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Jax Daily Record Wednesday, Oct. 23, 201911:44 AM EST

Council to seek outside legal help in potential JEA sale

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Attorneys and law firms interested in the job worth up to $1.85 million have until Friday to submit a resume.
by: Mike Mendenhall Associate Editor

Attorneys and law firms interested in advising the Jacksonville City Council in a possible JEA sale have until Friday to submit a resume, according to council President Scott Wilson.

Council approved a bill Tuesday night introduced by council member Garrett Dennis that sets aside $1.85 million to hire special legal counsel for its role in the potential sale of the city-owned utility.

The vote was 15-3, with council members Aaron Bowman, Terrance Freeman and LeAnna Cumber voting against the bill. Council member Joyce Morgan, who voiced support for the bill during the debate Tuesday night, was absent for the vote.

Council debated the bill for more than an hour. 

A floor amendment introduced by council member Danny Becton to reduce the amount of money set aside for legal counsel from $1.85 million to $500,000 failed 8-11, but generated debate about what is the appropriate amount of money to set aside.

Council members Dennis, Brenda Priestly Jackson and Randy DeFoor said any of the $1.85 million not used could be returned to the city’s general fund, while LeAnna Cumber argued that an hourly rate for legal work should be negotiated before appropriating the money. 

With JEA attracting multiple bids, council members indicated support for an independent assessment of JEA’s financial status, but took no action.

“If we have people stumbling over themselves to bid for this (JEA), then it’s worth more than what we’re being told,” council member Al Ferraro said.

DeFoor, a vocal critic of JEA’s transparency in its privatization process, said Tuesday that council needs focused advice from experts to get an independent review of the utility’s financial status. 

“I have a lot of questions that haven’t been answered, personally,” DeFoor said. “It’s been represented to us that JEA is in a death spiral, which is very different than what’s been represented to regulators. I have a question: What’s the financial status of the JEA?”

DeFoor also asserted that council’s legal representation needed to match the expertise and value representing JEA.

The utility contracted about $1.15 million in legal and financial services. JEA hired two legal firms and two financial adviser firms in July that are working with the JEA board and senior management team on privatization. 

Contracts with legal firms Foley & Lardner LLP and Pillsbury Winthrop Shaw Pittman LLP and financial firms Morgan Stanley & Co. LLC and JP Morgan Securities LLC show JEA will pay a combined $1.15 million base rate during its research into possible privatization.

The JP Morgan and Morgan Stanley fees will increase by $10.5 million, collectively, should their opinions lead to a “recapitalization transaction,” or sale of the public utility.

Bowman said any questions the council has before receiving a privatization proposal from the JEA board in March could be answered by JEA’s advisory team. Bowman said the city’s consolidated government structure makes any outside service hired by JEA accessible to Council. 

JEA Managing Director and CEO Aaron Zahn took the same position at the utility’s board meeting Tuesday in a back-and-forth with Becton, following a presentation from JP Morgan officials.

Bowman said he spoke with Zahn about using the JEA advisory team before Tuesday’s council meeting.

“Why are we wanting to spend $1.8 million or $500,000 right now when we don’t have a proposal, we don’t have questions … because we don’t have a proposal and we have access,” Bowman said. “We could have a meeting every day for the next five weeks and ask those people on contract at JEA any questions that we have. We don’t need to do this today.” 

Wilson said he thinks the council’s preference will be a legal team separate from those contracted by JEA. 

“I don’t want to ask their attorneys questions. I want to ask my attorneys questions. Someone who’s representing the council’s interests,” council member Ron Salem said. 

Wilson said the city has not issued a request for proposals for outside legal services. He said he will work with the city General Counsel Jason Gabriel to narrow the applicants before putting names and credentials before council for consideration.

The Office of General Counsel released a scope of services that will be specified in an engagement letter with any special counsel. 

That scope includes: 

• Legal impact of the potential privatization of public utilities.

• Engagement of third-party consultants and experts to assist council in its oversight function with regard to the potential privatization process.

• Attendance at public meetings.  

The document states the hired firm will advise the council in corporate translations, mergers and acquisitions; environmental and regulatory matters; labor and employment negotiations; procurement; and local government and legislative public policy.  

Wilson expects legislation approving the hire to move through in less than one council cycle. 

“I might do an in-and-out emergency,” Wilson said. “There are many council members who wish we already had someone on staff, so the quicker we can do it, the quicker we get to work.”

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