Destin ponders cost of placing utility lines underground

DESTIN — The city has many potential ways to pay for placing overhead electrical lines and other utility lines within Destin underground, staff told the City Council on Monday.


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While the council discussed the funding options, it made no concrete decisions.


The undergrounding of utility lines along U.S. Highway 98 and throughout the city is a project that Destin officials say would beautify the city and lead to fewer storm-caused power outages.


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Currently, the city is in the final phase of negotiating a new franchise agreement with Gulf Power for electricity services, according to Destin Finance Director Bragg Farmer. Items being negotiated include a price to underground the company’s power lines, as well as other utility lines attached to power poles, in Destin.


While placing all the lines underground will take at least two decades, city officials for now are focused on exploring possible funding sources to pay for the placements during the next 10 years or so. Funding must be identified and secured before issuing a revenue note/bond that would pay for the project upfront, according to Farmer.


Potential annual funding sources were requested last month by Councilman Parker Destin.


In #Destin, a possible “public service” tax charged to utility companies, the existing half-cent sales tax & a higher electricity franchise fee are among the potential $ sources to pay for placing overhead electrical & other utility lines underground. #Destin City Council

— Tony Judnich (@Tonyjnwfdn) January 7, 2020

They include a possible “public service” tax charged to utility companies that could generate $2.5 million, the existing local option half-cent sales tax that would provide $1.2 million, an additional 2% electricity franchise fee that would generate $850,000 and, eventually, funding from the city’s two community redevelopment areas in the amount of $1.4 million.


Councilwoman Prebble Ramswell, however, said she doesn’t support using any Harbor CRA funding for the possible undergrounding because of that CRA’s past instability.


She also expressed concern about charging a larger electricity franchise fee because that higher cost would just be passed on to customers.


Councilman Destin said Okaloosa County tourist development tax revenue, as well as settlement money from the 2010 BP oil spill, are other possible sources to help pay for placing utility lines underground.


Putting the lines below ground would benefit all local property owners by way of higher property values, Mayor Gary Jarvis said.


Councilman Skip Overdier, however, noted that the city is trying to buy more public beach property and that “we have to be careful we have enough money” available for that priority.


In other business, the council agreed, in response to concerns by Councilman Steven Menchel and to avoid state involvement, to have city department heads perform self-audits of continuing-service contracts within their departments.


The audit results are expected to be provided to the council by early April.


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