Palm Coast Utility Sale Hurdles Approved as Pontieri Cites Privatization Fears and Mayor Calls It ‘Virtue Signaling’

The Palm Coast City Council has approved a set of procedural hurdles intended to minimize the risk that the water and sewer utility, which the city bought for $83 million in 2003, is ever sold. The move was prompted by City Council member Theresa Pontieri last November in light of a push among a dozen states, including Florida, to encourage utility privatization. 

The ordinance, unanimously approved Tuesday, establishes “clear procedural safeguards ensuring that any [sale] is thoroughly vetted, publicly disclosed, and democratically approved,” the document reads. 

Mayor Mike Norris did not mind the intent, but had reservations. “I think it’s a bit of virtue signaling, because this ordinance can be rescinded by the next council, or any other council, by majority vote,” he said. City Attorney Marcus Duffy said the ordinance “adds an extra step” to the process on the public’s behalf. 

According to the ordinance, the utility may not be sold without a supermajority vote of the council (at least four of its five members) and unless the vote is itself subsequently approved by a simple majority of the electorate at a city referendum.

The council’s action is to be preceded by the city manager publishing a fiscal impact analysis, a regulatory analysis, and a competitive process for the sale, transfer or long-term lease of the utility, and at least two public hearings. Any sale would have to satisfy all outstanding debts, including bonds. 

The restrictions do not apply to the sale of surplus property or obsolete assets. 

“This is a great recommendation by the Vice Mayor in particular,” Council member Charles Gambaro said of Pontieri’s proposal, “when we as a council decided to invest so much into this system.” 

Pontieri said the utility is “arguably our most precious asset.” The utility is the single-largest portion of the city budget, operating as its own “enterprise fund,” autonomous of the general fund, meaning that it does not operate on taxes, but entirely on utility rates. It is a more than $400 million operation, a figure that only partially includes what is soon to be a $582 million bond whose revenue will finance vast improvements and expansions in the system. The bond is backed by a sharp increase in utility rates.  

“This is the best way to protect our utility,” Pontieri said of the amended utility ordinance. “There’s a lot of initiatives all over the country with private companies’ equity funds basically purchasing up utilities, both water and power.” One of those major purchases was the recent acquisition of Allete, the Minnesota-based utility powerhouse that had previously owned the Palm Coast utility through a subsidiary, when it was known as Florida Water, and that still has major land holdings in Town Center through subsidiaries. 

Pontieri made a connection between the acquisition and the ordinance to push back on Norris’s comment about virtue signaling. “It’s a little obtuse to say it’s a virtue signal,” Pontieri said. “If you’re paying attention to what’s going on around the country right now, BlackRock specifically– and now, by the way mayor, BlackRock is Allete, and Allete is now suing us. So this is all kind of connected. So I’m just trying to see in the future to protect our city and our residents and our water system. The last thing I want is for BlackRock to own my water.”

BlackRock, the global investment company, is the parent company of one of the principals that acquired Allete in December. 

“We need to make sure that nobody can come in and force us to sell it,” Pontieri said. “And believe it or not, there’s a state process where that’s in place and it actually could happen. And we just want to make sure that we keep local control over our utility.” (As reported here previously, in 2023, Gov. Ron DeSantis signed legislation encouraging consolidation of utilities, and authorizing public utilities to use methods that boost their sale price, thus encouraging publicly owned utilities to sell.)

A provision in the ordinance that would have exempted contracts shorter than 10 years from the restrictions was deleted at Pontieri’s suggestion.  

Norris said anyone making the business decision to buy Palm Coast’s utility “will be making a bad, bad, bad decision, unless we can sell it back to the people we bought it from and profit like they did, underestimating our utility.” He cited the current demands and requirements on the utility plus the upcoming bond. 

In answer to a question by Tony Amaral, the city council candidate in this year’s election, the city attorney says that even if the utility were to be taken over by a state agency or the Florida Governmental Utility Authority, the ordinance the council approved Tuesday would still have to be followed. 

utility-ordinance-restrictions