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Vero water bid to Shores only matches County

STORY BY LISA ZAHNER, (Week of August 25, 2011)

After contending for more than a year that it could offer Indian River Shores residents a better deal for water and sewer service than Indian River County, the City of Vero Beach has now decided it can only match county prices -- and even that may come at the expense of city residents. 

The Vero Beach City Council voted 4-1 last week to authorize City Manager Jim O’Connor to present Shores Mayor Tom Cadden and Town Manager Richard Jefferson two options for a 30-year water-sewer franchise agreement to take effect Oct. 1, 2012.

The first option would be to offer Shores residents the same rates as are offered in Vero Beach rates, removing the 10 per cent surcharge they currently pay.

That option would save Shores residents $300,000 per year but would be subject to potential future rate increases imposed by city staff and elected officials.

The second option would give the Shores Indian River County rates, which are not expected to rise for at least the next five, maybe 10 years. That deal would save Shores residents $370,000 per year.

Both proposals envisage transferring water and sewer system assets owned by the town to Vero.

“Under the city rates, everyone would experience lower bills,” said O’Connor. “Under the county rates, some would see an increase and some would see a substantial decrease.”

Condominium residents in the Shores would benefit the most from the switchover to county rates, as would customers who use small to moderate amounts of water.

Very large consumers who use upwards of 15,000 gallons per month of potable water could see a slight cost increase if they continue to consume at that level. The average consumption on the barrier island is about 6,000 gallons per month, per household.

Reuse water agreements for communities like John’s Island would be worked out separately with the management and association boards of those communities, but generally the Shores would still have access to Vero’s supply of reuse water.

O’Connor said he felt the offer was fair, and said giving Shores residents a break would not cause existing city ratepayers to pay more.

“It should have no effect on the city rate structure for the next three years,” O'Connor said.

When asked by Councilwoman Tracy Carroll if Vero Beach would incur substantial capital costs by acquiring and maintaining the Shores system, O’Connor said no.

The system was sound, O’Connor said, and he went on to say that did not anticipate any immediate capital needs.

Councilman Brian Heady voted against the proposals because they reduce city revenue at a critical juncture when the city is contemplating having to raise taxes. Mainland city and Central Beach customers could view the move as subsidizing affluent Shores residents’ utility bills.

Vice Mayor Pilar Turner pointed out the cost of not giving the Shores a deal which entices the town to remain on the Vero system. 

“The alternative is that Indian River Shores goes directly to the county and we lose $3 million in income,” she said. “You either lose $300,000 or you lose $3 million, so that’s the tradeoff.”

Water and sewer bills from the Shores funnel roughly $3 million per year into city coffers, a portion of which supports City Hall operations and general city services like parks and police.

The idea basically steals the county’s thunder as it matches the offer presented by County Utility Director Erik Olson this summer. He said the city proposal is interesting and added that it would complicate the city’s billing structure.

“What I foresee happening would be the city having three different rate structures within their system,” Olson said.

“The inside the city customers would be on regular city rates, the Shores customers would be on county rates and then the South Beach and other county customers would still be on city rates plus the surcharge.”

Olson said he met with County Administrator Joe Baird about Vero’s proposals, but said he had not met with individual commissioners to discuss the new development or how the county might respond.

Turner pointed out that both proposed contracts with the Shores are fully assignable, so if Vero does succeed in working out some kind of regional utility solution with Indian River County, it could turn over the right to serve the Shores in such a deal.

“It would give us a little more strength in negotiating with the county in regard to a regional situation,” she said.

Earlier this month at a luncheon of the Indian River County Taxpayers Association, O’Connor, in response to questions from the public, suggested a utility authority be formed instead of Vero being taken over by Indian River County.

Mayor Jay Kramer has also supported this idea and has even suggested a private company could operate the utility more efficiently than government.

County officials, including Olson, Baird and Commissioner Bob Solari, have stated numerous times they see no advantage or efficiencies to be gained by county customers in joining a utility authority with the city.

The formation of a utility authority would require all parties to pool resources into a new and separate entity.

Vero would retain proportional power in the authority and could keep transferring money into its general fund. The county and Vero would both contribute employees to the authority.

Indian River County has proposed to take over the Vero utility for the cost of paying off the debt, which is about $24 million.

The county has said it would be able to use about one third of the city’s 80 water-sewer utility technical and maintenance employees, but that the county would not have jobs for higher-paid management personnel as it already has people in those positions.

“A merger means that some of the rank-and-file employees keep their jobs, but a utility authority lays off more of the rank-and-file employees but means that some of the management keep their jobs,” Olson said about possible staff motivation for the utility authority concept.

“From our perspective, a utility authority is just unnecessary, added layer of government,” Olson said.

Unless there is a major policy shift on Vero’s end – or unless the Shores opts for getting Indian River County rates directly from the county and not from Vero – it appears that any attempt to form a regional utility is dead in the water.

The Indian River Shores Town Council is scheduled to meet next at 5:01 p.m. on Sept. 9 in council chambers at town hall to consider the budget, with a regular town council meeting to follow. 

Mayor Cadden also has the power to call a special meeting to consider the proposals should he deem necessary.

Meeting information is listed on the town website at on the town meetings tab.