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Clearwater to put its natural gas utility on the market

City Council members said they wanted to see how much Clearwater Gas System could fetch, but they weren’t committed to selling it.
Clearwater is one of 27 towns or cities in Florida that own a natural gas utility, and Clearwater Gas is the fourth-largest of the municipally owned systems.
Clearwater is one of 27 towns or cities in Florida that own a natural gas utility, and Clearwater Gas is the fourth-largest of the municipally owned systems. [ DOUGLAS R. CLIFFORD | Times ]
Published May 16|Updated May 16

CLEARWATER — City Council members on Monday agreed to put Clearwater Gas System on the market in order to find out how much the natural gas utility could sell for in the private sector.

Officials cautioned that the move is not a commitment to sell the utility but more of a fact-gathering exercise to help them decide whether selling the utility would be in the best interest of the city.

Clearwater is one of 27 towns or cities in Florida that own a natural gas utility, and Clearwater Gas is the fourth-largest of the municipally owned systems. Every year, the utility pays the city’s general fund at least 50 percent of its net income, a dividend that has averaged $3 million annually over the past decade.

During the work session discussion, City Finance Director Jay Ravins said that on top of the dividend, the gas system pays for shared overhead like finance and legal services. With the shared services factored in, the city would need to recoup almost $5 million a year to make the general fund whole if it sold the utility.

A valuation done in March by Raymond James estimated the city could get $115 million in a sale of the utility — a median projection that could fluctuate significantly, Ravins said.

City Manger Jon Jennings sought the valuation after taking over the administration in November and talking to several council members about the future of the city’s role in owning a gas utility.

“I appreciate our new city manager coming in and taking a real holistic look at how our city operates and doing our due diligence in multiple departments,” council member Kathleen Beckman said. “I just think that’s prudent operating behavior. We are stewards of our citizens’ money and we are tasked with making good financial decisions.”

Council members acknowledged there would be several unknowns regarding a potential sale. The likely buyer would be a private utility that would continue the natural gas service, and council member David Allbritton questioned how that would impact residents’ rates.

He said the public utility benefits residents with the dividend that is paid to the general fund each year and with historically competitive prices.

“I’m ok with getting the information, but right now I think it’s a valuable enterprise fund for us and I’m really not interested in selling it,” Allbritton said.

It’s also unclear how many of the roughly 90 Clearwater Gas System employees would be absorbed by the new owner.

Jennings met with gas employees on May 9 to announce that the idea of selling the utility was being explored.

Ron Rice, president of Clearwater’s Communication Workers of America local, said the news has been a shock to employees who had hoped to spend careers working for a government utility.

“It runs the gamut between fear for their jobs to frustration,” Rice said. This is a group of professionals who have put a lot of effort into getting the proper training and putting the work in for the city.”

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The city considered selling the utility once before. In 1989, the then-City Commission agreed to put the gas division out to bid over concerns about its profitability. A year of study showed the city would make $900,000 more profit each year by retaining the gas system.

The commission voted unanimously not to sell the gas system in 1990 but directed staff to boost profitability and its customer base.

In the last 30 years, Clearwater Gas System has tripled in size to 30,000 customers in Pinellas, Pasco and Hillsborough counties.

On Monday, Clearwater Gas System Executive Director Chuck Warrington told the council he estimated the system could double its customer base in 20 years, especially with the extensive development occurring in Pasco County.

He said the gas system has been in discussions with Moffitt Cancer Center about its plans to build a 775-acre campus in Pasco County for research, education and patient care.

Despite the growth, Mayor Frank Hibbard said he does not believe the city has run the gas utility as aggressively as it used to. He said if the city were to retain Clearwater Gas System, “we need to be more aggressive and allow it to expand.”

He said the possibility that legislative changes impact natural gas in the future could mean Clearwater’s asset has hit its peak value, making the exploration of selling it a needed exercise.

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