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Florida Power and Light no longer wants to collect a 3 percent tax from its customers outside city limits in Miami-Dade, ending renewal talks with the county and setting up a significant budget shock for suburban services after 2020.
The FPL “franchise fee” is one of the more obscure taxes paid by local residents. It adds between 3 percent and 6 percent to most electric bills, and FPL passes on the money to local governments in exchange for having exclusive rights to run electric poles and underground wires above and below public roads and lands. The money goes to cities, and to Miami-Dade for FPL customers in areas outside of municipal boundaries — an unincorporated area that accounts for about half of the county’s real estate.
With so many FPL customers, the county share of the utility’s franchise fee amounted to $27 million this year. That’s about 5 percent of the taxing district’s $512 million general fund, the collection of property taxes and other revenues that is the main revenue source for government services in the suburbs. Miami-Dade uses the franchise fees to help fund police, parks and road services in the unincorporated areas, where residents rely on the county for municipal services.
“It’s big,” county budget director Jennifer Moon said. “I know this revenue isn’t going to be there in two years.”
On Wednesday, FPL’s Irene White wrote Moon a letter formally notifying the county that the franchise agreement will expire in May 2020, and with it the fee the utility currently adds to suburban electric bills. The letter reiterated FPL’s position that it was fine with letting the franchise agreement expire, since state law already protects utilities’ ability to run infrastructure through public lands.
“As you know, franchise agreements have no impact on a regulated utility’s responsibility to serve every home and business in its service area,” wrote White, head of external relations in Miami-Dade. “FPL has proudly provided electric service across most of Miami-Dade for the last 90 years, and we look forward to continuing to serve our customers well into the future.”
The county’s loss would be suburban rate payers’ gains once the current agreement expires in 2020. The franchise fee in unincorporated Miami-Dade is set at 6 percent, but credits allowed for property tax bills that FPL pays typically result in a monthly fee of between 3 percent and 4 percent, according to the county.
Miami-Dade released updated budget forecasts Wednesday showing the lost franchise revenue dramatically increasing deficits for county operations in the Unincorporated Municipal Services Area (sometimes called UMSA). The deficits arrive in 2020, and hit $84 million worth of red ink by 2025. That’s far worse than the earlier forecast with millions of franchise-fee dollars, when the deficit only hit $58 million.
A graphic inside the updated revenue section of the budget shows the jarring change. A franchise fee generating about $28 million in 2020 plummets to zero in 2021.
While franchise fees are paid across Florida, Miami-Dade’s charter contains a unique provision requiring voters to approve the deals. County voters last approved Miami-Dade’s agreement in 1990. It expires in 2020, and county leaders and FPL executives had been in talks on how to persuade voters to extend the fees through a referendum.
Environmental groups demanded concessions from FPL in exchange for referendum support. The Miami Climate Alliance and others urged the county to require the for-profit utility to agree not to cut off power for unpaid bills during extremely hot days, shift fully to renewable power in the unincorporated area by 2030, and to provide more help for low-income residents to reduce energy consumption.
“It was one of the few times that advocacy groups could actually have some leverage over a behemoth like Florida Power and Light,“ said Susan Glickman, Florida director for the Southern Alliance for Clean Energy.
FPL representatives countered they were fine with continuing without a franchise agreement if the company couldn’t reach a deal with Miami-Dade. While the franchise agreement makes permitting easier for some FPL construction projects, state law already protects utilities’ ability to operate on government land. That limited FPL’s incentive to face a potentially embarrassing loss at the ballot box in Miami-Dade.
Moon, who was leading the FPL negotiations, said this week that the for-profit company told the county it no longer wanted to participate in a franchise agreement after 2020. FPL executives were not available for comment Wednesday.
Miami-Dade has two years to get ready for lost money from an expired franchise agreement. Talks also could resume. Miami-Dade also could simply replace the lost revenue with a small increase to property-tax rates to match the average fee paid by residents. Glickman said the franchise agreement shouldn’t be seen as anything beyond a subtle way for governments to get more money.
“It’s just money out of their taxpayers’ pockets,” Glickman said. “The county will be just fine. Even if you don’t have the franchise agreement in play, Florida Power and Light isn’t going anywhere.”