As the debate over selling the JEA rages on, inaccurate information continues to permeate the arguments on both sides.
Fact-checking one post on Facebook illustrates the point:
“JEA answers to the citizens which owns the water rights and electricity. If sold you would be at the mercy of an investor owned company and pay much higher rates.”
Aside from the bad grammar, this makes little sense. There is no evidence that investor-owned utilities always charge higher rates than municipally owned utilities. And private utilities are regulated, from Tallahassee, so no one is completely at their mercy. There is some benefit to local control, however.
“JEA is a major source of recurring city revenue.”
A private company also would be a recurring source of revenue, from franchise fees and property taxes. However, those in the know believe the total probably would be less than the current city contribution in lieu of taxes, (currently $120 million) which is based on JEA’s gross revenue.
A private utility would pay property taxes. JEA does not. On the other hand, a private utility pays federal income taxes, while JEA does not, and also pays dividends to stockholders. JEA also has the inherent advantage of a municipal utility, which is the ability to get cheap capital via tax-exempt bonds. The JEA’s contribution to the city was calculated to be what a private utility would pay out. But an investor-owned utility would pay only property taxes and franchise fees to the city, and that could not possibly be as large as the current contribution.
Bottom line: sale might mean a large loss of income for the city.
“JEA employees volunteer within the community.”
Commendable, but so do the employees of private utilities.
“JEA rates are lower than competitors.”
JEA has no competitors. Like all utilities, it has a designated service area in which it has a monopoly. JEA’s rates have been lower than most other Florida utilities but their rates have increased, which is one reason they are exploring other options. Florida Power & Light’s rates last year were less than JEA, but its rates are increasing.
Discussion of selling the utility has come up several times over the years, most notably when it was caught using oil as its sole source of fuel and oil prices shot up, taking rates with them. At that time, many people were in favor of a sale. After JEA began using multiple fuel sources, rates went down and talk of a sale quieted.
Today, largely because of energy conservation, JEA has declining revenue, which could force up rates, and a potentially expensive investment in nuclear power that has gone off the rails.
It is possible that the push to electric transportation, and some of the amazing progress being made by the private sector, might spur a new growth spurt for electric utilities, but with such an uncertain future it might make sense to sell the utility — if anyone were foolish enough to offer a large price for it, which really doesn’t seem likely. More likely bargain hunters would try to grab it cheap.
Other options being explored include turning over management to a private company. That seems unlikely to improve the situation unless a private company could find a way to slash costs, improve services and still make a profit. But there is nothing wrong with examining that option. Having a tightly run company that also has the advantages of a municipally owned utility might be a winner.
Changing the way the local utility operates is an issue worth debating, but only if we use arguments that have some foundation in fact.
One thing that should be recognized is the motivation for selling the utility and getting a big wad of cash.
Mayor Lenny Curry has talked about paying off the city’s debt with the proceeds.
Well, of course, reducing debt always is good. But there may be more to it.
Curry’s major accomplishment to date has been “solving” the city’s pension problem. But it isn’t working.
Despite a healthy stock market, the unfunded liability of the plans is growing – perhaps too fast. One reason is the healthy pay increases that have been going to the police.
If it gets to a certain point, the city has to start paying down the unfunded liability, rather than waiting until the ½-cent sale tax kicks in. That would blow a big hole in Curry’s plans to postpone the day of reckoning.
If the city debt were paid off, the new tax would kick in immediately, and rescue the city from an expensive spurt in payments on the unfunded liability. Curry, an accountant, cannot be unaware of that factor.
