The City of Murfreesboro moved a step closer 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 on the public transparency of the process. She also asked when documents would be made available to the public. Rick LaLance was not present for the meeting.
The only buyer being considered is Middle Tennessee Electric Membership Corp., which first offered in 2015 to buy MED.
City Manager Craig 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.
The council met in a joint session with the Murfreesboro Electric Department Power Board when approving the expenditures, which are coming from MED’s budget. That meeting was open to the public, but no public comment was allowed.
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. 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.
After the joint meeting, the council held its monthly session where members of the public are allowed to speak on any topic. Several residents asked sharp questions on 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 the cost of electric bills and what value is being placed on MED. He also asked who would receive the legal and accounting fees, and whether the proceeds from a sale would be used retroactively to repeal the property tax increase. He also wanted to know what recourse ratepayers would have if MTEMC were to raise rates after the merger, as well as whether MED employees would be laid off, and whether MED’s assets would be sold off.
Another citizen, Andy Dickey addressed several points, including the possibility of allowing citizens to vote on whether to sell MED. He said state law requires a referendum to be held when a city sells its power department. If the city does not hold a referendum, he said, he questions whether the city would be entitled to any proceeds from a sale – his position is that the MED ratepayers should receive the money.
The council said there could be a meeting in a couple of weeks in which members of the public are allowed to offer more input.
After the public comment period, the Post asked Tindall who the attorneys and accountants are. The attorney is the law firm Balch & Bingham of Birmingham, Alabama. The accounting firm is Jackson Thornton.
After the meeting, Tindall, who is an attorney, told the Post that 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.
Also after the meeting, McFarland said that while the council has not discussed what to do with any proceeds from a sale, he would like to use it to pay for infrastructure projects.
The Post last week filed a freedom of information act request with the city to obtain 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.