The Flagler County Commission this evening will consider approving a $6 million bid to build a 500,000-gallons-a-day reverse osmosis water treatment plant, expandable to 1 million gallons in the future. The measure potentially cures one of the thorniest county issues since Flagler government bought the utility from a private developer for $5.5 million in 2013 (not including additional, generous development credits), knowing it was in very bad shape, and knowing that at least $3.9 million in repairs were needed. That figure has long since been eclipsed.
In 2011, a state agency had recommended the utility sale price to be $1 million.
Sawcross Inc. of Jacksonville was the lowest of three bidders, by a shade. To finance the project, the county would seek a $3.8 million bond. The rest of the cost would be paid through impact fees and grants.
County officials say the entire cost will be borne through Plantation Bay’s utility system and its rate-payers, without affecting county taxpayers at large. County Administrator Jerry Cameron said he’d work to solve the Plantation Bay problem “without raising their rates.” He said Friday that, in fact, rates will not go up to pay for the repairs. “I think there’s going to be a rate reduction” in the future, he said. He did not explain how.
The term of the loan is 14.3 years, at a fixed interest rate of 2.99 percent. Closing must take place by May 31 for that rate to stick.
Interest on the loan will total $927,000, bringing the total amount the county will pay by 2033 to $4.73 million, doing so in annual installments of around $300,000 to $330,000.
“The 2019 bond will be payable solely from and secured by a pledge of gross revenues derived from the operation of the Utility System after payment of operation and maintenance expense,” Jay Glover, managing director of PFM Financial Advisors, tells Lorie Bailey Brown, the county’s finance director, in an April 24 memo. The county hired PFM to be its financial adviser in the Plantation Bay matter.
PFM issued a request for proposals to six local, regional and national banks. Sterling National Bank offered the lowest, 2.99 percent rate. The loan is to be issued on what’s called a “non-bank qualified basis,” which,, in effect, raises the interest rate. Bank-qualified loans are cheaper because the bank deducts interest expenses, but the county isn’t going that route on the Plantation Bay loan because the county will be seeking other, steeper loans this year (think about the construction of the sheriff’s district office in Palm Coast, expected to cost $12 to $15 million). But local governments are limited to $10 million in bank-qualified loans in any calendar year.
A six-page, single-spaced timeline of the Plantation Bay utility history, prepared by the county’s Julie Murphy, accompanies tonight’s item, and for the first time with that much detail traces the history of the utility back through its earliest development days as a Development of Regional Impact, or DRI. As early as 1985, the developers at the time signed a development order “that gave Flagler County the right to acquire the utility at a lower cost than the $5.5 million eventually paid in 2013,” the document reads.
The original developer transferred the DRI to Mori Hosseini’s ICI Homes between 1991 and 1992. Hosseini through his various companies would become a generous campaign donor to several county commissioners over the years. In the mid-2000s, then County Administrator David Haas attempted twice to acquire the utility for the county but failed. (Haas then went to work for Hosseini’s ICI.) Two successive negotiations failed, though it remained the county’s aim to acquire the plant.
In 2011, the Florida Governmental Utilities Authority “produced a report that listed significant owner liabilities including Occupational and Safety Hazards Act violations,” according to the timeline. “The Authority estimated then the $3.9 million in improvements were needed. The Authority noted that the problems existed because of ICI’s deferred maintenance of the system. The FUGA recommended to the county that no more than $1 million be offered to ICI for the utility.”
Then-County Administrator Craig Coffey negotiated a $5.5 million purchase of the utility, briefly using Bunnell government as a partner to facilitate a certain kind of loan that only the city could secure. The Purchase price did not include a credit for 150 prepaid single-family residential connection impact fees valued at just under $700,000. That’s $700,000 not currently or potentially available to defray the cost of utility improvements or lower loan costs. The sweetheart deal also capped the cost of subsequent impact fees. The deal was arranged even though the county was aware of state Department of Environmental Protection orders against the utility for not providing continuous monitoring.
In February 2013, the County Commission in a 4-1 vote approved the deal in a late-night meeting even though three commissioners at the time–George Hanns, Charlie Ericksen and Barbara Revels–were uncomfortable with it. Only Hanns dissented. Nate McLaughlin, who was replaced by Joe Mullins, also approved the deal after lobbying for it alongside Coffee at public hearings, as did the late Frank Meeker. The utility’s 1,600 customers were not necessarily placated. The county soon started spending additional dollars, and early last year began repairs to the sewer plant, only to discover more grave, structural issues. issues.
The commission meets at 5 p.m. at the Government Services Building. It is discussing Plantation bay matters at 6 p.m.