Palm Coast Council’s Theresa Pontieri Calls for Stronger Controls on City Utility to Protect Against Privatization

Note: This is one of two articles on the subject. See: “A Brief History of Palm Coast’s Water and Sewer Utility.”

As more than a dozen states, including Florida, are encouraging the privatization of utilities, Palm Coast City Council member Theresa Pontieri wants new, pre-emptive guardrails protecting the city’s water and sewer utility from being bought by a private company.

Palm Coast bought the water and sewer utility in 2003 for $82.3 million. The utility is not for sale. Council members are not interested in a sale. No company has proposed buying the utility. But Pontieri is proposing that if the utility were to be considered for a sale, a non-binding referendum would be required first, as well as a supermajority of the five-member council before approval is ratified. Her colleagues are interested. The proposal, which would amend the city’s utility ordinance, will be discussed at a workshop in January.

“We’re seeing across the country utilities being purchased up by private entities,” Pontieri said at Tuesday’s council meeting. “This is a very concerning thing for me, because it takes local control out of the hands of the residents of their own utilities, their own water. We know how valuable, particularly in the city, how valuable our water assets are, and we are seeing these types of assets being privatized around the country, and I think we need to protect that.”

Pontieri’s proposal highlights an issue of great consequence to ratepayers: as utilities privatise, rates rise, and local control, including environmental oversight and transparency, diminishes.

The issue has so far received little attention among the broader public. That attention spikes when it may be too late—when a utility is in the process of being privatized, as is the case now in Pennsylvania and Minnesota.

In Minnesota, state regulators have approved the $6.2 billion sale of Allete Corp. to BlackRock, a private equity firm. Allete was the former owner of Palm Coast’s water utility, and is the current owner, through subsidiaries, of all the remaining undeveloped land in Palm Coast’s Town Center. (See: “Behind BlackRock’s Deal to Buy Allete, Major Landholder in Palm Coast’s Town Center.”)

Allete last month sued Palm Coast government, alleging the city’s water and sewer utility has failed the company, costing it two contracts to sell land in Town Center. It is unclear—and sheer speculation—if the lawsuit is part of BlackRock-related strategic positioning ahead of a play for the city’s utility.

Electric, water and sewer rates have been increasing sharply in recent years across the country, particularly since 2022, and rising faster than the rate of inflation. Investment in aging infrastructure is a reason (and the leading reason in Palm Coast). But so is AI and data centers, which affect both power and water. So is climate change.

So is private acquisition of utilities, a trend Florida lawmakers spurred.

A 2022 study of 500 water utilities in the country concluded that private ownership is unquestionably the leading factor in driving up water and sewer rates, while “In states with regulations favorable to private providers, water utilities charge even higher prices.”

Florida is among those states. In 2023, Gov. Ron DeSantis signed legislation (SB 194) encouraging consolidation of utilities, and authorizing public utilities to use methods that boost their sale price, thus encouraging publicly owned utilities to sell.

The bill was an invitation to privatization. “Given the potential issues with small water systems, states have looked into ways to encourage system consolidation,” a legislative analysis of the bill states. “One tool that has been used in other states is a concept called fair market valuation. Fair market valuation (FMV) is a regulatory tool that seeks to incentivize larger water utilities that may be better positioned to make investments in the system and may have better access to economies of scale, lower cost capital, and water and wastewater system expertise.” (See the bill’s full legislative analysis here.)

At the time, 14 states had passed so-called “fair market value” legislation. Florida became the 15th. Such laws have “unleashed dozens of buyout attempts,” Stateline reported two years ago. “The deals provide a short-term cash boost for local governments, which can struggle to cover the cost of aging infrastructure. But critics say the public services and tax savings that governments might provide residents with the quick money don’t make up for the rate hikes, a phenomenon known as ‘taxing through the tap.’”

“When we specifically look at what’s going on in Tallahassee as well,” Pontieri said, “we’re losing a lot of local control. We’re losing a lot of home rule. We need to keep as much local autonomy as possible.”

If a future council were to sell the utility to a private company, transparency would plummet. Private companies are still required to be accountable to the state Public Service Commission, but local transparency into a private utility’s accounts would not be nearly as detailed. For example, today, all Palm Coast water utility records are public down to individual accounts, consumption and billing. That would not be the case with a private utility such as Florida Power and Light with electricity accounts.

“So I would ask this council to give direction to our legal counsel to amend our ordinance,” Pontieri said, suggesting Alachua County as an example to follow. There, a supermajority of the local commission is required to approve a sale of the county’s public utility. The Alachua ordinance says the utility may be sold if there is a “public benefit” to the sale. Pontieri finds the words vague. She would add a requirement in Palm Coast that the sale would have to be preceded by a non-binding referendum.

“I just want us to put in place some protections for our residents and that we keep our most valuable asset in the hands of our local community,” Pontieri said.

Council members Charles Gambaro and Ty Miller are interested, but asked for a workshop first. It will have to wait until January: there is no council workshop in December.-