Update: City hikes GRU rates after robust debate

The Gainesville City Commission voted 5-2 on Monday to raise Gainesville Regional Utilities’ electricity rates 7 percent and wastewater rates 5 percent for fiscal year 2022 and to continue raising rates each year through 2027.

The increases for next year will be the biggest jumps in the plan. From fiscal years 2023 to 2027, the electric rates will rise 3 percent each year, while the wastewater rates will rise 5 percent.

For consumers with average electricity consumption (800 kilowatts), their 2022 electric bills are expected to grow by $4.86 after the first year of the rate increase, according to a GRU presentation to the commission in May. With the rate increase, average wastewater usage (4 kilogallons) is expected to cost customers $1.72 more.

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In addition to raising rates on consumers, the commission also voted 5-2 to reduce the amount of revenue that GRU sends the city each year. Starting in 2022, the utility will transfer $2 million less each year to the city.

The general fund transfer from GRU to the city was $38 million a year in 2021. By 2027, the general fund transfer will be around $26 million.

The rate increases and the fund transfer decreases are expected to get the municipal utility on healthier financial footing. Without these measures, GRU would not generate enough revenues to cover increased costs, according to multiple GRU presentations to the commission.

GRU is also trying to pay down existing debt. GRU currently has $1.6 billion in debt and that amount is expected to grow to $3 billion by 2030. “And that’s just for the normal utility infrastructure needs,” Claudia Rasnick, GRU’s chief financial officer, said during Monday’s meeting.

A sizeable chunk of GRU’s existing debt comes from the 2017 purchase of the Deerhaven Renewables biomass plant for $750 million.

Transfer reduction sparks debate

Although both measures passed, the discussion about the reduction of the general fund transfer turned out to be the more heated debate.

Commissioner Adrian Hayes-Santos, who was one of two commissioners who voted against the transfer resolution, said he was concerned about what the reduction would mean in terms of the city government’s financial health, specifically whether the cumulative loss of $42 million over the six years would affect the city’s bond rating.

Bond ratings are important to local governments and municipal utilities because they can affect how much it will cost them to issue bonds to borrow money. The lower the bond rating, the more expensive it is to borrow.

In May, S&P Global Rating, an American credit rating company, lowered the bond rating for GRU. The lowered bond rating is expected to cost the utility $1.2 million in 2021 and an approximate $32 million over the next 30 years, according to GRU estimates.

Hayes-Santos said he was concerned that the city government’s bond rating would also be downgraded as a result of lowering the general fund transfer for six years.

“I have serious concerns about trading one problem for another,” Hayes-Santos said. “This is a significant hit to our general fund. I don’t know how we keep this up, especially if this is for six years.”

Of the city’s $137.8 million in revenues for 2021, the $38 million fund transfer from GRU represents approximately 27.7% of that revenue, according to a June city budget presentation.

With a decreasing amount of revenue from GRU, the commission may need to consider cuts to programs and/or increases to the county tax rate, city officials said.

Mayor Lauren Poe said Monday that he supported reducing the general fund transfer because the city has more options than the utility in dealing with budget deficits.

“We have multiple levers within the city that we can use [on the general government side] that just don’t exist on the GRU side,” Poe said. “I am more comfortable finding a way that best serves our neighbors using those multiple levers.”

Finding a way to help GRU customers who struggle with paying their utility bills was the other point of contention during the debate.

Commissioner Gail Johnson said she expected programs to help struggling customers to be part of the initial resolution and was surprised when they weren’t included.

“I was very clear that I would not be voting in favor of an increase until those programs came back to us [for a vote],” Johnson said.

Both she and Commissioner Desmon Duncan-Walker voted against the GRU rate increase resolution, but were in favor of decreasing the general fund transfer.

Commissioner David Arreola, who supported both the rate increases and the fund transfer decreases, said the city is running out of refinancing options with GRU.

“This is for the health of the overall organization–both sides of the house,” Arreola said. “But I think it’s a healthy choice. It’s a difficult choice, but a lot of healthy choices are difficult ones. “

Archer solar farm opposition

While the rate increases and the general fund transfer decreases were on the agenda, the City Commission also found itself dealing with another GRU-related issue at the start of its afternoon meeting: a proposed solar farm in Archer.

The solar farm, known as the Sand Bluff Solar Project, wasn’t on the agenda, so a series of Alachua County residents used almost an hour and a half of the general comment period at the beginning of the 3 p.m. meeting to voice their opposition to the project.

Archer residents and other concerned citizens spoke passionately—and sometimes rawly—about their opposition to the proposed 450-acre project. The speakers also expressed their disappointment in the treatment of the African American farming community that surrounds the proposed project site.

The Alachua County Board of County Commissioners has already voted against the project, most recently in July.

City Commissioner Gail Johnson asked GRU to make a report about the solar farm and the site selection process at the city’s Aug. 5 meeting.

“We clearly have a problem that we need to address,” Johnson said. “I am incredibly sensitive to the plight of many of the residents. I believe that we can reach our goals of 100 percent renewable energy, and I believe we can do it without disrupting generations of Black land ownership in Archer. I think that should be the directive of this commission.”

Monday’s meeting was a continuation of last Thursday’s regular meeting, when an air quality issue led to the evacuation of City Hall.

— With reporting from Seth Johnson

Editor’s note: This story has been updated with more information about the commission’s debate.

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