During Monday night's meeting, the Palmetto Bay Village Council was presented with an ordinance for first reading to amend the FPL franchise agreement with Florida Power & Light (FPL). The agreement allows FPL the use of public rights-of-way to maintain and improve the electric grid. The ordinance would revise two existing provisions of the agreement; 1. to do away with the sunset provision which essentially ends the franchise fee on December 31,2022, and 2. to change the franchise fee rate from 3.5% to 6%.
In 2019, the Village of Palmetto Bay and FPL signed the franchise fee, before that, Palmetto Bay was subject to the provisions of the franchise agreement between Miami-Dade County and FPL. The franchise fee under said agreement was 6% and it was part of each Palmetto Bay residential and commercial owner’s electric bill. At the conclusion of the county’s agreement, Palmetto Bay entered into its current agreement with FPL. At the time of approval, the historically assessed fee of 6% was lowered to 3.5% and the revenue stream was set to sunset on December 31, 2022. Our neighboring municipalities of Pinecrest and Cutler Bay kept the same rate as the county at the 6% mark. Since, Palmetto Bay has struggled to make up the difference for the loss of revenue which represents thousands less annually to the Village.
In a presentation delivered by Finance Director Desmond Chin, he explained that a typical customer who consumes 1,000 kilowatt hours in electric power pays approximately $100 to FPL on their light bill. Based on this scenario, a 3.5% franchise fee is equal to $3.50 monthly to the FPL customer and a 6% franchise fee represents $6 monthly to the FPL customer. While the increase to the customer is a nominal $2.50 per month or 8 cents per day, the revenue loss to the Village is significant, estimated at $800,000 annually. In essence, Palmetto Bay would have $800,000 available to deliver services to residents, whether for park and street maintenance, police services, special events and programs, and more…
According to Director Chin, franchise fees currently represent 5% of our General Fund revenues. General fund is our operational fund in the Village and how we pay for most services, almost like our checking account. Our largest expenditure by far is police at 53% and the second largest is parks at 15%. The remaining 32% is divided between eight departments plus General Government. In 2016, Palmetto Bay had 57 approved full-time employees. Five years later in 2021, the number is 59. The fluctuation in personnel has been minimal. Any reductions in expenses at this point will have a direct impact on service delivery to the residents. The only option to make up for the shortfall is to dip into reserves which are not intended to be used for recurring operating expenses. A forecast chart provided by Director Chin shows a $6.5 million dip in the forecast reserve balance from $8.5 million in 2021 to $2 million in 2024 if the FPL franchise revenue is eliminated. If the sunset provision is removed, the fund balance projected for 2024 changes from $2 million to $3.8 million. If both provisions are changed as proposed in the ordinance and the rate returns to 6%, the fund balance is forecast to be $6.2 million in 2024.
The ordinance will be heard for a second time before it is enacted. If you have any questions or concerns, please do not hesitate to contact any member of the Village Council, the Village Manager or our Finance Director so that we may provide you with accurate information. We also welcome your comments during our meetings and encourage you to remain engaged with us. Please visit our website for the latest news and updates from the Village or follow us on Facebook, Instagram and Twitter.
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