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Utility deal riles area officials

Two small towns' pricey deal with Florida Water Services has some local leaders talking of legal action to stop it.

© St. Petersburg Times
published September 24, 2002

Government leaders from Marco Island to Hernando County and beyond are reacting with shock and outrage to a roughly $500-million deal that would basically give two tiny Panhandle towns control over water and sewer properties now part of the Florida Water Services empire.

The president of one watchdog group, Florida Utility Watch, calls the deal a ripoff that could lead to higher water and sewer rates for people now served by Florida Water.

State Sen. Ginny Brown-Waite, R-Brooksville, said the deal was suspicious and that she had a gut feeling something stinks about it.

And assistant Hernando County attorney Kent Weissinger said this sweetheart deal would make the fat cats at Florida Water fatter while moving control of water and sewer rates further away from customers in Hernando and other Florida communities.

The controversy already has various government leaders talking about lawsuits, court injunctions and tough political tactics aimed at getting the Panhandle towns of Gulf Breeze and Milton to quash the deal before it's too late.

For their part, Florida Water officials and representatives of Gulf Breeze and Milton say, yes, they stand to make some money. But they say this is a perfectly legal arrangement that won't raise utility rates beyond normal inflationary adjustments.

One defender of the deal says government leaders from Hernando, Citrus and other local communities have no one to blame but themselves for letting a chance slip by to purchase the Florida Water utilities in their counties. In fact, says Brooksville attorney and Florida Water representative Joe Mason, it was their "dithering" and "arrogance" that cost them.

A coalition of local governments led by Citrus, Nassau and Polk counties had been working for more than a year to develop a proposal to buy all of Florida Water Services' properties -- water and sewer systems that reach into 28 counties, almost all of them in Central and South Florida.

In Hernando County, that includes roughly 30,000 Florida Water customers in Spring Hill.

The coalition -- known as the Florida Governmental Utility Authority -- hoped to eventually turn over the various utilities to the local counties. But in the end, the FGUA was outmaneuvered by Gulf Breeze and Milton.

The towns, with a combined population of less than 13,000, formed the Florida Water Services Authority Thursday and struck the deal to buy the utilities giant the same day.

The deal is unusual in that none of the affected water and sewer systems are located in Gulf Breeze or Milton, located about 20 miles apart in Santa Rosa County. In fact, the closest utility system is in Washington County, roughly 100 miles from them, according to Weissinger.

In deference to Florida's Sunshine Law, which requires that public meetings be advertised in local papers well in advance, they gave notice of the meeting in the Pensacola News Journal, said Gulf Breeze city manager Buz Eddy.

He said the Pensacola paper was chosen by his city's bond attorney. But Weissinger, Hernando County's assistant attorney, said, at best, that meets the bare minimum requirements of the Sunshine Law.

For the towns, the allure of getting into utilities far beyond their borders is a simple matter of cash.

Under terms of the deal, Florida Water Services would still operate the water and sewer systems. Gulf Breeze and Milton would reap the profits. Gulf Breeze, the lead government in the arrangement, hopes to gain $1-million to $1.5-million in revenue per year, Eddy said.

Weissinger contends that some of those payments are guaranteed and that, if necessary, the water authority created by the two towns can raise utility rates in Hernando County, Marco Island or any other community served by one of the systems.

But how did two towns the size of Mayberry come up with the $500-million?

Eddy said the purchase would be financed with a 30-year revenue bond paid back with revenue from the water and utility services. Of course, the whole deal is contingent on investors and insurers willing to back the bonds. But Gulf Breeze has swung some big deals before.

Since 1985, it has sponsored various big bond issues involving other local governments. The partners get the benefit of costs savings from a single financial deal. And Gulf Breeze makes a profit on the side.

Eddy said such tactics are needed because of unfunded state and federal government mandates. "It kind of behooves a city to creatively diversify," Eddy said.

Gulf Breeze became involved in the deal after the city's bond attorney was approached by Greenberg Traurig, a law firm Florida Water Services had hired to shop around their properties.

Florida Water spokesperson Lisa Lochridge said her company began to seek a new buyer in mid May, when FGUA's right to exclusively negotiate for the purchase expired. An FGUA spokesperson, Honey Rand, said the coalition still would make a scaled-down $419-million offer to Florida Water, just in case the new deal falls through.

Mike Twomey, of the nonprofit Florida Utility watch, thinks something fishy is afoot.

"I think it's clear that the whole thing was orchestrated by Florida Water Services," Twomey said. "They went and found them some lawyers, and they found some lobbyists, and they found some tiny governments they could use so they could sell the system, take out $100-million and still run the system without any regulation."

Hernando County commissioner Diane Rowden said the deal sounded like something Enron would have conjured up. "It just puts in your mind a couple of words: corporate greed," Rowden said. "Is that what we're looking at here?"

County commissions in both Citrus and Hernando plan to hold discussions today on how to respond to the deal.

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