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Vero plans to hire consultants for new water study

(Week of April 21, 2011)

The City of Vero Beach is proposing to launch a new optimization and rate study for its water and sewer utility – at a cost that could easily run over $100,000 – even as it continues to try to stall the idea of consolidating the city system with the water and sewer utility of Indian River County.

First step in the process would be a $78,975 “Optimization Study” conducted by the city’s current favorite consultants, GAI of Orlando, aimed at finding cost-cutting measures that could be implemented.  Any efficiencies found would then form the basis for a new rate analysis by the Public Resources Management Group (PRMG) at a price not yet determined.

The fact that City utility managers are pushing a major new expenditure in support of their go-it-alone plan would hardly seem to auger well for talks scheduled for April 29th to explore options for consolidation of the City and County water and sewer systems.

But if the City continues to try to cling to its water-sewer utility, it clearly needs to find some efficiencies somewhere.  Just before the 2010 election, the Vero Beach City Council repealed $13 million in rate increases approved in 2009 after an earlier study done by PRMG.

At the time of the repeal, City staff admitted no financial analysis was done to show how the utility could run without that revenue. Weeks later, a document surfaced showing that millions of dollars in capital projects had been put off and all non-emergency upgrades on the South Barrier Island had been put on hold.

Recently City staff said the capital projects had been “deferred” – not cancelled – but Water-Sewer Director Rob Bolton in January asked PRMG to adjust its 2009 findings based upon the so-called new reality of the deferred improvements. 

E-mail records from late January show that PRMG wouldn’t budge from its assertion the city must increase rates to stay afloat. In fact, the tweaked projections PRMG sent back to Bolton showed a slightly steeper incline of rates since the city is now a year off schedule in implementing the annual increases.

Enter GAI Consultants and the new $78,975 optimization study.

GAI does water-sewer work for both the Town of Indian River Shores and Vero Beach and last year was criticized for having the same engineers working for both parties on a proposed 30-year franchise extension.

Shores Mayor Tom Cadden – who was then just a volunteer advisor to the town – shooed away the controversy by saying that GAI was tasked with different duties for the town than it was for Vero Beach. Members of the Town Council bristled, recalling they were told GAI was their consultant exclusively.

The Shores must decide by November whether to stay on the Vero Beach system when its franchise expires in 2016.

Cadden is openly advocating to keep the Shores with the City of Vero Beach.

The supply of reuse water to the town has been identified as a top priority and GAI has included in the optimization study a section addressing this issue – specifically mentioning an effort to find ways to “augment the supply of reuse water” and to study the “expansion of capacity and sales” specifically with John’s Island and the Town of Indian River Shores.

But once town officials sign on to stay with Vero Beach, there’s no guarantee rates would not soar as PRMG had predicted.

Bolton and GAI propose to spend the $78,975 to figure out how to make the Vero Beach system more efficient, to get rates down, to modernize billing and convert Vero Beach to the standard industry measurement instead of using meter size so customers can see an apples-to-apples comparison with the Indian River County system.

The March 25 proposal states that after GAI makes its assessment, it will turn the data over to PRMG and task PRMG with coming up with a new rate analysis based upon the recommended efficiencies. There is no cost figure for the PRMG work in the proposal and when asked for an estimate, Bolton did not respond.

The city’s bonding agent, Craig Dunlap of Dunlap and Associates, is also listed in the proposal as being responsible for doing a financial analysis of the utility system. When asked how much this would cost, Bolton did not respond.

Asked directly via e-mail last Wednesday how much he would charge for these services, Dunlap did not respond.

Dunlap, according to Mayor Jay Kramer, was the person who introduced Kramer to Robert Sheets of Government Services Group. GSG, Kramer has stated, is interested in purchasing the Vero Beach water and sewer utility.

In fact, Kramer has said that GSG was prepared to offer $50 million for the water-sewer system. The staff has estimated that the system has a net value of about $47 million after all debt is paid off.

Kramer said Dunlap “works with GSG” so it would seem the bonding agent might not be the most objective person to do the financial analysis on the utility.

Kramer said Dunlap had offered to do some analysis of the Indian River County utility financials for the city at no charge. Dunlap did not respond when asked to verify all these statements made by Kramer.

Despite the lack of responses, GAI’s base proposal of $78,975 would be the very low end of the costs for the complete optimization study. There is also no estimate for services related to the study’s implementation. Those duties are addressed in the proposal, simply by saying the city would pay for those services at the same rates – $80 to $225 per hour – depending upon the GAI staffer performing them. No estimate is given for implementation.

Questionable timing

On the surface, ferreting out the inefficiencies in the system and bringing it into the 21st century seem like valiant goals, but it begs the question of why it wasn’t done when PRMG told the city it needed $13 million in rate increases over the next five years.

When posed with that question via e-mail five days before our print deadline, Bolton and Interim City Manager Monte Falls did not respond.

The proposal has not yet come before the Vero Beach City Council and staff could also not estimate when it would it would be on the agenda for a vote. It could be much too soon after the council approved $248,000 for GAI to appraise the electric system and look at the city’s electric options.

The optimization study would take 125 days and would be the third concurrent consulting project GAI would have going with Vero. When asked Wednesday whether the city was given assurances that the optimization study, if approved, would not delay work on the electric appraisal and analysis of proposed terms from Florida Power and Light, Interim City Manager Falls responded that “GAI is a very big company.”

That being the case, GAI principal Gerry Hartmann and his core engineering crew of four or five people have shown to be extremely hands-on when tackling local projects, as documented by invoices submitted for payment to both Vero Beach and the Shores.

When pressed about whether GAI promised to put different people on the water-sewer study to keep the electric project on a fast-track, Falls said he would speak with Bolton and find out.

As of press time, neither Falls nor Bolton had responded.

In the lead-up to the April 29 meeting with the Board of County Commissioners to explore options for combining the Vero Beach and county water-sewer systems, County Utility Director Erik Olson said he was unaware Bolton was proposing a major study to streamline the Vero system.

Olson has publicly referred to and relied upon the data contained in the 2009 PRMG report in projecting what Vero’s rates might be in years to come.

“It will be interesting,” Olson said of the upcoming meeting and of the optimization study being proposed.