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Vero’s consultants rebuff county queries on water-sewer purchase

STORY BY LISA ZAHNER, (Week of June 30, 2011)

The Vero Beach City Council voted last week to pay GAI Consultants $35,000 to cultivate buyers for some electric utility assets, but it appears the firm’s top consultant did not go out of his way to help the only known prospective buyer for the city’s water-sewer system.

For nearly a year, Indian River County staffers say they’ve been trying to get their heads around what they see as a sky-high appraisal of Vero Beach water-sewer utility assets in the Town of Indian River Shores and on the South Barrier Island.

Numbers as high as $24 million have been floated, but later depreciated down to $18 million in five years – figures the county feels are expensive for an aging utility system, nearly 50 years old in some places.

Interim City Manager Monte Falls and Water and Sewer Director Rob Bolton said the reason why the Vero Beach City Council and the Shores Town Council both hired GAI Consultants for the valuation of assets was so there would be “no dispute” over the way it was appraised.

Indian River County Utilities appears prepared to fork over that estimated $18 million to Vero Beach even though its staff disputes the appraisal.

But as part of the county’s due diligence on a potential acquisition of these utility assets, County Attorney Alan Polackwich asked GAI Consultants to provide the county with the last three appraisals it did so he and the utility staff could compare how certain components – water and sewer mains, lift stations, etc. – were valued.

Polackwich’s request appeared simple, but it set off an 11-day e-mail exchange with GAI Vice President Gerry Hartman. The following is a word-for-word transcript (in italics) of those e-mails obtained pursuant to a public records request.

Thursday, June 09, 2011 7:54 AM
Mr. Hartman, I understand that you will be providing a valuation of the COVB water/sewer system in connection with the possible consolidation of the city/county systems.  To help us understand your valuation (when it is complete), could you please provide us with copies of the last three written valuation reports that you have done on behalf of the buyer in government to government water/sewer system acquisitions?  If there is a confidentiality concern, please limit the request to reports provided to governments which are subject to the Florida Public Records Act, or equivalent public records laws in other states.
Thank you.
Alan P

Friday, June 10, 2011 3:10 PM
I would be happy to provide a copy of the Vero Beach water, wastewater, and reuse systems valuation for you as a response to the public record when it is complete.
My best---gerry

Monday, June 13, 2011 7:34 AM
Gerry, I wasn’t requesting copies of the Vero Beach valuation … I can get that here when it is provided to the city.  I was requesting copies of the last three valuations you did on behalf of the buyer in government to government water/sewer acquisitions.  Will you provide copies of those?
Alan P

Monday, June 20, 2011 9:32 AM
Gerry, I have not heard anything further.  I can only assume that you are refusing to provide copies of the last three valuations that you did on behalf of the buyer in government to government water/sewer acquisitions.  If my assumption is incorrect, please let me know when the copies will be provided.  Otherwise, I will consider myself free to advise the commission, councils, etc, that I requested and you refused to produce the copies.
Alan P

Monday, June 20, 2011 10:05 AM
Thank you for your email.  Under (1) USPAP  which governs as you know as well as, (2) our contracts, and (3) our company policy---you can get this information from our clients.  We cannot provide as you well know.   So we will not breach our ethics or agreements or policy when you have an acceptable alternative to get the information which you desire.   Thank you  gerry

Monday, June 20, 2011 10:43 AM
Gerry, I thought that I covered this in my original email by requesting only valuations which were provided to local governments which are subject to the Public Records Act … thus avoiding the confidentiality issue.  If you still believe that you cannot give me copies of the public record valuations, then I request the identity of the local governments for which you provided the valuations.  Obviously, getting the valuations from the governments is an “acceptable alternative” only if I know the identity of the governments so I can make the request.
Again, I am only interested in valuations which you performed on behalf of the buyers in government to government water/sewer acquisitions
Thank you.
Alan P

Monday, June 20, 2011 11:50 AM
From Gerald Hartman to Alan Polackwich, copied to Wayne Coment

1.Town of Franklinton and Franklin County---water, collection only sewer, and no reuse.   Appraisal

2. City of North Miami Beach---wells, water treatment plant, storage and repumping.  Appraisal

3. Gulf Coast Electric Cooperative and Bay County---water, wastewater and effluent disposal.  Investment as basis of deal with associated analysis and valuation.

4. Village of Royal Palm Beach and Palm Beach County---water, and wastewater.  Opinion of Value

Alan--- the above four answer your question---please obtain from public entities.  Page U-9 of USPAP lines 272 through 279 show the appraiser requirements in this matter for your reference.  Thank you for your consideration---gerry

At Hartman’s rate of $220 per hour plus Polackwich’s salary, the e-mail exchange over 11 days to get the names of four municipal utilities most likely cost taxpayers several thousand dollars.

Councilwoman Tracy Carroll and Vice Mayor Pilar Turner tried to fire GAI Consultants from the water-sewer project June 21 but couldn’t get a third vote. Despite his complaints about GAI, Councilman Brian Heady cast the vote which kept GAI on the job.

When shown the correspondence Friday, Carroll said she would speak with Hartman and find out why the names of the four utilities were so difficult to provide to Polackwich. 

“What concerns me even more is the fact that he included Royal Palm in the list of the most recent valuations,” Carroll said. “The Royal Palm deal went through in 2006 and they’re supposed to be such a big company. I guess that means they’ve only done four valuations in the past five years or so. That seems contrary to what I’ve been told.”

The City of Vero Beach is under contract with GAI Consultants for $273,000 worth of work related to the sale of the electric utility to Florida Power and Light and $258,000 in consulting and appraisal work on the city’s water-sewer utility.

Those contracts do not include charges for actually negotiating mergers or acquisitions and handling the closings if and when those assets are sold. That would cost extra.