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Vero water battle may shift to court

(Week of April 28, 2011)

Taxpayers could see the City of Vero Beach and Indian River County governments battle it out in court if they can’t agree on a plan to combine water and sewer systems sometime soon.

At the heart of the dispute is whether the county has the right to take back service to South County residents now on the Vero Beach utility system after a franchise agreement expires in March 2017.

Vero Water and Sewer Director Rob Bolton has said that, as far as he’s concerned, the City will continue to serve South Beach and collect a franchise fee until it is told not to do so by a court.

Bolton also floated the idea last week that, under Florida law, Vero could jack up the water-sewer surcharge on South Beach and Indian River Shores customers to 25 percent instead of the current 10 percent.

Bolton got a legal opinion from attorney Thomas Cloud of the Gray Robinson law firm backing him up. In that April 18 legal opinion, Cloud points to various agreements approved by the Board of County Commissioners in the 1970s and 1980s that allowed Vero to serve the South Beach customers in the first place.

“I am of the opinion that the City’s exclusive right to provide water and sewer service to the South Beach area exists and will continue to exist unabated whether or not the County’s franchises terminate,” Cloud wrote  in the memo to Bolton.

The memo outlined an agreement with the Moorings in 1968 and with the county in 1973, 1980, 1985, 1987 and 1989, and stated that Vero expended money to service the Moorings and other South Beach customers. The history includes a failed attempt by the county in 1981 to serve the South Beach customers and finally a “1985 Territorial Agreement” awarding Vero the exclusive right to serve the South Beach.

That was followed up by the 1987 franchise agreement giving Vero the power to collect a franchise fee. Another agreement was executed in 1989 giving Vero the rights to serve the South Beach, and which Cloud argues “supersedes all previous agreements, except the franchises between the parties, but has no end date.”

Cloud works hand in hand with GAI Consultants, the firm slated to do hundreds of thousands of dollars of appraisal and consulting work on Vero’s water-sewer system in the coming months.

With this legal advice in hand, the City of Vero Beach appears intent on forcing the South Beach customers to remain on the Vero system indefinitely, waving a possible 25 percent surcharge over their heads.

Upon hearing of talk of a 25 percent surcharge on the South Beach and Shores customers, County Commission Chairman Bob Solari conceded that the surcharge would be legal, but voiced his opposition. He serves as the commission’s liaison to Vero and the Shores regarding water-sewer matters.

“Imposing a 25 percent surcharge would, however, be morally wrong, and it shows the contempt that Mr. Bolton has for his customers,” Solari said. “It is consistent with Mr. Bolton’s words and actions over the past two years where his prime concern, has not been to serve his customers but rather to preserve jobs in the city utility regardless of the costs to the customers the utility serves and the damage that high utility charges continues to do to the economic viability of our community.”

The county has already given Vero Beach notice of its intent to not renew the franchise agreement in 2017 and County Attorney Alan Polackwich has issued an opinion of his own to back that up.

Polackwich argues the current commission can negate that territorial agreement -- that the commission cannot be held permanently to a decision of a former county commission that was designed to work hand in hand with the 30-year franchise agreement.

Polackwich wrote a memo April 5 to County Director of Utilities Erik Olson in response to a question from Olson about whether Vero’s territorial rights to the South Beach are “permanent.”

“My opinion is that (1) the Agreement established service areas only for the duration of the 1987 franchises, and (2) any attempt by the 1989 BCC (Board of County Commissioners) and City Council to establish service areas that would remain in place forever would probably be void, as being in excess of the legal authority of the commission and council,” Polackwich wrote.

Polackwich said he’s reviewed the background material surrounding the decisions and he said there’s no indication Vero or county officials at the time thought they were setting anything in stone.

“Neither the BCC (Board of County Commissioners) nor the City Council agenda memos, nor the BCC minutes, contain any language suggesting that the service areas were being established for any period of time other than the duration of the 1987 franchises.  If the intent had been to establish the service areas forever – which is obviously a significant and unusual action – this fact would surely have been mentioned in the memos or minutes.

The two legal opinions don’t seem to place Vero and the county in any position to compromise – either the 1989 Territorial Agreement is or is not permanent.

At this point, regionalization of the systems could be the only thing that keeps Vero and the county out of court, unless Vero Beach finds itself needing to raise water-sewer rates to a level that is not politically acceptable.

If the Indian River Shores Town Council votes to sign on with county water and sewer now that the county has offered regular county rates to the Shores, Vero will be forced to either cut expenses drastically or spread operating costs to its remaining customers.

Apart from the growing animosity between Vero and the county, the dispute comes down to money and the continued ability of Vero Beach to operate an independent utility and sustain current rates. Water-sewer utilities seek economies of scale:  the more water and effluent treated and pumped, the cheaper it is to treat and pump it per gallon.

About 90 percent of the county customers in question live on the South barrier island and are anecdotally considered to be high-volume users of water and sewer utilities. Although the city can’t generate accurate numbers due to the inadequacy of its computer system, it’s been estimated that the South Beach customers make up close to 20 percent of the city’s water-sewer utility revenues.

The Town of Indian River Shores is set to meet Thursday afternoon to consider a proposal from the county to take over the Shores water-sewer customers, who amount to another 20 percent or so of Vero’s revenue.

If the Shores signs on to switch to county service in 2016, presumably rates would need to go up for city ratepayers, and for South Beach customers on the system until 2017.

If the South Beach then goes in 2017, Vero Beach ratepayers will shoulder the burden of paying for the operation, maintenance and debt service on the system, and rates would have to almost double.

A proposal from GAI Consultants is currently on the table which would spend at least $80,000 to study ways to “optimize” the Vero Beach water-sewer system.

Mayor Jay Kramer has also lobbied South Beach community leaders to change their minds about wanting to go with the county. Organized vocal residents in the South Beach have provided much of the political impetus for the county push to reclaim that service territory for its own.