NATE MONROE

Dark future ahead for Jacksonville's utility

Nate Monroe
nmonroe@jacksonville.com
Times-Union city hall columnist Nate Monroe. (Will Dickey/Florida Times-Union)

COMMENTARY | JEA — the giant city-owned electric, water and sewer utility that once commanded wide respect within the industry and used its vast resources to prop up City Hall finances and civic efforts — is now a laughing stock.

There is much humor but little suspense, for example, in watching the utility's board of directors deliberate over the site of its future headquarters. I have not spoken to a single City Hall or Jacksonville political insider who believes it will be going anywhere other than Lot J, the parking lot adjacent to TIAA Bank Field and the space where Jaguars owner Shad Khan says he wants to build some sort of entertainment center. JEA is better positioned now to cater to a favored special interest than it ever has been.

This isn't to denigrate the agency's rank-and-file workforce, which is filled with brilliant and hard-working people, some of whom have dangerous jobs with punishing hours. Their work is diminished by a handful of people who lead them.

Medically speaking, the JEA board of directors is composed of sentient, autonomous organisms. Practically, however, it's hard to view this bunch as anything other than rubber stamps. The board will never live down its decision last year to hire as CEO a total industry newbie who had never before led a utility, and in the process disrespecting one of the top public utility executives in the United States. Aaron Zahn had no experience but did have political connections to Mayor Lenny Curry, and for that reason he was always the shoe-in to be the CEO — despite assurances from the board the process wasn't rigged in his favor.

And now here we are.

There are a number of reasons placing JEA's future headquarters near the stadium makes little sense. The site is contaminated. It's more prone to flooding. Khan's entire entertainment zone proposal is still totally conceptual. JEA would be its first tenant, and Jacksonville history shows government buildings don't anchor private development (see: jail, downtown waterfront). Taking 800-plus employees out of the central business district would deal a blow to a downtown desperately in need of more infill.

But there is one overwhelming reason JEA's future headquarters will probably go there: Khan wants it.

Since the JEA board now operates as more a sub-department within the mayor's office, Khan, a prolific contributor to local politicians generally and Curry specifically, is the easy favorite.

In his presentation to the JEA board Tuesday, Jaguars president Mark Lamping pulled the same stunt team officials have used in the past. He reiterated the franchise's commitment to Jacksonville, while implying that future commitment is not actually guaranteed if decisions like the one JEA makes don't go their way. The Jaguars would love to make Jacksonville the franchise's home "for as long as we can possibly project," in Lamping's words, but the team also needs to generate more revenue to make that happen. This is a dubious proposition. The team's value has skyrocketed to around $2 billion, versus the $770 million Khan bought the team for in 2012.

The nation's 65th wealthiest man won't go hungry over JEA.

JEA has entered a post-qualifications era, however, where common sense and objective metrics can be tossed aside with a little creativity, so anything is possible. In the case of Zahn's hiring, the board dispatched a far more experienced competitor by chiding him for not driving through Hurricane Michael to make an interview in person. It's not hard to envision an enterprising board member deploying a similar poison pill to derail the other two options JEA has for its future headquarters, which are both far more sensible than Lot J.

After the board meeting Tuesday, chairman Alan Howard told the Daily Record's David Cawton he is frustrated by the perception the fix is in for Khan. "It’s been a very deliberate process," he said.

Sound familiar?

A CURRY FRIENDLY AGENCY

I've covered JEA since 2013, when former CEO Paul McElroy was still pretty new on the job. The agency had its warts then, including a frustrating inability to act like a public agency rather than a private company. It was far too secretive, and the CEO held too much sway over the board.

Curry correctly sought to change that when he swept into office in 2015, when he nearly cleaned out the board and installed high-profile executives as replacements. At least, Curry said he wanted to change it.

What Jacksonville got instead is another compliant board, only this time it's the mayor rather than the JEA CEO calling the shots. Predictably, the agency has adopted some Curry-like attributes in the past few years, illustrated most clearly by the hiring of Zahn. Elevating a mayoral loyalist with little experience has become a bit of a pattern around here lately.

Another Curry attribute: Taking credit for things that didn't happen on his watch.

In the middle of a recent discussion about JEA and Zahn, a well-meaning and well-informed civic leader asked me why I hadn't covered a major expansion of solar power JEA is undertaking. Surely, this leader suggested, that is a good thing Zahn had done that's worth covering, right? It would be hard to argue with that.

It turns out I had written about the solar expansion more than once when it was actually formulated — in 2017, during the former CEO's tenure, before Zahn was even on the board of directors. But it's admittedly hard to know that since the solar expansion is something Zahn talks about as if it's a recent initiative, without mentioning the central role his predecessor played.

There are really two major things JEA has done under Zahn: Initiated a head-scratching set of legal challenges aimed at canceling JEA's financial ties to two over-budget, behind-schedule nuclear reactors; and using a recent downgrade to its credit rating as an excuse to liquidate some of its savings. The former has earned JEA push back from much of the utility industry and is not expected to work. The latter is a bit of accounting trickery JEA could have done anytime but decided against to maintain the highest possible credit rating.

THE REVOLUTION WILL COME QUIETLY

Curry is an anti-tax evangelist, but he, like nearly every other city and civic leader, is aware City Hall doesn't have enough money to take care of its needs.

JEA will almost certainly be the place Curry hopes to find more cash.

Privatizing the agency was Curry's first idea — a transaction that could theoretically generate billions in windfall for City Hall. But the dysfunction that broke out last year over that debate seems to have put the idea at least on pause, if not killed it altogether. There is an alternative way to find more money for the city, and it has the benefit of avoiding a high-profile controversy: Simply make JEA give up more money every year.

Zahn actually said in his interview to be the CEO that one of his goals is to double the amount of money JEA pays each year to the city's general fund. JEA is a public agency and doesn't pay property taxes, so the annual contribution it makes to City Hall each year is a form of compensation for that. The city gets a great deal: The $115 million or so it receives every year far exceeds what JEA would pay in property taxes.

JEA already pays more to the city than most of its industry peers, and credit analysts have said in the past they're not thrilled about that.

Doubling the annual contribution to somewhere near $230 million would require making sweeping changes at JEA. It's not hard to envision a smaller workforce, more shuttered power plants or sale of its infrastructure. Those changes could be done gradually and more quietly than an outright privatization, but they would be no less transformational and life-altering for the 2,000 employees at the agency.

And keep this in mind: That's your money. Increasing JEA's contribution to the city that dramatically wouldn't technically be a tax, but it would naturally raise a question over whether JEA's rates are too high.

Here's the difference between a Tallahassee Republican and a Jacksonville Republican: A Tallahassee Republican would suggest if JEA can afford to double its contribution, it should either refund the money to ratepayers or lower its rates. A Jacksonville Republican would take the extra money and use it to subsidize development projects.

A DIFFERENT JEA

The sum of all of this is JEA will soon be radically different: More political, less responsive to the public, more responsive to the political whims of City Hall and political donors, less nimble, less able to recruit talented staff. Expect more talk about JEA's value, and its rightful place as an asset of the city — not as an agency where people built careers and lives, one of the last places in the city a blue-collar worker could make a fair wage.

Take it from someone who has spent about a decade in a shrinking industry rife with layoffs and mergers: When your leaders start babbling corporate gobbledygook, it's time to worry.

JEA will emerge from this current political era a benighted civic institution.

Mike Balanky, a third-generation Jacksonville native with a long history of development in the city, is one of the two other bidders for JEA's headquarters. Although his proposal makes much more sense than Lot J, Balanky is a sharp guy and seemed to know the odds are stacked against him. In his remarks to the board Tuesday, Balanky summed up the dilemma succinctly: "It will take careful analysis, courage and conviction to find the right location for JEA, its employees and its taxpayers." Those attributes are in short supply.

Howard, the board chairman, told the Daily Record that implying the fix was in "disrespects this board and the staff at JEA and the consultants that have taken this very seriously."

Well, so be it.

Nate Monroe’s City column appears every Thursday and Sunday.

nmonroe@jacksonville.com, (904) 359-4289