The rebellion among Holley Navarre Water System board members against proposed debt restructuring by the collective that supplies their water focuses on concerns that the motive behind the deal is actually to enrich the City of Gulf Breeze.
“It’s a money grab,” said Brian Kelly, an HNWS director and finance committee chairman in an email he recently sent to this newspaper.
Gulf Breeze city officials are leading the push to refinance, promising that the new debt structure will offer lower interest rates and reduce annual loan payments while freeing up cash to build Fairpoint’s reserves.
But James Calkins, vice president of the HNWS board—who is also a director of the co-op, Fairpoint Regional Utility System — described Gulf Breeze’s sales pitch of lower payments and interest rates as “a full-blown scam.”
In fact, when questioned by a reporter, Gulf Breeze officials acknowledged they aren’t even sure how much of the current loan is principal versus interest, nor how much of a newly restructured debt would consist of either.
Not only have four current members of Holley Navarre’s board balked at Fairpoint’s request for them to approve the co-op’s new loan—which would increase the collective’s overall debt load by about 40 percent to $14 million or so—but two former directors who seek a return to the board in January’s scheduled elections have lately voiced their opposition in interviews with Navarre Press.
“I think Fairpoint should put in writing that the loan isn’t going to end up with the city making thousands of dollars in interest,” said William Goulet, a former HNWS board president who resigned in 2016.
The support of all three utilities in the collective is required for Fairpoint officials to sign a new loan agreement.
Goulet, who told the Navarre Press that he recently obtained the required paperwork to again run for a board seat, expressed concern that the debt refinancing proposal is being lobbied largely by Gulf Breeze Mayor Matt Dannheisser and Buz Eddy, the former city manager.
Although the new loan would ostensibly be made by Regions Bank, some of the refinancing opponents are suspicious that the debt would later be sold to one of the City of Gulf Breeze’s municipal financing companies: Gulf Breeze Financial Services (GBFS) or Capital Trust Agency.
Dannheisser is listed on the GBFS website as a director.
Debt Déjà vu
Gulf Breeze benefited from an HNWS loan restructuring in 2014.
Financial documents reviewed by a reporter show that a $7 million loan to HNWS from Orlando-based Hancock Bank in 2014 evolved into a series of municipal bonds issued by Gulf Breeze’s Capital Trust Agency. The bond records show that the lawyers who handled the legal requirements of that transaction were Dannheisser, then the Gulf Breeze city attorney, and Michael Tidwell, who currently has that job.
The bond documents don’t specify the fees that Dannheisser and Tidwell were paid. Dannheisser didn’t respond for this article.
“Fairpoint can pay off all its current loans by 2024. It doesn’t need to refinance and pay bankers and lawyers to add to the debt load,” Goulet said.
Another former HNWS director, Daryl Lynchard, said he too is planning to run for the board—and also opposes extending the Fairpoint debt.
Another supposed benefit of the debt restructuring, which would extend the 2024 payoff by 13 years, is that it would reduce annual payments from $1.4 million to about $700,000.
“That would free up cash needed for capital improvements and to build up reserves,” Eddy said.
But freeing up cash is another worry for the debt restructuring opponents because it would might allow the Fairpoint board to spend the extra money on matters that aren’t being specified and without the approval of the boards of the three member utilities.
“We would be handing over control of millions of dollars over 13 more years,” said Kelly, a partner in a Pensacola-based financial advisory firm.
By invitation only
Further, some HNWS board members don’t like the secretive nature of the debt extension’s proponents. They point to a behind-the-scenes meeting last week at the HNWS offices in which sources said Dannheisser and Eddy conferred with Paul Gardner, the utility’s paid general manager.
It’s unclear whether Holley Navarre and Fairpoint are supposed to operate under Florida’s Sunshine Law that requires the boards of utilities, among others, to meet in public and prohibits directors from speaking with each other in private about official business.
Goulet said, “I always tried to operate under the Sunshine Law and I think that’s the way it should be.”
Gardner, who is paid roughly $130,000 a year in his job at HNWS and who also holds the paid position of Executive Director of Fairpoin, didn’t respond for this article. He supports the debt restructuring.
Kelly asked Gardner in a recent email, “Will the loan proceeds be kept in cash accounts…to be drawn out whenever management decides to use them…?”
Further, Kelly wondered, could the extra cash become merely a discretionary largesse to be used for non-emergency purposes such as paying bills, funding pensions and no-bid contracts for unspecified future projects?
If Gardner answered, he hasn’t shared that response with this newspaper. Kelly is calling for Gardner’s ouster.
Meanwhile, Kelly, Calkins and another HNWS board member, Ricki DeSantis, say they will ask for an independent audit not only of their utility’s finances, but of Fairpoint’s as well.
DeSantis said: “Everything needs to come out in the open.”
Read the full article in the Nov. 9 issue of Navarre Press. Subscribe online at navarrepress.com for as little as $38 per year.
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