Panel warns GNV to make GRU changes

Gainesville Mayor Harvey Ward
Mayor Harvey Ward said he’s not concerned about threats about being replaced.
File photo by Seth Johnson

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.  

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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.  

Rep. Mike Caruso speaks during the Thursday audit meeting.
Courtesy The Florida Channel Rep. Mike Caruso speaks during the Thursday audit meeting.

“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.  

The John R. Kelly Generating Station
Photo by Seth Johnson The strain of GRU’s debt on the citizens of Gainesville was the subject of a special meeting on Thursday. 

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.” 

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Juan

No Threat Mayor. Accept Reality . No one Pities the COG financial demise.

TeachYourChildren

The Mayor and CC (minus Book) should be replaced! The Mayor is hiding his true intentions to carry on the demise of GNV started by his predecessor! Chestnut, D-W have done nothing to help anyone but themselves since being on the CC. Willits and Eastman (in addition to Sacco) are the new votes for anything that helps the socialist cause of running GNV into the ground!

Last edited 1 year ago by TeachYourChildren
Juan

Commisioners, No one wants to be annexed into the City of Gainesville. Your GRU has an 84% Debt Ratio. GRU currently has a 22% plus debt burden. Compared to other Utilities your GRU is 400% out of whack.The math has been done for you. Nonsubstainable Debt. Let that sink in. Until failures and failed agendas are recognized and accepted the drastic remedies cannot begin. GRU will be sold for pennies on the dollar and GRU Customers may finally be releived of govermental abuse. I think in fact the City of Gainesville is going to shrink with reverse annexation and Springs County is going to flourish.

Mike

The mayor has to have a good opinion of the city, otherwise he wouldn’t have been elected.

But, he really doesn’t understand that most people are already doing everything they can to avoid being annexed by the city of Gainesville. He probably doesn’t understand that most folks from outside the city will also even avoid going INTO the city as much as possible. If shopping can be done elsewhere, it’s preferable. When anything has to be done downtown, the visits are dreaded.

There are many reasons, but they’re real and the number is increasing.

Nancy

Wake up these people were not elected, but written in. Held elections to cover up.

T J M

I remember GNV saying that we would save millions by purchasing the bio-mess plant from the joint venture company, who built it. Where’s that savings now?

Jack Carter

It appears that the poor leadership of the past has caught up with the current leader ship of the Gainesville City Commission . This concept of being the first to invest in a new technology just to say you are the first to have one has been the problem.(biomass plant). This contract to buy 74.9 mega watt solar from Origis Energy is
similar to the original contract with the biomass plant.
Jack Carter

Nancy

100% agree with you. Doing a hugh contract like that; banking on electric vehicles. When we are not ready and do not have the reseach on how electric vehicles will affect our health. Cell phones can give you cancer; what will electric vehicles do?