The City of Murfreesboro moved a step closer last Thursday to selling the electric department after the City Council voted 4-2 to spend $400,000 to $500,000 in legal and accounting fees to explore the deal.
Voting for approval were Mayor Shane McFarland and council members Bill Shacklett, Eddie Smotherman and Kirt Wade. Voting no were Ronnie Martin and Madelyn Scales Harris, who asked sharp questions about public transparency and how much has been spent on fees without the fees being brought to the council for approval. She asked when documents would be made available to the public. Rick LaLance was not present for the meeting in which the vote was taken, but did attend later.
The council made the vote in a joint session with the Murfreesboro Electric Department Power Board; the expenditures are coming from MED’s budget. That meeting was open to the public, but no public comment was allowed. Unlike the council’s regular weekly Thursday night meetings, which are televised, this joint meeting was not televised for public viewing.
Prior to that meeting, the council and Power Board met in an executive session that was closed to the public to discuss what they said were potential legal issues related to the sale.
The council has not approved a sale, but instead voted to spend money to explore whether to make the sale. City Manager Craig Tindall said the city has already spent $22,500 in legal fees and $10,000 to $12,000 in accounting fees that were budgeted in this year’s budget.
Before the 4-2 vote, Martin said he understands the need for due diligence but was uncomfortable spending money upfront.
Scales Harris said, “I feel as a councilmember disrespected in this whole deal because I feel like we’re taking the cart before the horse. We haven’t even discussed … selling MED or anything, and yet we’re still hiring these lawyers.”
McFarland said the council has given the city attorney and department heads authority to make decisions on what they believe to be the city’s best interest, and so the council has not been left out.
Regarding public documents related to the process, Scales Harris questioned whether the council would give the public a chance to react.
“Are we going to get the public’s input on this,” she asked.
City Attorney Adam Tucker said the document related to the sale would be publicized when it is presented to the council. McFarland interrupted to tell Scales Harris she had asked the same question minutes ago in a non-public meeting and was receiving the same answer, so she already knew the answer.
Scales Harris said, “I’m not satisfied with that answer. What I’m saying is, if it’s a public document, in a sale of this magnitude, yes, it may be on the website, or it may be on the radio, but I think we owe it to the public to get their input on a sale of this magnitude. We owe that to the public.”
Tindall said, “Councilmember, I think we do that on a regular basis.”
Scales Harris interrupted and said, “No we don’t. No, no, sir.”
Tindall said the resolution is a public document and there will be a workshop session where the transaction will be discussed, and the city needs to have outside consultants to help it prepare. The city will allow public input but is not at that point, he said.
Scales Harris said the city is handling the sale in a way that does not respect the public.
The only buyer the council is considering is Middle Tennessee Electric Membership Corp., which first offered in 2015 to buy MED.
Tindall told the Murfreesboro Post he did not believe the full $500,000 would be spent, and if the sale happens, MTEMC would reimburse the legal bills.
Citizens speak out
After the joint meeting, the council held a monthly session where members of the public are allowed to address it on any topic. Several residents asked sharp questions about the proposed sale; the council does not typically directly answer questions in these sessions.
Dr. Bill Ford represented the Rutherford County Republican Party. He is a former president of the Federal Reserve Bank of Atlanta and a retired holder of the Weatherford Chair of Excellence in Finance in the Jennings A. Jones College of Business at Middle Tennessee State University.
Ford’s questions included how a merger would affect electric bills and what value is being placed on MED. He asked who would receive the legal fees, and whether the proceeds would be used to repeal the property tax increase. He wanted to know what recourse ratepayers would have if rates increased, as well as whether MED employees would be laid off.
Another citizen, Andy Dickey, asked about allowing citizens to vote about selling MED. He said state law requires a referendum to be held when a city sells its power department.
He later told the Post if the city does not hold a referendum, he questions whether the city would be entitled to any proceeds from a sale — his position is that MED ratepayers should receive the money. If the city did not pay to found MED, then ratepayers own it, not the city, regardless of whether the city operates the utility.
City officials said last Thursday that the public would have a voice and that there would be a public meeting in a couple of weeks.
After the public comment period, the Post asked Tindall to identify the attorneys and accountants. The attorney is the law firm Balch & Bingham of Birmingham, Ala. The accounting firm is Jackson Thornton. The law firm was hired because it has experience in selling utilities, Tindall said.
Tindall, who is an attorney, told the Post he does not interpret state law to mean a referendum is required. He said the city did not create MED using public bonds, so state law would not apply.
Wade told the Post it is too soon to talk about holding a referendum but he believes the process should be transparent.
“Let’s see how it plays out first,” he said.
McFarland said, after the meeting, that while the council has not discussed how to handle proceeds, he would like to use them to finance infrastructure projects.
The Post last week filed a Freedom of Information Act request with the city for a copy of a new report that places a monetary value on MED. Tindall said that request is being processed, but to his best recollection, the value is more than $200 million.
In 2015, MTEMC offered $150 million for MED. The city hired a consultant for $19,000, and the consultant reported MED was worth $422.9 million, according to old press reports. The deal fell through.