By Steve Fussell
Fruitland Park commissioners approved the first reading of an ordinance Thursday evening to renew the city’s exclusive 30-year franchise with Leesburg Electric to provide power to city residents and businesses, including those in the proposed Villages of Fruitland Park.
Commissioners are expected to vote a final approval of the ordinance at their regularly scheduled meeting next Thursday.
Leesburg city commissioners are expected to approve their side of the agreement on November 18.
The contract extension is the last major hurdle before development of the proposed Villages of Fruitland Park can begin. The Villages must still secure project approvals from a variety of state and local agencies, but approval is expected.
Fruitland Park city manager Rick Conner told commissioners that Villages officials have said they plan to close on the acquisition of more than 700 acres in the Pine Ridge Dairy tract and proceed with agency reviews of their proposed development.
Closing on the acquisition is expected early next month and development approvals process will start almost immediately.
Villages officials earlier said they expect to start ground work on the project next summer and begin building and selling new homes next fall.
Conner said the project is still on track to meet that timeline.
City managers and attorneys hammered out the contract extension agreement to head off a potential struggle over who supplies power to the Villages of Fruitland Park. At stake is an estimated $1 million to $1.5 million in annual profits from the electric utility.
Leesburg Electric currently provides electric and gas service in the city at the power company’s “preferred rate,” which is the rate they offer their best customers.
Leesburg plans to spend upwards of $7.5 million to build new infrastructure that will supply underground utilities specified in the Villages plan. The Villages is expected to fund approximately $2.5 million of that cost—roughly the amount required to place the utilities underground.
The current contract, which was signed 30 years ago, expired in 2008. Fruitland Park then notified Leesburg of its intention to buy the infrastructure—power lines, poles and transformers—and create its own electric utility.
An independent appraisal commissioned by Fruitland Park in 2009 estimated the value of that infrastructure at approximately $2.9 million.
Fruitland Park city attorney Scott Gerken said a second appraisal commissioned by Leesburg Electric estimated a much higher value. A third appraisal stipulated by the franchise agreement was never commissioned as negotiations bogged down and were eventually abandoned.
Under the extended franchise agreement, Fruitland Park can bid to acquire its infrastructure from Leesburg every five years.
Vice Mayor Sharon Kelly said she wants to start that process immediately, and city commissioners agreed.
Conner said the process is a long and arduous one.
“Besides buying the infrastructure, organizing a city-owned electric utility is an enormous undertaking,” Conner explained.
“Under a best case scenario it would take more than three years to organize an electric company, hire the managers, negotiate agreements to buy wholesale electric power, acquire service trucks and equipment, hire and train workers, institute a billing procedure and all the rest, and all that is a considerable cost to the city above and beyond buying the infrastructure,” Conner said.
Fruitland Park commissioner John Gunter said he understands that the Villages of Fruitland Park will generate profits of $1 million to $1.5 million annually for Leesburg Electric.
Those estimated profits—and the $7.6 million worth of new infrastructure—might make it impossible for Fruitland Park to acquire its own electrical system when the five-year purchase window opens in 2019.
Under the city’s current franchise agreement, Fruitland Park earns almost $600,000 in franchise fees and utility tax revenues without doing anything.
“This year Fruitland Park will collect a franchise fee from Leesburg Electric that we budgeted at $295,000 and taxes estimated at $277,500,” Conner said.
For comparison, the city anticipates property taxes will generate approximately $730,000 in revenues this year.
Still, had the city vigorously pursued its acquisition five years ago—before the Villages proposed building 2,038 new homes in the city—the purchase price would seem a bargain given the added cost of new infrastructure.