GRU Authority votes down motion to fire CEO/GM, reduces GRU budget, keeps utility rates flat, and cuts the GFT by $6.8 million

BY JENNIFER CABRERA

GAINESVILLE, Fla. – At their June 10 Special Meeting, the Gainesville Regional Utilities Authority voted down a motion to fire the CEO/GM, decided to keep utility rates flat next year, and voted to set the General Fund Transfer at $8.5 million, a $6.8 million reduction from this year’s $15.3 million transfer.

Staff budget presentation

GRU CEO/GM Tony Cunningham gave a presentation on updates to the FY25 budget he had proposed on May 29 , saying he was looking for input on the General Fund Transfer (GFT) from GRU to the City’s General Fund and other budget items like utility rates.

Cunningham reviewed the direction provided by the board at their May 29 meeting, including a desire to keep utility rates flat, reduce or eliminate the GFT, reduce the operating and capital expenditure budgets, and reduce reserves. He said he could reduce capital expenses by about $15 million for FY25, but that would only delay the expenses because “all of our items in our capital budget are things we require to continue to operate and maintain our facilities.” Cunningham and his staff emphasized throughout the meeting that the budget was “built to maintain the level of service that we provide and the reliability we provide.”

In response to a slide showing that reducing the GFT to zero could result in no electric rate increases through 2034, Chair Ed Bielarski said, “This slide goes contrary to the narrative that’s out there that the General Fund Transfer doesn’t do a lot for rates and rate reductions. I mean, this elimination of the General Fund Transfer over that next decade would ostensibly hold no increases for 10 years to the electric system. That’s a consequential number.”

Director of Accounting & Finance Mark Benton pointed out that this was a result of putting all the benefit of GFT reduction toward rate relief instead of splitting it between rate relief and debt service.

Carter: City would raise property taxes

Director Craig Carter said he continued to be concerned that if the Authority cut the GFT, the City Commission would raise property taxes to compensate for their loss in revenue. He said, “I’m in agreement with trying to recoup the $68 million. I’m not in favor of [100% reduction for 10 years] because, quite frankly, then you’re just putting the shoe on the other foot.” He said the Authority is required to look at “consequences of our actions… I definitely want to recoup the $68 million, you can look at all my previous statements. I said that when I was Chair.”

Bielarski: “Any other consideration is a violation of what we’ve been instructed to do”

Bielarski responded that under the bill that created the Authority, the board is required to consider “only pecuniary factors and utility best practices standards” in their decisions. He added, “I think any other consideration is a violation of what we’ve been instructed to do and why we were appointed.”

Skinner: “We need to be reasonable”

Director Chip Skinner said, “I go back to – [the City has] been addicted to this money. What do you do with an addict? You don’t cut them off. That has detrimental aspects. So we need to be reasonable… I concur with Director Carter and trying to recoup, even though it was in the past, that $60+ million.”

Bielarski agreed, “I was the guy that said that having a General Fund Transfer for a municipal utility is ordinary, reasonable, and necessary. So I’ve never been for taking it to zero. But what I have been for is the recoupment.”

Cunningham said he wanted to discuss his concerns around reducing the operating and capital budgets further, but Bielarski said he had a presentation of his own. Carter objected that the presentation wasn’t in the backup for the meeting.

Bielarski’s presentation

Bielarski began by reviewing his requests from the last meeting: He said the budget proposed on June 10 was responsive to the requests to keep utility rates flat, provide options for the GFT, and reduce reserves, but it didn’t reduce capital expenses as much as he had requested, and operating expenses weren’t reduced at all from the May 29 budget.

Bielarski’s presentation can be viewed here.

Bielarski also objected to some of the assumptions behind the budget, and GRU and City staff argued against his objections at various points during the meeting.

Bielarski said he had learned that GRU had issued a Request for Statement of Qualifications (RFSQ) on May 15 for 30-50 MW of fast-start natural gas-fired capacity in 2028 and 50 MW of battery storage capacity in 2029 despite telling the Authority on May 29 that the IRP (plan for future capacity) was still under review. He argued that the board had not approved any of these plans and had not approved the funds for the services listed in the RFSQ. Bielarski added that new regulations from the U.S. Environmental Protection Agency will make new gas plants “highly unlikely and uneconomical to construct.”

Bielarski concluded that his research had identified about $12 million in possible cuts, spread over the FY24 and FY25 budgets (page 12 of his presentation). He made five recommendations:

• Reduce capital expenses by $20 million, starting with the $15 million in the June 10 budget and spreading the remaining $5 million across the departments;
• Reduce operating expenses by $12 million;
• Keep utility rates flat for FY25;
• Maintain the current GFT formula but recover the $68 million against the annual $15 million until it is all recouped;
• Reduce projected reserves from $88 million to $50 million in 10 years.

Bielarski also listed “follow-up recommendations,” mainly asking GRU staff for a GFT formula and for better communication on the IRP, upcoming capital projects, and the status of agreements between GRU and the City. He then asked for a motion on his recommendations.

Cunningham protested that because the board was appointed so close to the deadline for presenting a budget to the City Commission, he hadn’t had a chance to walk through it in detail with the board. Bielarski objected that that was obfuscation: “You gave us numbers and said you couldn’t change those numbers… I’m showing you, you can.”

Motion to terminate Cunningham

After some back-and-forth between Bielarski and Cunningham about Bielarski’s assertion that GRU staff was proposing a budget that was deliberately higher than needed, Bielarski said, “Listen, we’re stopping discussion at this point. I will entertain a motion at this point for the termination of the General Manager and removal from his position.”

Carter quipped, “I was off by two weeks – I guessed the first week.”

Director David Haslam made the motion to terminate Cunningham as CEO/GM. After waiting to see if someone would second the motion, Bielarski passed the gavel to Haslam and seconded it himself.

During public comment on the motion, Jim Konish said that Director Eric Lawson had “pulled the plug” on a search for a new CEO/GM that had been approved by the previous board.

Carter responded, “I’m the one that stopped the CEO search. I talked to [the board’s attorney] first, and I said under the current set of circumstances, I don’t believe it’s wise to move forward.”

Debbie Martinez said, “As a retired registered nurse, addicts have to work through recovery; otherwise you become enablers… We’ve been watching the financial bleeding for four months while we’ve been giving proclamations to GRU employees. So yes, I support this motion.”

Chuck Ross said to Bielarski, “I think your bullying behavior of the Manager today is appalling… I don’t think this is an appropriate way to conduct business, and no, I do not think you should terminate the Manager now, but I think the damage is done already.”

Board discussion of motion to terminate Cunningham

When the discussion moved back to the board, Carter said the selection of Bielarski as Chair was “well-orchestrated” at the new board’s first meeting and added that that was “illegal, as the attorney will let you know.”

Carter said the board’s job is to hire a CEO/GM, so they need to do a search, but he felt that Bielarski was being disrespectful to Cunningham. Bielarski responded that staff members were showing “a disrespect to the board” by “saying, ‘Well, we can make any budget that we want.'”

Carter: “If it continues, the Governor can take this and cram it because I didn’t want to be here, anyhow.”

Carter complained that Bielarski had come in with a presentation without giving it to staff and the board in advance and putting it in backup, and “now staff can’t respond to it except for in the spotlight and the gotcha moment… I don’t think the employees deserve to be treated like that. And if it continues, the Governor can take this and cram it because I didn’t want to be here, anyhow.”

Haslam expressed frustration that the board was being asked to vote on a “heavy-handed” budget with little opportunity to talk to each other about the details. He said he felt like staff wanted to “get this thick, heavy budget” in front of the board “so [we’re] confused and hopefully somebody just pushes it through. That’s what I feel is happening.”

Cunningham: “I do not think it would be the best thing… to make a rapid change”

Cunningham said he recognized “the need for a search, and I’m okay with that approach of doing the search, but I do not think it would be the best thing for our employees or our customers in this time to make a rapid change without any chance for us to walk through where we are as a utility.” He said the RFSQ is “to look at people – we have not decided anything… We’re not moving forward, we’re not trying to do something unknown to the board.”

Director Chip Skinner said he didn’t think the timing was right to fire Cunningham, “and who are we going to get to replace the current General Manager if we go down that road today?” He said he was concerned about the board being back in a “two-to-two deadlock” if Bielarski agreed to take the position of Interim CEO/GM.

Lawson: “I don’t subscribe to surprises.”

Director Eric Lawson said his philosophy was to go over his questions and requests during his private meetings with GRU leadership: “I don’t subscribe to surprises… I feel like this has been a surprise. I appreciate your questions, but I would rather you spend the time with [staff], show them your analysis and your questions, and then allow them to bring it back. Now, if they bring it back and they don’t properly address your questions, then that’s when you lean in.” He said he didn’t think staff had been “dealt a fair hand” because they had so little time to get the board up to speed on the budget before the deadline.

Lawson also said that the search firm had said they were “really going to have trouble” finding a CEO/GM right now because candidates prefer to go to investor-owned utilities, which are less political. He said his view was that the board should take a year to “really dig in, educate ourselves, push on different things that we’re interested in” before making changes to the leadership team and the CEO/GM, “so I don’t support terminating the CEO… We do have a deadline, we have to vote on a budget. But we’ve all agreed we can go and modify the budget.”

Bielarski responded that he had asked Cunningham to bring back $5 million in cuts to operating expenses, and he “wholeheartedly came back with nothing.”

Cunningham responded that he hadn’t been “taking it lightly,” but the utility’s budget had already been cut in recent years, and inflation was increasing their costs, “so that’s a reality to continue to provide the level of service that we have recommended as part of our mission.”

The vote

As Bielarski and Cunningham continued to discuss whether Cunningham had responded appropriately to Bielarski’s requests, Carter asked that the board go ahead and vote on the motion. Carter said, “Tony, I almost feel like firing you, just for compassion, buddy.”

The motion failed 2-3, with Bielarski and Haslam in favor of terminating Cunningham.

Motion to reinstate the CEO search

Carter made a motion to “immediately reinstate the CEO search,” with Bielarski leading the search instead of Lawson. Bielarski said he didn’t think it was an appropriate time to do an executive search: “What you need is a qualified interim that will direct your utility… You’re not going to hire a permanent replacement right now because there’s too much turmoil.” The motion did not receive a second.

Motion to develop a list of possible interim CEO/GMs

Skinner made a motion to develop a list of possible interim CEO/GMs in case Cunningham resigns, but Carter and Bielarski said it was a moot point. The motion did not receive a second.

Cunningham said he was “fully, utterly, completely committed to doing what is best and right for this utility and the customers we serve.” He recommended adopting the budget staff had presented, with the understanding that the board could change it in the future.

Haslam: “Can we meet in the middle?”

Haslam said he wanted to “work with the board… I’ve said publicly more than one time that I want the GFT gone, right?… Can we meet in the middle? Actually, let’s cut it in half. But the problem is, if we cut it in half, I want that $7 million to come from somewhere else. I don’t want it to come from the people.”

Bielarski said that was basically what he had proposed in his presentation and asked if anyone wanted to make that motion.

Carter said he wanted to recoup the $68 million over 10 years, not up front as Bielarski had proposed, but he was fine with reducing capital expenses by $20 million “if it’s achievable without killing the utility.”

Motion on Bielarski’s recommendations

Carter made a motion to reduce capital expenses by $20 million as proposed by Bielarski, reduce operating expenses by $12 million, keep utility rates flat (he said “reduce utility rates to zero” but obviously did not intend that), set the GFT at $15.3 million minus $6.8 million for 10 years, and reduce reserves to $50 million at the end of 10 years. Bielarski seconded the motion.

Cunningham asked whether he could cut $12 million at his discretion or would need to do it exactly as specified in Bielarski’s presentation, and Bielarski said it would have to be as shown in the presentation.

Lawson said he was concerned that staff hadn’t had a chance to analyze the information presented by Bielarski and give feedback on any risks associated with the cuts, “and so I’m uncomfortable voting for something that really just comes from one person.”

Carter said he was “going to go with this” and trust that staff would come back if they find “unintended consequences.” He said he was going to lean on Bielarski, “so if you’re wrong, it’s your fault.”

The motion passed 4-1, with Lawson in dissent.

Motion on Bielarski’s follow-up recommendations

Bielarski then brought up what he called his “follow-up recommendations”:

• Direct staff to do an analysis to determine an appropriate GFT formula and present it to the board;
• Direct the CEO/GM to provide immediate communication to the board on anything related to the IRP;
• Direct the CEO/GM to provide immediate communication to the board on anything related to the Main Street water reclamation facility;
• Direct the CEO/GM to provide immediate communication to the board on the status of agreements between GRU and the City for the FY25 budget.

Carter made a motion to approve the follow-up recommendations, and Haslam seconded the motion.

After public comment, the motion passed unanimously.

Member comment

During member comment, Skinner proposed scheduling a retreat, and Cunningham agreed to work with Bielarski to set that up.

The post GRU Authority votes down motion to fire CEO/GM, reduces GRU budget, keeps utility rates flat, and cuts the GFT by $6.8 million appeared first on Alachua Chronicle .