What do you put on the table when playing blackjack—your money? Sure. Would you put your authority as a person or your ability to earn an income on that table? Hopefully not. If you did, people might think you have a gambling problem, and they’d be right. Well, the JEA board has that itch to bring Chapter 21 of our city charter back to the blackjack table and see what the payoff might be. As this is the third time the city has proposed to turn JEA into chips, they just might have a gambling problem. And we have much more to lose than merely money. (But lots of that, too.)
Chapter 21 is the portion of our city charter that establishes JEA with all the plenary authority of city government to “own, manage and operate a utility system within and without the City of Jacksonville.” Within the JEA charter, there are several kinds of power codified for the people of Duval. There is, of course, the authority to own and operate electricity, gas and water/sewer systems and all the properties and infrastructure that goes with that responsibility. Another kind of power is civil authority, your authority.
Back in the heady days before term limits, when elected officials needed to apply long-term thinking to enjoy long-term success, JEA was created as an extension of city government. JEA’s civil authority has allowed Jacksonville to manage its own development and expand utilities based on what’s happening here, rather than what’s happening on Wall Street.
This arrangement has been good for a city that consolidated with the surrounding county. Jacksonville could not have expanded electricity, water and sewer into the rest of the county so quickly and affordably with tax-free bonds if it had had to negotiate the expansion with a private utility based on market value. We are still reaping the benefits of those savings. Now, some want to sell that off … again. Deal you in?
Privatizing JEA would require a transfer of what is now civic authority to a private, investor-owned utility (IOU). We wouldn’t be selling just our electric company; we would be selling our authority. We wouldn’t end up with just a new power company; we would end up with an utterly changed government. The sale of JEA would be like cutting off a limb, selling it to someone, and calling it OK because the buyer is doing the work you were doing with that limb, so you don’t need it. Place your bets.
Beyond that, the $110-plus million that currently goes into city coffers each year would have to be paid by the IOU. According to the 2012 council auditor’s report (from the last time the city had this itch), before purchasing JEA, the IOU would have to pay a whopping total of $6.4 billion to the city for JEA’s share of the pension plan, refunding tax-exempt debt, and ad valorem taxes on the real property purchased from JEA. That’s in addition to the price of net assets, which the Daily Record recently reported as being worth $5.5 billion. That outlay all comes before they could sell a single watt. Does that sound like a good bet to you?
And who would want to buy JEA? Florida Power & Light seems to be in the best position to do so. And why not? Even if it costs an arm and a leg, it gets to buy out the competition. JEA is delivering power more efficiently at similar rates and provides better service than private utilities. If council and the JEA board allow FPL to buy JEA’s electric distribution, it would allow it to eliminate the competition. JEA is FPL’s competition right now and the citizens of Jacksonville are the investors instead of Wall Street. If we sell, we allow the benefits of competition to be eliminated.
FPL has customers and investors to serve. JEA has a constituency of citizens to serve. A buyout would also eliminate your leverage at the ballot box. You elect those who appoint the JEA board. If you don’t like the politicians who appointed the board, you can vote them out. You have no say in who runs FPL.
A private IOU would be hard-pressed to run an electrical grid and a water/sewer system with a sufficient profit to satisfy investors and pay all the legacy costs, corporate income and state taxes, and pay a good wage to its employees without raising rates. JEA does that now and hasn’t raised rates in two years. In 2016, the Public Service Commission approved FPL rate increases each year through 2019.
If local unemployment concerns you, a private company supplanting our public entity should also concern you. The council auditors’ 2012 report states that “IOUs would save $72,345,480 per year by laying off an estimated 747 employees whose positions duplicate existing IOU employee positions.” This is what our own assessment says, even before the private green shades get hold of it.
Instead of selling JEA, we should double-down and expand into FPL’s market. Chapter 21 explicitly allows us to do so. Since JEA has similar rates, it is competitive. Customers in surrounding counties can benefit from local service and Duval can benefit from out-of-county revenue flowing through the Jacksonville budget as a hedge against higher taxes.
There is a sense this time around that only the electricity service portion of JEA will be offered or sought for sale. In the Daily Record, City Councilman Tommy Hazouri cited concerns about how the city would provide water/sewer service if a company bought only the power side of JEA. I’ll bet that that will involve a tax or rate increase. Still, that might be better than a private company operating our water system. Recall Flint, Michigan? Of course you do.
One good argument for private ownership is that the property-based school tax revenues from the newly privatized property would provide revenue to Duval schools. The problem with this position is that the school tax money goes to the state which decides through an algorithm how much each county gets. Duval would likely receive a portion of that money, but a lot of it could go to Orange, Miami-Dade, Hillsborough, etc.
The term-limited, short-term thinkers on the council might be looking for a big payday during their term and could make a deal that sends the downsides of JEA’s sale into someone else’s term after they move on to the next office. The question is: Where do we want the money from our power bills to go? Wall Street or Main Street?
JEA is not a company. It is an arm of Jacksonville city government. We shouldn’t let a boardroom tantrum create a crisis that doesn’t exist. If our right hand offends, we should not cut it off. We shouldn’t play that hand, either. We should step away from the table.
Minion is a citizen investor in JEA.