$71 Million Cost Just Too Risky for Business

The Family Businesses for Affordable Energy (FBAE) said today that area businesses should resist Destin, Florida’s, takeover of its electric service, warning business owners will face higher utility rates and higher taxes and fees, while seeing a reduction in service, reliability, and critical storm response.

The city of Destin, Florida, is looking at municipalizing the area’s electric service.  In this case, Destin would buy and take control of the current electricity system now provided by Gulf Power, buying all the necessary assets to be the city’s power provider.  Under the proposed scheme, Destin would operate its own government run electrical system.

“The results will be disastrous,” said Alex Ayers, Executive Director of the FBAE.  “This has been tried recently around the country and business owners have been stuck with the bills.

“We are talking higher taxes and higher utility rates, while service and reliability drop significantly,” he said.  “The bottom line is that Destin’s municipalization equals business owners paying a lot more and getting a lot less.”

Destin’s own municipalization study estimates the cost to Destin’s taxpayers will be at least $71 million, an amount of debt that is more than triple Destin’s $21 million annual city budget

It is even questionable if the $71 million initial cost estimate is accurate.

“These experts come into cities like Destin and low-ball the original costs estimates, leaving the city with sticker shock when the real price of municipalization comes in,” he said.  “And business owners and taxpayers will get stuck with the bill.”

For example, Destin’s municipalization consultants, WHH, provided purchase cost estimates to the city of South Daytona of $9.5 million, then the price jump to $15.6 million. Fortunately, the voters of South Daytona rejected the city’s municipalization move by a vote of 62 percent.

Another city in Florida, Winter Park, was given a $15.8 million estimate by other consultants. The final price was $42 million to municipalize.  In addition, the city of Winter Park lost $11 million in its first four years of government-run electric service.

And in Las Cruces, New Mexico, the city expected municipalization costs to be $30 million.  When total costs soared to $110 million, Las Cruces abandoned its effort.

When cities face escalating and unexpected costs for municipalization, they turn to higher taxes, higher fees and higher rates.  “The businesses of Destin can’t take this risk,” Ayers explained. “That kind of sticker shock will hurt business, kill jobs, and cause prices to rise for everyone.”

Government run electrical service can’t compete with investor owned utilities when it comes to service and reliability, especially when it comes to storm response, a critical need for locations like Destin.  Municipalized cities like Tallahassee, Fort Pierce and Jacksonville have had highly publicized failures when responding to hurricanes and storms.

“Business just can’t afford the financial and safety risk of a city-run electric service,” Ayers said.