The city of Vero Beach pocketed only about 22 percent of the $183.3 million it got from Florida Power & Light when it sold its electrical utility late last year, and that money is already spent or encumbered.
After paying off debts and other obligations to the Florida Municipal Power Agency, the Orlando Utilities Commission and bondholders, the city walked away with $39.1 million from the December 2018 sale of its electric power infrastructure and customer base.
“The sale was very much like any kind of other property sale or real estate sale like a closing on a house,” said Cindy Lawson, the city’s finance director. “There was a sale price, there were some minor adjustments and then there were disbursements of the sale price to various entities.”
Budget documents and deliberations last week showed that the city has since spent or committed the entire net sale proceeds of $39 million plus a few million more to retire old debt, fund pension obligations and bolster the general fund, which for years was subsidized by millions transferred from the profitable electric utility.
At the time of the sale, the city had an existing “audited electric fund cash balance” that came from utility customer payments and contained approximately $27.6 million. Combined with the net sale proceeds, that gave the city a $66.7 million reserve fund to use in its 2020 budget and beyond.
So far this year, the City Council has spent or committed $42.5 million of that amount, putting the city back at square one with a little more than $24 million to use for other current or future municipal needs.
At budget workshops last week, council members expressed interest in using that remaining money to cushion emergency fund coffers and for capital improvements, including street paving and stormwater projects.
Here is where the $42.5 million went:
In February, the city used $8.2 million in sale proceeds to pay off loans associated with the former Dodgertown golf course and Municipal Marina.
Approximately $5 million was used to retire a loan the city took out to buy the golf course, which was sold to Indian River County in February for $2.45 million.
Roughly $3.2 million went to pay off a loan taken out by the marina to buy property and build a boat storage building. Paying off that loan early frees up $338,000 annually for 10 years in the marina fund that can be used for maintenance and improvements, city officials said.
Another $6.7 million was committed to provide a multi-year transition subsidy to the general fund though budget year 2022-2023, including $1.71 million transferred to the general fund this budget year, city officials said.
Roughly $15.8 million was set aside by the city for underfunded employee pension plans. The added cash will fully replenish the pension fund to pay benefits to former and current employees enrolled in the pension plan before it was terminated. The city has since replaced its pension system with a traditional 401K retirement plan.
Another $2.3 million will be paid in a lump sum to fund pensions for former electric utility employees enrolled in the city’s pension plan prior to 2015.
Roughly $9.5 million is earmarked to fund a trust dedicated to cover health insurance for retired city electric utility workers for the next 25 years.
All of that adds up to more than $42 million and puts the city in much better financial shape, according to city officials.
“This is a good way to show a positive effect of what happened with the sale,” City Manager Monte Falls said.