Powering Strong Communities

State Actions Undercutting Public Power

Recent efforts at the state level in Florida and Texas aim to undercut public power’s local authority and value. The focus of two of these efforts center around how much utilities contribute to a city’s general fund. Often, these are payments in lieu of taxes that the utility provides to the city, and account for a sizable portion of city funds.

In Texas, a state Senator introduced a bill in February that would prohibit cities from transferring revenue from municipally owned utility companies to their general fund. As drafted, the bill could have affected both public power and municipal water utilities. The bill didn’t make it past committee review, in part because stakeholders from across the state, including from districts representing the cities of San Antonio and Austin, quickly weighed in on how important this revenue is to municipal operations. An article in a local San Antonio paper noted how CPS Energy’s contribution accounts for more than one quarter of the city’s general revenue fund.

A similar measure in Florida, HB 1331, would have created a new statutory provision authorizing outside-the-city surcharges on utility customers of up to 10%, with the surcharge based on the percentage of customers located outside municipal boundaries. Introduced in tandem with SB 1380, the laws would have placed municipal utilities selling retail electric or natural gas service to customers outside their city limits under the full regulation of the Florida Public Service Commission, among imposing other significant limitations. The legislation would have imposed limitations on percentages of transfer to the general fund for both inside- and outside-city customers. The legislative push this year was another in a series of efforts at the state level aimed at capping or culling the general fund transfers of Florida’s municipally owned utilities.

“Prohibiting or limiting general fund transfers would eliminate a city’s right as the utility owner to earn a reasonable return on the investment in its utility systems, a recognized right of every utility owner and operator, to provide an essential service and promote a higher quality of life in their communities,” said the Florida Municipal Electric Association, which represents the interests of public power communities across the state, in a statement released in the spring when the legislature was weighing the bill.

“This will inordinately affect rural, often economically distressed, communities that have a weaker tax base because of the volume of tax-exempt properties that are located there, such as houses of worship, schools and government buildings,” the statement added.

Several Florida public power cities filed resolutions critical of the state legislation, including Jacksonville, Leesburg, Newberry, Havana, Green Cove Springs, New Smyrna Beach, and Wauchula.

Neither measure passed this year.

Unfortunately, another measure in Florida, HB 1645, did pass. It amends the Gainesville city charter to establish the Gainesville Regional Utilities Authority to govern the public power utility. Among other things, the law requires the governor to appoint the five members of the authority, to include at least one member from outside the city boundaries. Each member will serve four-year terms.

An analysis of the bill provided by Florida House staff shows that it also limits transfers from the utility fund to the city “to the aggregate of utility system net revenues less the flow of funds and requires any remaining funds after the transfer to be dedicated to additional debt service or used as equity for future capital projects.”

The bill is similar to a referendum rejected by Gainesville voters in November 2018.

In March, Gainesville Mayor Harvey Ward weighed in on how the bill undercuts the local authority and decision-making of Gainesville Regional Utilities and Gainesville residents.

“Political appointees would deny Gainesville voters the right to elect members of GRU’s governing body. This move would disenfranchise Gainesville voters,” he said. “Right now, our neighbors can serve on the Utility Advisory Board, or can come to city commission meetings or can talk to commissioners in the aisles of the grocery store or the hardware store. They have direct access to their decision-makers. This move would silence the voices of an engaged citizenry.”