Pay it Forward, Publix
Everyone loves Publix. When I moved to Lakeland, I remarked more than once to old friends back North, that Publix was the best grocery I’ve had the pleasure to shop. (OK, I still complain when I want to shop at 11 pm and Publix refuses to believe we’re not all day people.)
The local media loves to report how Publix always makes the top 100 employer ranking. People love to tweet and meet at the Southgate Publix. My favorite series of short-pieces was on the reopening of that very same store. I love taking my daughter there each week to pick up staples and a cookie.
All that love and we forget Publix is a corporation. With the sense of entitlement that the corporation brings. Publix is no longer George Jenkins helping your aunt out with the groceries. Sure, there are managers and baggers and cashiers that are your friends and family. But Publix is a 21st Century grocery juggernaut with its eye on the horizon and its mind on the bottom line.
Now that bottom line means Publix wants a better rate from Lakeland Electric. A few months ago there was a scare that the City leaders would charge Publix a bit more for electricity. The reaction was like eggs went up 25 cents a dozen. That was it. Publix decided to look for a new supplier of eggs, err, electricity
They’re so sure they can get a better rate from TECO, they’ve met with your city officials to see if they can help grease the skids to sell Lakeland Electric to TECO or somebody. Key words: bigger and more willing to give Publix a better rate. But there’s a hitch. You.
You see, it currently would take 66% of registered Lakeland voters to put Lakeland Electric on the block. There’s a reason that number is so high. Years ago, Lakeland leaders saw the problems faced by other cities after selling off their electric companies. They wanted Lakelanders to make damn sure before we flew down that rocky road.
Now, a Publix official and our point person on the economic development front have approached City officials to see about getting that number reduced. They’d like to take it to the voters to determine how many it would take to sell off our greatest revenue producer.
Sure, it’s easy to say, “Let the voters decide.” But, lets face the truth, most voters don’t study the issues. They vote with their heart. A well-placed commercial or two talking about lower rates from an even bigger corporation or an editorial or two discussing the missteps taken by Lakeland Electric 15 years ago will sway lazy voters. (Not you, of course. You know the expectations we have for our readers.)
Elsewhere on Lakeland Local, Billy Townsend has written:
I am not qualified to determine if that’s a legitimate gripe. But if Publix thinks it’s a legitimate gripe, then I probably do, too. In fact, I more or less support a “Publix rule” for LE rates. If you employ a billion people and have the massive beneficial effect on this city that Publix does, you get to pay whatever the hell you want for power. I exaggerate, but only a little.
It should be obvious I take a much more cautious approach with Publix. They’ve a bit of dirt on those beautiful aprons. Just ask any tomato picker. But, I’m willing to listen if they can convince me that their savings won’t just come out of my pocket. If selling Lakeland Electric means Publix saves $25 million a year, I’ll bet $25 the price of my eggs won’t drop 25 cents. If selling Lakeland Electric means Publix will save $25 million a year, I’ll bet $25 your electric rate will rise faster than the price of eggs will drop. Worse yet, City Officials who’ll miss that $25 million a year will be forced to go hat-in-hand to some Publix official to get a new park and announce your tax rate must rise.
It’s simple. Right now we sell electricity to Publix. We get the profit. We use that profit to keep taxes lower. As soon as some out-of-town concern sells electricity to Publix, we lose the profit and we’ll have to make that money somewhere. Publix isn’t about to turn around and add it back to the city pot.
Or would they?
I have a proposition for Publix. Buy (a piece of) Lakeland (Electric). And, unlike the Chamber, this will do more than make good sense. It’ll make good dollars. I’d like to see Publix pay it forward.
Let’s establish a fund. All the big users of Lakeland Electric can contribute. Kick in a healthy amount to buy a piece of Lakeland Electric and get a rate that is the lowest in the state. Not by a lot, but enough so everyone in the state can point to Lakeland and write, “The Lowest Rate in the State… Guaranteed.” Kick in enough money so that the city can prepare for needed future Lakeland Electric upgrades.
Not only would Publix get a lower rate than they could from TECO, but let them have a person on the Utility Board. Someone who’d help guide and care for this local resource. Someone who’ll see the 10,000 foot view of Lakeland’s future. Someone who isn’t merely in Lakeland because Winter Haven wouldn’t give them a deal, but someone who is so intertwined with Lakeland that they’d sink or swim with the city. Someone local.
Because, that’s why we love Publix, isn’t it? They don’t always have the best price and they’re not always the most convenient. But they’re our local store. It’s important to buy local, don’t you think Publix?
photo credit: Tom Hagerty for Lakeland Local
Tags: florida, government, Lakeland, Lakeland Electric, Publix, teco
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I agree Chuck. Publix getting involved in the sale of LE scares me.
Publix has been very good to the community for a very long time. They are a class act and they DO “pay it forward”. I agree wholeheartedly with Billy Townsend.
I was taught a long time ago that there is no such thing as a free lunch. Everything comes at a price of some kind. If Publix gets cheaper power from LE, which it will be with LE’s recent efforts to burn lower cost coal and the lower natural gas prices, then the retail system. That would be us little fish and smaller commercial users, will have to make up the difference. Or the city will have to live without the $25 million it gets from LE. Which do you think will actually happen? If paying almost the lowest rates in the state (you can look it up) is straining Publix, perhaps they need to get more efficient in their use of power. Barring that they could build their own power generation. Then they could blame themselves for the cost.
Gwen, so you agree with “But I will not support getting rid of the most valuable thing I own without an extraordinary deal. How extraordinary? It better produce a dividend of at least $35 million/year, indexed to inflation for 100 years.”?
Chuck, thanks for writing the article, as I think it is important for the community to have an open forum about this issue.
To me, the main points of the matter, are:
1. 66% of the voting population would have to vote in favor of selling the utility. That is not 66% of those who actually vote, nor a majority of a 66% turn out. No, it is instead a barrier that is unlikely to ever be met. Even if 100% of the community agreed to the issue, getting 66% to voice that opinion at the ballot box would be virtually impossible.
2. Because of that limitation, the Charter in place denies Lakeland (its citizens and elected officials) the option to sell the utility. Options are valuable. TECO could make an incredible offer, complete with rate guarantees and labor contracts, and the city would not be able to accept it. This puts the city at a disadvantage. Imagine the city had a major budget crisis for whatever reason and HAD to sell the utility. Under the status quo, they likely could not.
3. The $25 million dividend the city receives from Lakeland Electric is important, but it is not impressive. At a $1 billion dollar valuation, that is a 2.5% yield. While that yield would be slightly-above average for an established S&P 500 company, it is about half of TECO’s dividend yield (today 4.89%). Thus Lakeland could sell the utility, invest all of the money in TECO, and get back a $49 million dividend instead. And that is based on a billion-dollar sale price. It could be more. We don’t know. Lakeland doesn’t have the option to sell.
4. As far as Publix is concerned, if they can get better rates from other municipalities or vendors, and it makes financial sense to move some or all operations elsewhere, they must undertake that move. it is in the best interests of its shareholders (employees, retirees, and their families all over the Southeast) to do so. It would be much better for Publix (less expense, more goodwill), as well as for Lakeland (jobs, infrastructure, taxes), for existing and new operations to stay “local” but by no means does it have to be that way if a better deal, everything considered, can be had elsewhere.
I agree that any potential sale should be examined with the utmost scrutiny, but barring any sale is nearly as bad as accepting any offer. Neither affords the city the option to decide what makes the most sense for its citizens.
3. The $25 million dividend the city receives from Lakeland Electric is important, but it is not impressive. At a $1 billion dollar valuation, that is a 2.5% yield. While that yield would be slightly-above average for an established S&P 500 company, it is about half of TECO’s dividend yield (today 4.89%). Thus Lakeland could sell the utility, invest all of the money in TECO, and get back a $49 million dividend instead. And that is based on a billion-dollar sale price. It could be more. We don’t know. Lakeland doesn’t have the option to sell.
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“Could” is the operative word, isn’t it? Show me “will”, locked in with various legal protections and we’ll talk. In fact, I feel certain that if you can produce reasonable assurances of $50 mil/year dividend over decades, you’ll find lots if interest, including from me. But if a thing seems too good to be true…
Just remember that Lehman Bros. and other big investment banks made a lot of similar pitches to municipal pension funds. Didn’t work out so well. Like everything else, this is essentially a replay of defined benefit v. defined contribution.
And Wesley, just to be clear, are you the Wesley to whom Barnett Park is dedicated? Nothing sinister. I just think that’s a relevant piece of information here.
Very well said, Wesley.
Chuck, I had not seen/read the entire piece by B. Townsend when I first posted. I did just read it and agree with most of what he wrote. I do not like LE and as a 30+ year citizen (and single mother of 5) of Lakeland, paid very high rates to fix the stupid deal “City Leaders”made.The same “City Leaders” who proposed raising Publixs’ rates, most likely. On the other hand, I love Publix, from a customer side of view, as well as a more personal side. However, after the many years of picking up the tab created by LE, I do not wish to pick up a tab so that Publix can get better rates. Maybe the “City Leaders” should assure Publix their rates aren’t rising and fire the moron (ala Coca Cola’s new coke recipe boondoggle) who proposed it.
I agree, nothing should be done without extensive due diligence. But why would a company expend the cost to dive deep into a preliminary deal if the Charter says it can’t be done?
I don’t think a 5% return over decades is too good to be true. High-quality municipals yield about that much. A mixed portfolio could yield much higher. Sure, there is risk involved, but there is also risk involved in owning a utility. A diversified $1 billion asset portfolio is much safer than owning one company.
Oh sorry; yes, my family did donate Barnett Park. I am a tax-paying citizen of Lakeland like everyone else. Also like a lot of people in town, I own some Publix stock and buy my electricity from Lakeland Electric.
Thank you for being you and serving as an example that people can take care of each other and the community voluntarily.
Publix should be free to purchase anything they need from the suppliers that best suit them. Publix’s only moral duty is to return the greatest value they can to their shareholders, which in this case happens to be the employees. Publix has made a lot of millionaires over the years right in their employee base. Tell me that’s not doing something for their community, I dare you…
Because companies don’t do anything out of the goodness of their heart. If TECO has interest, they don’t have interest out of a neighborly sense of decency. They probably like our ratio of natural gas-powered generation w/natural gas prices looking to be on a long-term decline. (I may also be totally wrong. I admit not knowing the ins and outs of the power biz. But that’s my guess.) If that’s attractive enough to them, they’ll make a pitch with actual numbers. Perhaps a valuation range that leaves room for negotiation. This really shouldn’t be a mystery. If they make a good pitch, you can use that to get your referendum.
It’s not clear to me that overcoming a referendum is that great a hurdle. But I think they need to make a pretty concrete pitch first. Because I don’t trust an effort to make it easier to sell my most valuable asset based on what “could” happen.
And thanks for the openness above. We appreciate it. It’s a good discussion.
Skep, are you aware that the large park into which Barnett Park was inserted is a direct result of our socialist power plant? Would not exist without it.
And you are certain such a thing could not have come about on its own. There was no other City or private property that might have been used to create a park without the excessive forced donations to LE that all LE users pay?
My, my. How does anyone get a park without the benefits of a publicly owned power generation and distribution system? Or are all parks situated only municipalities that own such a system? It seems that I’ve visited parks in TECO served areas, but maybe I’m mistaken. I am getting older and the memory isn’t what it used to be.
Oh yeah, and your assertion is false on its face.
This “dividend” back to the city is just a form of indirect taxation. If the purposes to which the City is putting the funds it receives are legitimate, the people shouldn’t mind direct taxation to pay for it so it’s all out in the open and everyone understands what they are funding. All this talk about taxes going up if we lose LE is just misdirection, we’re already being taxed. Even if LE rates were exactly the same as the next cheapest private provider, these “profits” that are distributed for other purposes could be used to lower overall electricity rates and make every LE user better off directly with more of their own money in their pockets rather than through amorphous “lifestyle” improvements for which politicians can take unjustified credit.
Yes.
Skep: We get that you despise everything that most people who live here like about this city. I’m sorry that we’ve all so violated your liberty. I wonder why you even wnat to live around we moochers andfascists or whteverwe are.
Do you deliberately misunderstand me or is it just an unconscious knee-jerk reaction?
I love Lakeland and I’m not against parks and bike trails or the other things that make this a nice place to live. I would happily pay taxes or user fees (better user fees) to make these things available. If I didn’t like the taxes, I can fight them or move somewhere more amenable to my worldview. I believe local government is the best government and if the people of an area want a thing, let them get together and make it happen. Just do it openly and honestly. If the denizens of Lakeland want these things, let the City tax or charge us for it. By using LE as a piggy bank it hides the true costs right in plain sight in everyone’s utility bills.
I don’t know the full history of Lakeland Electric. There might have been a day when it made total economic sense to do what they did, but I don’t believe that’s still the case and certainly wasn’t the case for most of the last 10 years where we’ve paid much higher rates then we might have otherwise.
I find it interesting that the CEO (Sherrill Hudson) of TECO also serves on the board of Publix (since 2003).