Goliath gets an ally as cities start to hurl stones
By HOWARD TROXLER
Published March 10, 2004
TALLAHASSEE - The long, difficult struggle between the small town of Belleair in Pinellas County and mighty Progress Energy Inc. has often been described as a matter of David versus Goliath.
If that's the case, then the Florida Legislature is leaning toward the Philistines.
There are bills pending (House Bill 1217 and Senate Bill 2780) that would hit Belleair with new taxes if Belleair exercises its right to buy out Progress Energy and start its own electric utility.
Belleair is still studying the takeover, but throwing a bunch of new taxes into the mix might very well scotch the deal, Mayor George Mariani Jr. says. The city of Winter Park, which voted last fall to buy out Progress Energy, is in a similar boat.
Yet Belleair and Winter Park are just part of a bigger fight. The goal of these bills is to impose taxes on any Florida city that expands utility services - electric, water and sewer, natural gas, telecommunications - to an area previously served by a private company.
A city that took a customer away from a private utility would lose its tax-exempt status. That city would have to pay taxes on sales, intangibles, motor fuels, telecom services and documentary stamps.
The cost could mean higher rates for customers - making it less attractive for cities to expand, which is the idea. It fits perfectly with the Legislature's reflexive dislike of government, and preference for private investment.
"This bill basically punishes local municipal utilities of all stripes," complains Barry Moline, executive director of a group representing Florida's 32 municipal electric systems. "All it does is raise rates on local customers."
Such a law also could affect Clearwater, which is the largest city in the state to operate its own natural gas utility. Mayor Brian Aungst says the city's early assessment is that the bill is "pretty poorly worded."
The law would affect smaller cities around Florida that invested in their own fiber-optic or high-tech communications, because at the time the big private companies wouldn't spend money in their little burgs. Leesburg, for example, has linked its hospitals by fiber-optic cables and just reached a deal to tie in 44 schools.
The House sponsor, Rep. Frank Attkisson, R-Kissimmee, explained his bill in a committee workshop Tuesday. He said the goal is to create a "level playing field" so cities don't unfairly compete with the private sector.
"Certainly, this wasn't done in a punitive matter," Attkisson said. But he said cities that don't pay taxes have an unfair inside track when a private utility is up for sale.
Attkisson said he was convinced by the attempted sale of Florida Water Services Inc. to a government consortium last year, which could have wiped out $12-million a year in tax collections.
But speakers from cities with electric systems and the Florida League of Cities replied that there isn't really "competition" between cities and private utilities except, perhaps, in telecommunications, which should be considered separately.
Belleair and Winter Park want to buy out a monopoly electric company simply because they believe it has failed to serve them. They are seeking to provide a level of service to the public they can't get otherwise. Isn't that a core function of government?
Attkisson has raised an interesting question about the legitimate functions of government. Taken to the extreme, we might argue that every function of government could be performed by the private sector. Therefore, the government is always "competing" with potential private providers.
Can we say that any function is sacred? Can we agree that public safety and fire protection qualify? Until now, I would have classified water and sewer service as "core" functions of a city, but maybe they're not.
If these bills pass, the Legislature will have done exactly what it claims to hate the most - it will have created new taxes.
"You would expect a conservative philosophy to keep government as close as possible to the people, with local decision making," Moline says.
"This is the state coming along and saying, "No, local consumers, you don't know what you want. You need higher costs.' "
