Appraisal, $400M price tag for Vero Beach electric system still mystery

VERO BEACH – Last month, Vero Beach City Councilman Tom White said the city had done an appraisal of the electric system sometime in the past six months and found it to be valued between $350 million and $400 million.

Immediately, the city said it had no idea what White was talking about. A few weeks later, the city is still mum on where White got the information. He says City Manager Jim Gabbard told him about the appraisal and the price tag.

Prior to this, the only ballpark valuation the public had been given was Gabbard’s estimate as told to the Board of County Commissioners in August 2008.

That estimate of $200 to $250 million was attributed to the former Electric Utility Director R.B. Sloan, based on Sloan’s vast industry experience and no backup documentation was produced by the city to substantiate these numbers when asked.

“We haven’t done an appraisal,” Acting Electric Utility Director John Lee said. “But we did do two different things. A couple of years ago we did a valuation of the electric utility for insurance reasons and that was based on what it would cost to replace.”

The number the city came up with for that insurance valuation was about $230 million and that would not necessarily equate to fair market value as the components and generators are quite old.

“The other thing we did was a poles and structures inventory last year where we counted all the poles and structures, but didn’t assign a value or add it up and that changes on a daily basis as we replace poles and equipment,” Lee said.

The city has provided records of the insurance valuation, which includes all property insured by the City of Vero Beach for a total of $305 million. About $230 million of that was identified as part of the electric utility, including about $182 million for the power plant itself.

Since it did not have valuations assigned, the city did not provide a copy of the “poles and structures inventory” referred to by Lee.

White had said he got the information from retiring City Manager Jim Gabbard, but when asked to shed some light on the issue of where White’s information came from, Gabbard referred questions back to John Lee.

Phone messages left for White at City Hall were not returned as of press time.

Lee said that the city would embark upon a formal appraisal should the negotiations with Florida Power & Light progress.

“Down the road, if we get to the point with FPL where we’re negotiating a sale, they will conduct their own appraisal and we will do one of our own,” Lee said.

Critics of the city and its management of the utility have long believed that city staff or the council would find some way to “torpedo” any possible deal with FPL, and this latest effort to high-ball the value of the utility is being seen as a way to make any offer from FPL seem too low.

White has also made statements during council meetings that there are people out there trying to unload the electric utility for a “fire sale” price and Councilman Ken Daige has said that taking a price less than the utility is worth would be like tossing the power plant “in the river.”

Utility activist and CPA Glenn Heran said he’s not surprised that White would put unsubstantiated numbers out into the media, which inflate the value of the electric utility. And he also wasn’t surprised when he heard that White said he got the information from Gabbard, or that the city staffers are basically disavowing White’s statements now that they’ve been called on to defend those statements.

“Absolutely they are putting a number out there that is outrageously high so that whatever FPL comes back with sounds like a bad deal, that FPL is trying to low-ball us when what they’d be offering was fair-market value,” Heran said. “If it was worth $400 million they should have sold it a long time ago.”

“That number is not supported by a valuation based on net operating income, we’ve been able to find nothing supporting a number that high,” he said. “I can’t get to $400 million from any expert I’ve talked to or based on the Winter Park purchase of their system back from Progress Energy.”

Meanwhile, FPL is still figuring out if entering what could be laborious and politically charged negotiations with the City of Vero Beach to bring its 34,000 households into the fold and give customers FPL rates is even worth the trouble.

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