News > NewsPower, corruption and lies
In January 1947, city leaders of Winter Park attempted to purchase the privately owned electrical company that powered the city -- the Florida Power Co. -- for the quaint sum of $350,000. According to the city's charter, Winter Park officials had to schedule a referendum before they could offer bonds to pay for the purchase, so the matter was put to the voters.
Florida Power, naturally, was not pleased with the proceedings, so company officials unleashed a campaign blitz that would put today's spin doctors to shame. They tried to gain sympathy by publishing the names of their Winter Park-based employees, from division engineer Clifford Benham all the way to janitor Ben Myers, on the front page of the Winter Park Herald. Then they enlisted the help of a Herald editor, who warned "naive persons" in an editorial not to be "seduced by socialism."
The day before the election, Rollins College treasurer Ervin T. Brown sent a memo to voters, cautioning them about the pitfalls of public ownership. A city-owned utility would fail to respond to emergencies in a sufficient timeframe, Brown wrote, as well as drive up rates and subject each Winter Park family to hundreds of dollars of debt. Brown billed himself as a person with an "unusually favorable position" from which to make his observations; he had been a Florida Power board member two years before sending out his memo.
The company's campaign worked. When the vote was counted, 1,068 residents voted against buying the utility, and only 124 voted for it.
On Sept. 9, Winter Park residents will be asked again whether they want to buy out the electric company serving them. The names and purchase price have changed over the years. But the scare tactics of Florida Power -- which was purchased by utility giant Progress Energy four years ago -- remain the same.
This time around the price is almost $50 million. According to Progress Energy, the buyout would increase the city's total debt to more than $180 million, meaning each resident would be obligated for about $7,000. That's an astonishing amount. It's also misleading.
The city's own numbers show that with the utility purchase, it would be $104 million in debt; a more manageable sum for a municipality with a $60 million annual budget. And Winter Park's 24,000 residents will not be the only ones paying the tab. Thirty percent of Winter Park's total utility bill is paid by commercial customers, and another 23 percent of Progress Energy's customers reside just outside the city limits. Cities the size of Bushnell, Fla. -- population 2,050 -- run their own electric utilities without worrying about the debt-per-citizen ratio.
Second, there's the issue of a catastrophic event, like a hurricane, wrecking Winter Park's electrical system, leaving the city with no power grid. If Progress Energy still held the franchise agreement, it would have to pay to replace the city's electrical infrastructure. If Winter Park owned the utility, taxpayers would be stuck with at least a portion of the cleanup bill. (The federal government, in the form of FEMA, would likely pick up a big chunk of the repair costs.)
Third, Progress Energy's rates are among the lowest in Florida. The com-pany claims rates will rise if Winter Park takes over, though city officials say they will charge the same amount as Progress. Cities like Fort Meade, Wauchula, Kissimmee and Tallahassee charge high rates as a kind of hidden tax. In Fort Meade, for example, 13 percent of the city's $3.3 million general fund is derived from the sale of electricity. Utility proceeds produce almost $1 million for the panhandle town of Chattahoochee's general fund each year; the city's low property values generate only $27,000 in property taxes. "It's the only way we can survive," says Lee Garner, Chattahoochee's city manager.
Lastly, there's the issue of reliability, which is a tough one for Progress since they are considered "the worst of the worst" when it comes to brownouts and blackouts, according to Winter Park city commissioner Doug Metcalf.
City administrators are constantly bombarded with letters complaining about power outages. Progress averaged almost 200 minutes of service interruption each year from 1997 to 2002; publicly owned Orlando Utilities Commission averaged about 40. Almost every Winter Park resident has a horror story about losing data from the home computer or spoiled food in the dormant refrigerator. Toni Turton, who lives in south-central Winter Park, says Progress failed to repair a live transmission wire snapped by a twister several years ago. Her small child and dog couldn't go in her backyard for four days while the wire lay on the ground. Outages? They've gotten better in the past year, she says, but she still sees too many. "This past week the power was out twice," she says.
Nonetheless, the utility company says Winter Park can guarantee no better reliability than Progress Energy.
There's a lot at stake for Raleigh, N.C.-based Progress Energy, whose $8 billion in revenues ranked it as the 228th largest corporation in America last year, according to Forbes Magazine. Among its 14 board members is Bill Frederick, former mayor of Orlando, who has taken a low profile in the debate. No Florida city has converted to publicly owned power since World War II, when Key West and Green Cove Springs did it.
As far back as 1994, Florida Power officials were concerned about "open competition for service" because of Florida's "sufficiently permissive legal climate" and relatively weak public-service commission. Meanwhile, more than 30 percent of Florida Power's 30-year contracts with cities across the state were beginning to expire. Among them: Apopka, Altamonte Springs, Maitland, Oviedo, Winter Park, Casselberry and Longwood. But instead of spending money to rebuild infrastructure to keep customers happy, Florida Power did just the opposite: It began to stockpile cash to become more attractive to a potential buyout.
When Progress Energy swallowed Florida Power, the com-pany finally began spending money. But they spent it on all the wrong things. Company officials made good on their promise to make it as painful as possible to sever ties with the conglomerate. Checks for $100 began appearing in the campaign contributions of Casselberry politicos favorable to Progress Energy. In Winter Park, the company spent $8,000 on a "call blast" using a message from former state legislator Allen Trovillion, who was Winter Park mayor from 1962 to 1967. They spent another $25,000 on a direct-mail campaign and another $5,000 on phone banking.
Company officials disseminated information on how to begin a grassroots campaign using Trovillion and other well-known Winter Park residents, like former mayor Joseph Terranova. They conducted polls and circulated a petition in Winter Park Towers, encouraging old folks to side with Progress Energy. They scanned commissioner Metcalf's campaign records for supporters who could "influence" him and "become active on the issues." Longtime power representative Ken Cone was supposed to "assemble" information for a smear campaign against commissioner John Eckbert, the 35-year-old investment banker who spearheaded the push to buy the utility.
The company also ran up Winter Park's legal bills. One of the ways Florida Power enticed city commissioners to re-sign previous 30-year contracts was to offer a 6 percent franchise fee, which the company charged directly to utility customers. This fee, totaling $1.6 million annually for Winter Park in recent years, went into the city's general fund, which helped pay for city services like fire and police protection. Progress Energy officials stopped paying Winter Park the franchise fee once the 30-year contract ran out in 2001. (The city and electric company have operated under temporary agreements since then.) There is no legal reason for Progress Energy to refuse payment; the company lost its case in district court and again on appeal, and will likely lose after the Florida Supreme Court hears arguments in the case this week. In the meantime, an Orange County judge granted the city a temporary injunction to continue the payments.
Allies of the electric company say they're not entirely thrilled with some of the actions it has taken. But they say the debt Winter Park would take on is too much.
"This issue is really about old versus new Winter Park," says Fae Moxley, the 71-year-old treasurer of the political-action committee Winter Park Taxpayers Committee Against Government Owned Electric. "New Winter Park is much younger and has much more money. Debt doesn't bother them. They are the kind of people who would take out an equity line to spend a month in Europe. We don't want debt. The young people don't seem to think about it much."
Says Allen Trovillion, one of the PAC's chairmen: "The young people don't understand the history of the city. We've always paid as we went. We paid $600,000 cash for City Hall [in the 1960s], every dime of it. That's not the way it is now. We just borrow more money. That's not right."
Then again, Winter Park had to pay cash because, historically, its credit rating wasn't much to brag about. "They couldn't have borrowed money if they wanted to," says commissioner Metcalf, a reserve Air Force general who is president of a telecommunications company.
But that has changed. The last time Moody's Investors Service rated Winter Park during a 2001 bond issue, it gave the city an AA1 rating, their second-best slot.
"The rating carries a stable outlook and is based on solid financial operations supported by a modest operating tax rate, affordable debt and the affluent, residential tax base," the report summed up. Winter Park keeps $9 million in a reserve fund, up from $1 million in the early 1980s, helping to give the city a healthy financial outlook. "That shows exactly how well-managed this city is," Metcalf says.
The Winter Park Herald had it wrong 56 years ago. The buyout is neither a push for socialism nor a "bureaucratic boondoggle," the term preferred by Progress Energy. If the referendum passes and other legislative hurdles are accomplished, the city will hire a company to manage the poles, wires and other equipment it will own. It will then need a company -- like the Orlando Utility Commission or even Progress Energy -- to generate the power. It's a chance to show generations of Winter Park residents what good old capitalism can do for them.
"We're trust-busting in the Teddy Roosevelt sense of the term," commissioner Eckbert says. "We're busting up an abusive monopoly. We want to go to a competitive bid so we can hold our utility accountable rather than be beholden to one company for a lifetime. Progress Energy is a lot like the Hotel California. You can check in but you can't check out."