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County threatens to give Vero notice of water-sewer switch

(Week of April 7, 2011

Beachside residents south of Castaway Cove – some of whom have been begging for years to be emancipated from the City of Vero Beach water-sewer system -- could move a step closer to getting that wish fulfilled when the County Commission considers formal action on a major salvo in the ongoing utility war.

If passed this month, a resolution proposed by County Commission Chair Bob Solari would officially put the City of Vero Beach on notice that it will be losing more than 4,000 water and sewer customers in March 2017.

In September 2009, the Indian River Board of County Commissioners had a similar resolution on the table, fulfilling the requirement it give a minimum five-year notice to Vero of non-renewal of the current 30-year franchise agreement that covers residents of the unincorporated county now on the Vero system -- 90 per cent of whom live in South Beach.

Looking at a possible regional deal, commissioners did not act at that time.  However, this week a resolution to pull South Beach out was back on the County’s plate, and the issue of regionalization is no farther along than it was 20 months ago.

In fact, Vero staffers are now proposing an “optimization study” aimed at getting city rates down and Mayor Jay Kramer is advocating other options, including a privatized utility authority.

The new resolution, and what Commissioner Bob Solari calls a “starting point” in his memo to the board, was drafted by utility activist and South Beach resident Dr. Stephen Faherty.

The document says that utility rates for county residents on the city system -- which are higher than county rates generally and also include a 10 per cent surcharge -- have hurt the South Beach real estate market.

As a procedural matter, the county commissioners typically do not act on questions proposed under “Commissioners Items” as this was placed on the agenda by Solari. It is expected that the draft resolution will be tweaked and put in proper form by staff – with a staff analysis and recommendation to re-emerge next week for a vote.

County Attorney Alan Polackwich Friday said he was in the midst of researching the issue, but had not issued an opinion.

Or the commission may not act this month, but instead may wait to see what comes of an April 29 joint meeting with Vero intended to flesh out options for regionalization.

The appointed liaison for water-sewer issues, Commissioner Solari has stated publicly that he’s in favor of pulling the county residents off the Vero system, predicting that City of Vero rates for South Beach homes could soar over the next few years based on a 2009 rate study commissioned by Vero.

As far back as the fall of 2009, Commissioner Wesley Davis said he wanted to give regionalization a chance, but said if something couldn’t be worked out, the county should set in motion the planning and construction to serve the mainland county and South Beach residents.

“I’m ready to move this off center,” Davis said.

Commissioner Gary Wheeler could be a swing vote on this resolution once it gets in final form. When the issue came up at a County Commission meeting in March, Wheeler raised questions about whether or not the County would encounter any legal obstacles in taking over service of these customers as Florida Statute gives municipalities permission to expand utility territories five miles beyond city borders.

“I did have some questions. I’m not opposed to it,” Wheeler said. “I would be in favor of doing it if the residents would like to come to our system because we’re solvent and we’re cheaper.”

To show that the customers in question are behind the move, Faherty sent out a blast “Utility Update” email on Saturday urging those affected to attend the commission meeting and to urge passage of the resolution.

Wheeler said that to get his vote, the deal would have to assess the net costs of connecting the county system to the South Beach residents who will benefit from the project. Cost estimates range -- depending upon the level of cooperation from the City of Vero Beach -- from about $4 million to $9 million.

“I’m not going to pay a premium to take something away from the city,” he said.

“The customers in the south barrier island wanted water-sewer and first they have to want us to do this.  I wouldn’t take on hostile customers. And it’s got to work financially.”
Indian River Shores Mayor Tom Cadden and Vero Beach Mayor Jay Kramer have also raised the legal and territorial questions, and those are yet to be answered.

Cadden has repeatedly blamed the county commissioners for backing out of a joint Vero-County-Shores effort to hire a consultant to study five different permutations of utilities going forward.

After six months of meeting, hammering out a scope of services and voting on a consultant, county officials balked at paying $25,000 to interview local officials about what the political will was to regionalize. Based on the lack of unanimity to go forward, Cadden disbanded the joint committee, thus stalling the issue.

Over at Vero Beach City Hall, Vice Mayor Pilar Turner for months has been prodding city utility staff to develop budget and rate projections for the contingency of customers being pulled off the Vero system in 2017. Turner has said she was told by staff that they didn’t want to expend the time and resources to run such a scenario “unless it became a reality.”

The city’s own 2009 utility rate study showed the water-sewer system to be heavy burdened with fixed costs. That same rate study projected water rates would increase by 37 percent and sewer rates would increase nearly 60 percent by 2013.

The Vero Beach City Council approved $13 million in phased-in increases in the summer of 2009, but then the 2010 City Council repealed the increases based on concern over soaring rates -- but with no financial analysis.

Without major changes to the way Vero does business, many say it’s inevitable that rates would have to go up for customers who remain on the system if county customers peel off in 2017.

Meanwhile, Indian River Shores officials have expressed skepticism about the lack of rate guarantees in a proposed 30-year franchise agreement for Vero to provide water, sewer and reuse irrigation water to the Shores.

Indian River County has not raised water and sewer rates since 1999, according to Utility Director Erik Olsen, and there are no rate increases projected for at least the next five years. County Administrator Joe Baird told the Shores Town Council that he thought a three-year rate guarantee at the outset of a 30-year agreement with the Shores would be fair. The County proposal is expected to surface in the next week, and be presented to the Shores April 28.

Losing the Shores in November 2016 and then the South Beach in March 2017 would amount to a 40 to 45 percent reduction in revenues for Vero and would amount to a crippling financial blow to Vero Beach Utilities, according to CPA Glenn Heran, who has extensively analyzed the financial reports of both Vero and the county.

“It’s impossible for the City of Vero Beach water-sewer system to lose 45 percent of its revenue and then spread all remaining fixed costs to those customers isolated within City limits without having to significantly raise rates,” Heran said. “Vero Beach rates are not competitive with Indian River County Utilities now, let alone future capital costs that will drive COVB rates even higher.

“South Beach has been loud and clear in its desire to return home to Indian River County; the solution is clear,” Heran said.
Vero Water-Sewer Utility Director Rob Bolton has stated publicly that expenses can only be cut so much before costs would need to be spread among the remaining ratepayers.