GRU Authority votes on funding litigation, continues work as normal after election
The Gainesville Regional Utilities (GRU) Authority voted Wednesday to recoup the costs of ongoing litigation with the city of Gainesville from the city by withholding funds from the general services contribution (GSC).
The GRU Authority also voted to keep its signed IT contract with the city in place and to enforce another signed contract with the city concerning the cost of streetlights. The directors also celebrated the current success of the debt reduction plan.
Less than 24 hours before the meeting, final results arrived from the November election, showing a massive victory for the local public utilities referendum. Initiated by the City Commission, the referendum would erase Section 7 of the Gainesville Charter and return management of GRU to the commission—eliminating the GRU Authority.
The referendum succeeded with over 70% of Gainesville voters in the affirmative. However, the GRU Authority will continue to run the utility under the status quo until an Alachua County judge can rule on pending legal issues .
The GRU Authority has called the referendum illegal—a position backed by the legislators who initiated the 2023 House Bill 1645 to create the authority.
At Wednesday's meeting, Chair Eric Lawson said the authority's legal team had diligently defended HB 1645 and Section 7 of the city charter. He said GRU should not have to bear the cost of defending the system put in place by the Florida Legislature and Section 7.
Lawson said he would entertain a motion that would transfer any cost of defending Section 7 to the city of Gainesville by withholding those funds from the GSC, a payment transferred monthly to the city and amounting to $8.5 million over the course of the current fiscal year.
Director David Haslam agreed and made the motion. The motion passed unanimously.
Director Jack Jacobs said Section 7 requires the City Commission to smoothly transition control of GRU to the new authority, which started in October 2023. He said the city had failed to do that and left no recourse for the authority besides litigation.
Also concerning the GSC, utility CEO Ed Bielarski recommended the authority rescind its previous direction concerning the IT service level agreement.
With different directors, the GRU Authority previously voted that the utility pull back more of the GSC funds in order to pay for the full cost of providing IT services to the city of Gainesville.
The contract has the city paying $2.9 million annually for the services, but GRU said the actual cost to provide the services is $5.9 million.
Bielarski said he tried to negotiate with the city by asking for a two-year contract and the full amount, but the city stayed firm in only wanting a one-year deal.
Because of the stalled negotiations, Bielarski said he recommends keeping the signed IT contract in place and taking the $3 million loss. However, he said that means all signed contracts need to be kept.
A memorandum of understanding places the duty to pay for county streetlights in the city, according to Bielarski. The city has refused and said it's a utility responsibility, so Bielarski recommended reducing the GSC by the annual cost of the streetlights, $1.3 million, moving forward.
For the first year, the GSC will reduce by $2.6 million to account for both Fiscal Year 2023 and 2024 that GRU covered the costs.
The GRU Authority accepted the recommendation.
Director Craig Carter said the decisions aren't punitive but corrective, setting the tone for both sides to move forward as written in previous decisions. When those contracts expire, then a new negotiation between the new boards can happen.
The city has said that it has little room in its budget for contingencies , and these losses could force changes to an annual budget passed less than 45 days ago.
Claudia Rasnick, GRU's chief financial officer, presented two items concerning the utilities debt reduction plan and investment policy. She highlighted the success of the debt reduction plan to date.
While originally started in 2020, she said the utility, under City Commission direction, didn't have the ability to fund the debt reduction plan until recently.
In 2022, GRU paid $30.5 million in scheduled principal debt payments along with $8.3 million in extra payments. In 2023, GRU paid $35.6 million in scheduled principal debt payments along with $3.4 million in extra payments. In 2024 under the authority, GRU paid $35.3 million in scheduled principal debt payments along with $39.5 million in extra payments.
She said GRU had reduced its principal debt by 4% in the previous two years with another 4% reduction anticipated in 2025.
Rasnick noted that these reductions in debt come while also anticipating no electric rate increases for the next 10 years. From the 2023 to 2024 fiscal year, the GRU Authority voted to keep the rate flat.
Bielarski said this allows GRU rates to slowly start getting closer to the state average—keeping flat while other utilities increase. Carter said the GRU Authority didn't sacrifice utility rates in order to reduce debt but found a balance for both.
The last item on the agenda concerned Deerhaven Renewable, the biomass plant. During an annual shutdown and once-every-10-year inspection, staff found 35 cracks along the dampening wire.
The discovery happened in October, and this marked the facility's first inspection since coming online in 2014.
GRU staff said they couldn't leave the cracks until the 2034 inspection because of the potential for even greater damage to the plant. So, the 25-ton rotor was removed and shipped to Charlotte, North Carolina, for repairs.
Because of the engineering design, removing the rotor requires damaging the 169 turbine blades attached to it. These specialty blades aren't available on warehouse shelves, and GRU couldn't find a domestic facility to fabricate new ones. GRU contracted with a company in Switzerland to fabricate the new blades and send them to Charlotte.
Once combined, the turbine and blades will return to Gainesville and be reinstalled into the plant. GRU staff said they hope to have the site ready for operation in late January to early February—a quick timeline for the work required.
The cost of the repairs will be around $1.1 million, however Bielarski noted that Deerhaven Renewables hasn't been the cheapest power plant to run recently, with natural gas operations coming in cheaper.
So, GRU will save some money by operating more natural gas plants until Deerhaven Renewables comes back online, helping pay for some of the repair cost.
