Secrets, Shenanigans and Mysteries: Should we sell JEA?

Nothing lights up a politician’s eyes like the prospect of free money.


That explains the excitement over the latest round of, “Hey, why don’t we sell the JEA?”

This possibility has been discussed and debated many times over the past 50 years since the consolidation of the city and county governments.

Each time it was rejected. But we have a new herd of politicians now, so here we go again.

It boils down to this: if you have an income-producing asset, you can continue to receive the income, or you can sell the asset and spend the money now but forgo the income. Some local politicians imagine they can have their cake and eat it, too.

JEA was worth about $2.6 billion in 2012, according to an estimate by the City Council auditor.  Today it is worth more but maybe not the $6.4 billion it could net from a sale, as alleged by a consultant to the JEA.

The Jacksonville Civic Council currently is conducting an appraisal as well.  For more information about this group, check this out:  

Whatever number is generated is likely to be the top end. Any potential buyer will do it’s own appraisal, and undoubtedly would be lower. Negotiation would arrive at a number in between.

If there is a buyer.

Municipally-owned electric companies like JEA only produce 15 percent of the electricity generated in America and the number hasn’t been changing. On the other hand, cities own most of the water and sewer plants, which is a job acquired by the JEA years ago when the city could not handle it anymore.

Any sale likely would involve splitting the functions and selling to different private entities.

It isn’t quite like selling your mom and pop grocery, however.

When it comes to JEA, the current owners also are its customers. After the sale, they would still be customers, but not own the business anymore.

They would share in the profits but perhaps not to the same extent. JEA provides about $116 million to the city, which helps keep property taxes lower than they would be otherwise.

A private owner would pay property taxes, and a franchise fee — and federal income taxes, which JEA does not pay. But Jacksonville residents would pay all those costs in their electric, water and sewer bills, along with the previous customers.

Since they are buying the utility from themselves, former JEA customers also would pay for the sale, as well as receive the proceeds.

The rates they pay no longer would be set by the JEA, which presumably would disappear. Rates would be set in Tallahassee.  (Did you see that?  Tallahassee would set the rates!)

So what happens to the money from the sale? It could be invested and whatever income it produced could be used annually by the city for whatever the council approved.

Or it could be spent, which is more likely. The temptation to spend billions of dollars is irresistible to politicians.

Some surmise that Mayor Lenny Curry would like to use it to help pay for his pension reform, which reportedly is costing more than anticipated.

Regardless, the danger is that the money would be spent and the problem of the missing future income would just be kicked down the road, the way the pension problem was for years.

A lot of pitfalls lie ahead if the council decides it wants to sell. Unless a willing buyer is found and wants the utility bad enough to spend a lot of money, it could turn out to be a bad deal for the owner/customers of JEA. Even then it could turn sour if the proceeds are misused.

An alternative might be to restructure the JEA, which has been done several times in the past. Giving the independent authority more independence and more authority, while retaining safeguards, might allow it to implement efficiencies that would result in lower rates and higher revenue to the city government.

Taxpayers need to remain alert. There is a major push to this idea currently. The question is whether that is because it is a good idea or because some people will benefit personally, as opposed to a public benefit.

Another cause for worry is that it seems to be on a fast track. There is no reason in the world to hurry.

Further alarms: two city officials appeared before a council committee and refused to be questioned without a lawyer.  (What???)

Yet, even stranger, another media outlet reported that other officials refused to turn over documents to the council concerning the city’s debt.  (What???)

This is the strangest thing I’ve seen in 50 years of covering City Hall. Unless there is a specific exemption to the public records law for those records, the officials are committing a crime. Anyone, including reporters, is entitled to see public records.

But the big shocker was the announced resignation of Paul McElroy, managing director of the JEA. I talked to him Thursday night at a meeting of the City Council committee looking into the value of the JEA and he gave no indication that he would resign the next day.  More information here:

The guy has a half-million dollar contract. If he thought JEA was going to be sold he had a great incentive to stay on board. According to other media reports, he would get a million-dollar golden parachute if JEA were sold.

Lastly, as opponents continue to ask: Who is pushing the idea? No politician has yet claimed ownership but the train rolls on.

Because of the lack of transparency, fast tracking and the sudden resignation of the CEO, we give this deal a BIG STINK.

What do you think is going on with this deal and why all the mystery surrounding it?

Lloyd Brown

Lloyd was born in Jacksonville. Graduated from the University of North Florida. He spent nearly 50 years of his life in the newspaper business …beginning as a copy boy and retiring as editorial page editor for Florida Times Union. He has also been published in a number of national newspapers and magazines, as well as Internet sites. Married with children. Military Vet. Retired. Man of few words but the words are researched well, deeply considered and thoughtfully written.

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