Six years ago, the Flagler County Commission, behind then-Administrator Craig Coffey’s deal-making, agreed to buy the Plantation Bay utility from developer Mori Hosseini for $5.5 million in a late-night vote despite public qualms that the county was acquiring a clunker, an official government consortium’s analysts that placed the utility’s value at no more than $1 million, and the reservations of three commissioners, though two voted for the deal anyway.
The acquisition proved to be a nightmare, and the utility far more expensive to fix and run than Coffey and his supporting commissioners had claimed at the time: the county accumulated a $13 million debt from three loans. The county is looking for a bail-out–both for the debt and to be rid of the utility.
Only one commissioner is still on the commission from those who voted for the deal: Charlie Ericksen. He’d voted for it despite his reservations. He remained entirely quiet Monday evening as commissioners and county officials in turn spoke in the most candid terms yet about the bad deal, about the terrible water quality residents have endured since (contradicting public claims–in effect, lies–by county officials to the contrary over the years), about the county’s incompetence as a utility operator, about the county’s dismal prospects of getting rid of the utility, and about one silver lining–the deal County Administrator Jerry Cameron arranged with the Florida Government Utility Authority to take over management for now, to the county’s substantial relief, but also at the substantial cost of $1.6 million a year.
Some of those confessional statements: “We had not been able to improve water quality, which was totally unacceptable” (Cameron). “We don’t have core competency in this area and we don’t have the proper qualified staff to be able to do that” (Commissioner Donald O’Brien). “It turns out that we the county is not the best organization talent wise and organization wise to run water treatment plant… We’re not going to build a reverse osmosis plant anymore” (Commissioner Dave Sullivan). “We’re just going to have a professional administration that is going to improve the situation for the residents of Plantation Bay, which is our responsibility” (County Attorney Al Hadeed).
It was as much a surrender to reality as it was a reversion to the deal the Florida Government Utility Authority had recommended six years ago, before the big debt, before the continued hardships to customers, the higher utility bills and the county’s many deceptions along the way, in a previous administration that had become skilled at making opaque, financially burdensome and questionable deals.
“We actually attempted to have the transaction from the developer to FGUA in 2010, 11, 12, and the developer refused to engage in that transaction,” Hadeed told the commission Monday evening, still avoiding mentioning Hosseini’s name openly (Hosseini is a politically powerful developer who’s frequently contributed to Flagler commissioners’ campaigns in the past, and whose Flagler deputy, David Haas, was a Flagler County administrator). “So it’s just come around,” Haded said.
The confessional aspect of Monday’s commission meeting was incidental to the issue before commissioners: a deal with FGUA to take over management. But because of the deal’s cost and an upcoming town hall meeting with Plantation Bay residents to explain the deal, in January, Cameron took time to place the matter in context–and to place a very large distance between himself, the 2013 deal and its catastrophic consequences.
“We were proceeding on information provided to me when I first got here with regards to what was going to be required to put our utility on a firm footing, comply with consent orders, and take steps to immediately improve water quality,” Cameron said. (Coffey and his deputy administrator are gone, but most of the rest of the administration is still in place.) “After approximately five or six months, it became clear to me that I was developing many questions that I was not able to get answered, and in spite of working with some consultants, we had not been able to improve water quality, which was totally unacceptable, because the water was in such bad shape that we were getting multiple complaints even daily with regard to that water quality. A little research showed that the water quality had never been acceptable during the time that we were managing the utility.”
That alone was a startling revelation: for six years, the county had delivered “unacceptable” water to residents of Plantation Bay.
Cameron sought advice and was directed to talk to the Florida Governmental Utility Authority, a consortium of 13 counties that runs the authority and provides water and sewer service to 100,000 customers (Cameron had mistakenly said 1 million). “They gave me definitive answers as to why we were having the problems that we were having,” Cameron said. “I gave them authorization to take over the operation of the utility for several weeks in order to see if they applied what they had discovered and applied corrective actions if we would indeed see the result. They assured me that I would see the result. As a result of that very short experiment, the water quality came up to really good quality water for the first time in anybody’s memory out there. As a result of that, I entered into discussions with them about possibly taking over the management of the utility. During that period of time that they would be managing it, we will look and see at the possibilities of us divesting ourselves of the utility.”
But divestiture is not likely any time soon.
“The possibility of turning that utility around over to anyone right now is nil, because of the tremendous debt load,” Cameron said. “You can’t make it up through substantially increasing rates, because they’re already the second-highest in the region.”
Based on the county’s current budget, the combined water and sewer utility generate revenue of $2.33 million from customers, but have an annual debt-service charges of $809,000, operating expenses of $938,000, and personnel expenses of $648,000. (Fore the water utility alone, revenue from customer billing is $1 million, personnel expenses are $327,000, operating expenses are $480,000, and debt service is $335,000, half of it principal, half of it interest.)
The actual loan for the acquisition of the entire Plantation Bay plant was $5.68 million, at an interest rate of 2.37 percent over 30 years. But that was just one loan, which started coming due in 2015 and won’t be paid off until 2043. Total cost: $8.1 million.
The county also borrowed $387,000 to repair the sewer plant, at 2.12 percent interest over 20 years. Total cost: $483,000. And it borrowed $3.8 million for the water system, at 3 percent interest over 15 years. Total cost: $4.7 million.
So the county’s combined debt at Plantation Bay is actually $13.3 million.
And of course that doesn’t reflect all of the county’s utility debts: the county is also paying on a $6 million loan for the Beverly Beach-Eagle Lakes utility, paying $156,000 a year for that. (See all those budget and debt figures broken down, according to the current county budget, here, though the debt chart on the $3.8 million loan reflects an earlier chart. The revised chart us here.)
The county is working with the Department of Environmental Protection, its legislators and its lobbyists to hunt for a debt bail-out (“to see if the large debt can be mitigated,” in Cameron’s words). Meanwhile, FGUA will do the job, which could be more permanent than temporary. “These are interim measures we’re putting in pending figuring out how to divest ourselves of that utility in the future. But if we can’t do that, we still have the options to enter into permanent management agreements with them,” Cameron said.
“The expertise they applied achieved amazing results,” he continued, now using language as familiar as language once used by his predecessor to describe water improvements at the utility. “The week before they took over management, I would not have been comfortable bathing in the water. Two weeks after they took over the management, I don’t hesitate to drink it, it’s just the same as bottled water that I have sitting on the desk here.”
Not so fast, Helen Siegel, a board member on the Plantation Bay homeowners’ association, said: “It has improved somewhat. But the water is not as good as it ever was today, in Plantation Bay. The water is still yellow,” she said. And Siegel agreed with another Plantation Bay resident who addressed the commission: the county should not vote on the agreement with FGUA before the town hall meeting on Jan. 22.
Jane Gentile-Youd, the Plantation bay resident who became a permanent fixture in the commission’s public comment segment, largely over Plantation Bay issues–she ran for a county commission in 2018–thanked Cameron for his candor, but said that was not the issue: “Nothing should be executed that contains our personal funds ever again until we have a town hall meeting,” Gentile-Youd said. “I am sure this FGUA would have no problem continuing on an interim basis just for a month until we have a town hall meeting, and let them keep on going on a temporary basis they are now. I have been getting many, many requests from people, including one of the officers of the board of directors, who specifically asks that at the town meeting, that Mr. Cameron be in charge, and that Mr. Mullins not attend the meeting.” Joe Mullins is a county commissioner who’s had verbal confrontations with Gentile-Youd, and vice versa, though it is unusual for a commissioner to be asked not to be present at a public meeting. “But I explained to this officer of our board of directors that that is a decision Mr. Mullins himself will have to make, but it’s been requested that he not be there.”
Cameron and Sullivan said nothing is irreversible about the deal with FGUA. The issue Monday was to approve new management oversight. “We’re not in the divestment conversation yet,” O’Brien said. “That will come another time after there’s been a full presentation to the community and the public, and then we can discuss the pros and cons of that decision.”
Commissioners unanimously approved the agreement.