 

Officials threw out ideas like eliminating GRU’s annual money transfer to the general government of Gainesville, raising property taxes and cutting city services.  

Ward said the city will incorporate the discussion into its annual budget process that starts in May. He said Friday that he won’t make promises on changes until staff returns with options and the entire commission has a chance to discuss the Tallahassee meeting.  

He said the city will enter the budgeting process knowing additional pressure exists to make changes. He said the pressure will alter the city’s plans already underway to improve.  

As an example, he pointed to the city’s action in 2021 to reduce the general fund transfer of $38 million by $2 million each year for seven years.  

“We will meet their expectations,” Ward said on Friday. “Gainesville is an amazing community, an amazing city government—in many ways a model for other municipal governments. We will continue to lead the way. We will respond to everything that’s been asked of us and make sure that we raise the bar.” 

Ward called the utility’s debt high but rebuffed the idea that it is “really bad.”  

He said GRU is still considered an investment-grade utility by crediting agencies. He added that the city’s decision to reduce the general fund transfer was looked at favorably by the agencies, who have kept GRU’s bond rating level since then.  

“We’re not in a dangerous situation, according to the rating agencies,” Ward said. “I’m not saying that we don’t have high debt. We’re going to address that. I am dedicated to making sure that happens.” 

On Feb. 9, Moody’s Rating Service announced GRU’s rating would remain at Aa3 despite a recent downgrade on the city side, a result of new methodology.  

“The affirmation of GRU’s Aa3 ratings reflect its resilient service territory, diversified operations and a track record of raising rates as necessary,” Moody’s report said.  

Legislators also took aim at Gainesville’s recent contract agreement with Origis Energy to provide 74.9 megawatts of solar power by 2025, furthering the city’s goal of Net Zero by 2045.  

Sen. Keith Perry, R-District 9, questioned the citizen cost of the net zero initiative and the redacted solar contract.  

GRU said the contract contains redacted sections because of trade secret concerns by Origis, and Ward said Friday that the solar array will benefit customers. 

He said GRU will not invest capital in the buildout. Instead, the city has contracted a 20-year rate for the energy provided by Origis.  

Derek Noonan, who presented the audit for the state, said by only maintaining its current facilities GRU’s debt could increase by around $250 million by 2045. If the city pursues more renewable energy generation, he said GRU could incur an additional $895 million in debt.  

“So, there’s a pretty wide spread as to how much additional debt they may incur in the future years,” Noonan said. “It just depends, policy wise, which way they want to go.” 

Caruso also questioned the number of GRU customers who live outside Gainesville’s city limits, saying those customers have no representation in city government.  

Most of those customers live on the western edge of Gainesville, within Alachua County’s urban core in communities such as Jonesville or Tioga. On Feb. 17, Ward told Mainstreet he considers the area a textbook example of urban sprawl and would like to see more annexation in the area.  

On Friday, Ward reiterated that position.  

“I continue to be interested in annexation,” Ward said. “I want more people to have a voice in governance of our city. I think that’s entirely positive.”  

Moving forward, Ward said the other city commissioners will likely address the pressure from Tallahassee at its next meeting. City staff will need to bring forward ideas to tackle GRU’s debt, involving budget pressure on the general government side.  

A reduction in GRU’s general fund transfer means the city will need to cut services or find new revenue sources, Ward said. He added that the general fund transfer forms around 20% of the general government’s spending.  

At Thursday’s meeting, Caruso said failure to address GRU debt could have severe consequences.  

“We will write letters to the governor, ask him to remove you from office and put people in that will take the bold actions to save GRU, to save the utility and to ultimately save the city,” he said. 

On Friday, Ward said he’s ready to make changes necessary but brushed aside the threats.  

“If people want to make threats, that’s okay,” Ward said. “That’s their business. I am here to do a job. And I love this community, and we’re going to do the job. We’re not shirking our responsibilities here.”