February 5, 2024
GRU Authority & the City
It’s going to be a very lively month between the GRU Authority and the City Commission, with a lot at stake. At the end of the month the City Commission and the GRU Authority will be having our first joint meeting to discuss the finances between GRU and General Government.
A lot has happened in a short time, and more is coming this upcoming Wednesday at 5:30 PM for the GRU Authority Meeting. Here’s where we stand:
Reneging on 2022 payments
The Authority told City staff late in January that in two weeks, February 1st, they will be reneging on their agreements to pay for certain services in 2022 (1). Essentially they say they are no longer going to pay in arrears for services rendered, they will not use the City Auditor or City Equal Opportunity Director, and they won’t be paying for many other services, despite having agreed to all of these before. So, with only two weeks’ notice (2), they reduced their payments for to the City by $1.4 million over the year and will likely come back to us for more money in the future.
As anyone who has ever worked in a business or overseen a contract knows, this isn’t how agreements work. You don’t get to unilaterally decide how many services you receive and how much you’re going to pay for those services after the fact. That’s called a “default”.
This action reminds me of that scene from “Father of the Bride” when Steve Martin tries to rip out hotdogs and buns at a grocery store and tells the cashier how much he’s going to pay for them. This turned out poorly for Steve Martin.
Father of the Bride is funny. Playing games with millions of dollars and the lives of city workers and critical city services isn’t.
As the arrest of George Banks makes clear, this isn’t how the world works. If you want to negotiate, negotiate, but agreements are a two-sided thing, and GRU can’t afford to lose the services we provide to them. This isn’t how any credible “business” would run itself.
Because this cut comes suddenly midway through our fiscal year, the City Commission is going to have to decide if we lay people off in these departments or cut money from other areas to shore their budgets up. We don’t have wiggle room, seeing as we gave GRU $19 million per year last year, so something has to go.
And of course, we won’t just throw our arms in the air and say, “Yes GRU Authority, whatever you want. Don’t pay us money. Change the terms of agreements with no forewarning. Expect the same level of service. Exempt yourself from independent audits and federally required equal opportunity requirements. Whatever you want, we’re fine with it.”
So preparing our response is happening now. But that’s just how we started the month, here’s what’s coming up this upcoming Wednesday:
Complete elimination of the General Services Contribution
On Wednesday the GRU Authority is considering completely eliminating the $15.3 million in transfer this year and placing it into “escrow”. Up until this time the conversation has been around cutting next fiscal year, which they are legally required to wait until as per our Charter. Now the conversation is shifting to doing it right now.
Whatever putting the transfer funds in escrow means in this scenario, the result is a drastic and sudden slash to revenues, bringing the transfer down to zero immediately. This would, of course, completely break the City’s budget, which is a carefully constructed, balanced budget that was submitted to the state through statutorily mandated budgeting processes.
Doing that would be insane. But even if they don’t follow through on gutting the City budget mid-year, putting something this crazy on the agenda creates chaos and even more uncertainty around governance stability at GRU and the City. That hurts employee morale and increases the risk of a bond ratings downgrade. It is also, to put it mildly, not “running GRU like a business (2).”
Eliminating our main affordable housing fund, “ConnectFree”
Connect Free is the City’s primary, and in many cases only, funding source for low-income affordable housing. It is paid out of surcharge fees on water/wastewater connections in the unincorporated area to help pay for water/wastewater connections for low-income developments in that same service area.
It is used by low-income families and groups like Habitat for Humanity and the Gainesville Housing Authority to lower the cost of their water/wastewater connections. But most importantly it is used as leverage for state and federal funding for larger affordable housing projects.
This leveraging of money has brought in roughly $100 million of outside investment to our area for creating mixed-income and low-income housing like Deer Creek Senior Housing, Arbours at Tumblin Creek Veteran Housing, and Royal Park. In total, over 500 units of affordable housing have been created since 2016 with the help of ConnectFree. That’s an incredible return on investment, roughly $150 for every $1 invested into the program.
The loss of this money is going to gut our community’s affordable housing goals, and with the Authority gutting our general fund along with it it’s hard to see how we get it back. The result is going to be more families without homes and millions in lost investment for our neediest residents.
Forcing City taxpayers to pay for GRU operations costs
For over 50 years the City and County have had an agreement where we service their streetlights in exchange for the right to locate GRU utility infrastructure along County roads. It’s a common payment called a “franchise fee”, although an uncommon arrangement through trading services for this instead of money (4). Local governments own roads and “right-of-way” and utilities pay the governments a rental fee to use that land to place their electric, water, and gas lines.
As GRU made very clear in a “Streetlights and Fire Hydrants” report from 2005:
Gainesville Regional Utilities infrastructure resides in Alachua County and City of Gainesville right-of-way. Compensation for right-of-way usage or consideration such as franchise fees is common. In all of the actions and agreements between the City of Gainesville and Alachua County there has been recognition of consideration for infrastructure in the right-of-way. Linking the payment for streetlights and fire hydrants to surcharge collections, as well as the City of Gainesville responsibility for unincorporated area streetlights and fire hydrants have been forms of consideration.
Now GRU staff is recommending that the City taxpayers pay for this, despite City taxpayers receiving nothing in return for GRU placing utility infrastructure along County roads. It is wholly and clearly a GRU operational expense. Why they believe City residents should pay for this GRU operations expense I have no idea.
Whatever the reason, the result is a loss of about $1.1 million per year. Another significant blow to our budget, one that seems arbitrary and totally unreasonable.
Moving forward
It’s hard to tell how all of this will turn out, but if the GRU Authority goes through with it we are going to be in a crisis, both at GRU and the City of Gainesville. My hope is that one day the GRU Authority will focus on running an efficient utility that provides reliable service for an affordable rate.
There’s a lot that needs to be done at GRU: high rates, high debt, massively overbuilt utility infrastructure, and a changing utility landscape. That will take a lot of time to go through. Instead, this Authority’s time is focused on extracting as much money from City taxpayers as possible.
There has not yet, to date, been a single discussion at the GRU Authority about lowering GRU rates, improving efficiency at GRU, the long-term plans for energy infrastructure, or any of the things I would expect this Authority to be working on. Every agenda is primarily focused on the City Commission and General Government and trying to pry as much money from us as possible. To put this into context, the transfer makes up about 3% of GRU’s budget.
Our City Commission and city staff have been very patient with the GRU Authority as they try to figure this all out. Patience may be a virtue, but it has its limits.
- To give credit where credits due, C. Eric Lawson, the CEO of North Florida Regional Medical Center voted against this decision.
- I know I’ve already mentioned the two-weeks thing, but it needs to be repeated.
- GRU isn’t a business, it’s a municipal utility that should be run efficiently and effectively as every organization should. This is a big talking point of the Authority, to “run GRU like a business”, so as a person who has run my own business for years and run entrepreneurship training programs I like to point out when they come up short of this goal.
- It’s an arrangement that has worked out very well for GRU. If they were paying standard franchise fees they’d be paying the County roughly 7 times more than they are now.
You can read more of LWV of Alachua County's actions and updates on the GRU controversy in our Article and Action Alert.
