NextEra Energy offered $11 Billion for JEA

[CityLife]

Does anyone on here, a financial advisor type perhaps, have any idea how much of an annual revenue stream would be created by an $6.5 billion endowment?  If the endowment would exceed the revenue stream, THAT money could go to infrastructure and economic development without negatively impacting anything else.

If you could get the endowment to fully replace the funds JEA was paying the city annually, that would be a pretty significant fact. The new owner would pay property taxes and a business license fee as well, so that would be significant new revenue too.

Of course, there would no doubt be much higher utility rates on the citizens too.

It's all about the assumptions and management of the funds.  If it was strictly treated as an endowment, traditionally, non-profits have siphoned off 5% annually of the balance at an annual snapshot date or of a multiyear average balance.  With today's low interest rate environment, many have lowered that to 3%. 

A bigger question is how do you invest the money:  In fixed income, the stock market, hedge funds, private equity, real estate, precious metals, venture capital, etc.?  Most large university endowments will do some mix of all of these with a somewhat heavier weighting toward the more risky, but higher reward, investments.  I don't know if the taxpayers could stomach that.

Keep in mind, if one skims off all the annual investment returns or more, the income created will get depreciated over time by inflation.  At 3%, $6.5 billion yields $195 million a year.  If no funds are added to the endowment via net investment gains or contributions, in 20 or 30 years that would have a lot less purchasing power than today.  This is one reason why nonprofits must constantly work to add to their endowments.

Good post. Yeah, I believe 3-5% annual growth is the normal assumption for endowments as well as municipal general funds. Most municipal reserves and endowments do not pull out all of the yearly returns and choose to re-invest a significant portion of gains. So ideally Jax would have pulled out a large chunk for CIP and operating expenses, but continued growing the reserves to keep the fund sustainable.

I'm curious what having a large sum of money could have saved the City in long term pension liabilities or other debts. The latest I can find online is the city pays $260 million a year in annual payments to pension funds from the general fund. The better play might be paying off the unfunded pension liability upfront (I believe around $3 billion) and not having to hemorrhage a ton of money from the general fund yearly.

IF the numbers thrown out are anywhere close to accurate, it would have been interesting to see some of the different options the City would have had to play with.

[Steve]

As Diamond noted in the article, don't forget to subtract paying off the Vogtle nuclear plant liability the City was going to keep from the $6.5 billion proceeds (after paying off JEA's debts).  If one estimates this at around $3 billion or so (and counting), the City nets "only" about $3.5 billion.  Subtract transaction costs for brokers, lawyers, etc. and the number drops some more.

Also don't forget the one thing Curry said he'd do with the money was pay off all city debt, which is about $2B. Now we're to a little over $1B.

See how quickly $11B goes away?

[Ken_FSU]

Per Monroe, the NextEra deal would have potentially paid out over ONE BILLION DOLLARS to JEA execs.

[Ken_FSU]

Any other similarly sized city in America, $6.5 billion (once outstanding debt is satisfied) is an incredibly tempting offer, and a possibility that's at least worth exploring or putting on the ballot. We've just go no track record whatsoever though of being able to properly steward public money. We'd squander it within a decade, and the have-nots would be left holding the bag.

That is an astronomical amount of money for a city to have in it's coffers. For comparison, if Jacksonville was a university, that amount alone would make it the 18th highest endowment in the US. Higher than Johns Hopkins, USC, Vandy, Dartmouth, NYU, Brown, and several other elite private schools. It would be more than the entire combined endowment's of the twelve universities that comprise the State University System of Florida.

Even COJ could not find a way to squander that type of money. I've said it before, but I think there is a good chance that it could have been a great deal for Jacksonville, but unfortunately due to complete political ineptness and greed, we never even got to properly evaluate it.

And still almost $2 billion less than the net worth of a guy who can't throw a few million in to the Hart Bridge ramp project to make his entertainment complex more accessible.

[thelakelander]

Per Monroe, the NextEra deal would have potentially paid out over ONE BILLION DOLLARS to JEA execs.

Wow. that's crazy. Talk about being way too greedy.

[BridgeTroll]

Lessee... 1 billion dollars divided by how many JEA billed customers?  Might've been a nice little nest egg...

[jaxlongtimer]

Nate Monroe drops another JEA shoe today:

https://www.jacksonville.com/story/news/columns/nate-monroe/2020/08/28/bonus-caused-internal-jea-rift/5644470002/

$1.1 billion payout to Zahn and friends, lawyers knew plan was not legal but tried to reclassify it to sneak it through at JEA's request, memos show Curry behind the sale of JEA come hell or high water, legal advice ignored, Baker, Mousa and Hughes conflicts of interest, efforts to hide from public records and much more!  A scandal that keeps on giving.  Looking forward to some indictments.

[acme54321]

Lessee... 1 billion dollars divided by how many JEA billed customers?  Might've been a nice little nest egg...

Not really.  JEA has 450k electric customers.  Unless you call $2000 a nice nest egg...

[BridgeTroll]

Lessee... 1 billion dollars divided by how many JEA billed customers?  Might've been a nice little nest egg...

Not really.  JEA has 450k electric customers.  Unless you call $2000 a nice nest egg...

True. I do however trust what I might do with that money versus what the city would do with it...

[JaxAvondale]

Lessee... 1 billion dollars divided by how many JEA billed customers?  Might've been a nice little nest egg...

Not really.  JEA has 450k electric customers.  Unless you call $2000 a nice nest egg...

True. I do however trust what I might do with that money versus what the city would do with it...

Agreed! Scandal aside, there is an argument to made to sell JEA but it is dependent on what the city is going to do with the funds.

[blizz01]

So what's the over under on anyone seeing jail time?

[Steve]

Lessee... 1 billion dollars divided by how many JEA billed customers?  Might've been a nice little nest egg...

Not really.  JEA has 450k electric customers.  Unless you call $2000 a nice nest egg...

True. I do however trust what I might do with that money versus what the city would do with it...

Agreed! Scandal aside, there is an argument to made to sell JEA but it is dependent on what the city is going to do with the funds.

I agree. When the conversation first started I was actually open to it. Not a chance now.

[Steve]

So what's the over under on anyone seeing jail time?

I bet they can nail Zahn. To me there's a few groups:

JEA executives: I think they'll get them
JEA Board: I think they weasel out of it. The key thing here is there's proof that the executives lied to the board, which may give them an out.
Baker and Mousa: Doubt it.
Brian Hughes: Doubt it even though there's no way he didn't know the details.
Curry: see Hughes.

[thelakelander]

What's the over under that Curry's Lot J/Shipyards plans were totally dependent on having money to spend from the sell of JEA?

[marcuscnelson]

What's the over under that Curry's Lot J/Shipyards plans were totally dependent on having money to spend from the sell of JEA?

I'd think basically guaranteed. If NextEra's proposal reached his desk, he must have been salivating over the idea of a multibillion-dollar slush fund to build Downtown 2: Jaguars Boogaloo, and with it secure his future political prospects.