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Jilted utility group not quitting

Although another suitor has a deal to buy the giant Florida Water Services, FGUA is determined to prevail.

By BRIDGET HALL GRUMET, Times Staff Writer
© St. Petersburg Times
published October 4, 2002


SARASOTA -- Some might call it an exercise in futility.

Florida Water Services already has agreed to sell its 152 systems statewide -- including systems in Spring Hill, Sugarmill Woods, Citrus Springs and several other Citrus County communities -- to a pair of Panhandle towns for $507-million.

And yet late Thursday morning, the Florida Governmental Utility Authority pressed forward with its plans to buy the utility giant, passing a resolution stating its competing $450-million proposal is in the public interest.

Yes, they got the memo about the Florida Water sale to the towns of Gulf Breeze and Milton, which formed the Florida Water Services Authority two weeks ago to buy the state's largest utility.

But FGUA members believe that sale won't hold up, and they want to be ready with their own offer, good through Dec. 6 -- just in case.

"I think it's very likely, either through negotiated means or litigation, that (the Panhandle) deal will not close," said Citrus County Administrator Richard Wesch, who serves on the FGUA board. "When it fails to close, we want to be in a position to close our transaction so we can move forward."

Florida Water's parent company, Allete, told the FGUA not to bother. In a Sept. 30 letter to FGUA chairwoman Lea Ann Thomas, Allete president Donnie Crandell says his company has no intention of backing out of the Panhandle sale.

"We recognize that certain local governmental units and the FGUA representatives are disappointed that Florida Water has reached an agreement with another buyer," Crandell wrote. "This disappointment, however, should not result in unwarranted interference in our transaction with the (Florida Water Services) Authority. We will vigorously resist any efforts to undermine our present agreement."

The FGUA, a coalition of Citrus, Nassau and Polk counties, has no plans to interfere, Thomas said.

But many of the affected communities -- including Citrus County, Hernando County, Palm Coast and Marco Island -- are mulling over legal options to block the sale. Representatives from those communities met in a closed-door session after the FGUA meeting to discuss legal strategies.

"We're trying to work out how to not duplicate efforts, how to use our resources as best we can and how the larger communities can assist the smaller communities in defending the public's rights," Hernando County Attorney Garth Coller said.

Communities across the state were stunned by Florida Water's announcement two weeks ago that it would abandon its yearlong negotiations with the FGUA and sell its systems to a newly-created utility group in the Panhandle.

The towns of Gulf Breeze and Milton pulled off the deal in stealth, announcing their public hearing in a Pensacola newspaper that does not reach any Florida Water customers. No one notified the affected communities because they were part of the rival FGUA proposal to buy Florida Water, Gulf Breeze officials said.

"They showed a deliberate intention to exclude public participation," Coller said. "I think that shows a lack of public purpose."

Neither Gulf Breeze nor Milton is served by Florida Water; in fact, the nearest system is more than 100 miles away. But the towns with a combined population less than 13,000 will share at least $1.5-million in annual profits from the utility.

Under the Panhandle deal, local communities will not have the option of taking over the Florida Water systems in their area, as they could under the FGUA deal.

The purchase also removes Florida Water from any regulation by the Public Service Commission or local utility boards.

Officials in the affected communities fear the $507-million Panhandle purchase price could mean higher rates or less money for system improvements than the $450-million FGUA offer.

Ultimately the customers pay for either sale, since revenues from water and sewer bills will pay off the bond debt used to buy Florida Water.

"The price of $507-million was set by Florida Water with zero negotiations," Marco Island City Council member John Arceri said. "They didn't even counter back with $506-million."

The $507-million price includes $471-million for the systems and $36-million in future connection fees.

Arceri said Allete needs the money. Weak prices in the wholesale energy market have caused Allete's revenues to slip 4 percent over the last six-month reporting period, according to financial reports. Last month, the Minnesota conglomerate restated its expected earnings to $1.80 or $1.90 a share, down from $2 to $2.10 a share.

Moody's Investors Service recently downgraded Allete's economic outlook from "positive" to "stable."

"The $507-million (Florida Water price)," Arceri concluded, "was set for the sole purpose of relieving Allete's financial problems."

Ed Gray, executive director of Gulf Breeze Financial Services, told the Times the $507-million price was reached after Gulf Breeze reviewed revenue projections and engineering reports on the condition of the systems. Because he was not familiar with the FGUA price, Gray said he could not explain the $57-million difference.

The legal sabre-rattling of affected communities aside, Gray told reporters earlier this week he expected the Florida Water sale to the Panhandle towns to go through.

"I have heard nothing that would dissuade us from moving forward," he said. "I know of no circumstance in which we would not go forward with the transaction."

-- Bridget Hall Grumet can be reached at 860-7303 or bhall@sptimes.com.

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