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‘Optimization’ plan to keep Vero utility afloat springs major leak

STORY BY LISA ZAHNER, (Week of January 12, 2012)

A consultant’s plan for “optimizing” the Vero Beach water-sewer utility to keep it afloat with competitive rates has already sprung a major leak.

The first of many efficiency recommendations in last year’s 350-page, $85,000 GAI Consultants’ study – a “readiness-to-serve charge” designed to raise $250,000 – not only failed to prove politically feasible,  but also drew the ire of owners of nearly 1,000 vacant lots who faced paying more than $300 per year, per lot, in new water and sewer fees.

“Readiness to serve charges are developed in a defensible, easily understood, just and equitable manner, and follow in consideration of the utility’s goal of adding revenue sources based on services provided,” the GAI Water-Sewer Optimization report states on page 26 of the section containing schedules and budgets.

 In reality, not so defensible, not so easily understood, not so just and not so equitable.

Voted down by the City Council after a string of property owners and a beachside attorney, Eugene O’Neill on behalf of Palm Island Plantation, protested the new charge, O’Neill said the charge might not even be legal. Yet GAI Consultants boasts 30-plus years of experience in the utility business in Florida and presented their recommendations as “expert” advice, the best advice the city could buy.

Without the readiness to serve charge in its back pocket, the water-sewer utility now has a $250,000 hole in its $17 million 2011-2012 budget. On top of that, the city has proposed giving the Town of Indian River Shores county rates and eliminating a 10 percent surcharge to entice it to stay with the Vero system. Cutting that surcharge would eliminate another $300,000 in revenues per year.

The assessment of those county rates – regardless of the trajectory of city rates – would further reduce money coming in, perhaps by a half-million dollars or more, assuming that the average Shores customer would save roughly 20 percent by switching to county rates.

The newest carrot the city is dangling in front of the Shores is an offer to set a price for reuse water which is no more than 30 cents higher per unit than Indian River County. Reuse water accounts for $1.2 million in revenue in the 2011-2012 budget. It’s unclear how much of that would go away annually to subsidize this effort to get close to County reuse rates.

Can the Vero utility take a hit of more than $1 million per year from its planned revenue, beginning in October, without raising rates for inside city customers, who are stuck on the system permanently, and also for mainland county and South Beach customers, who cannot exit until March 2017?

City officials say yes, at this point. But it will require going back to the drawing board again – speeding up some of the other “optimizations” in the plan. Councilman Jay Kramer has called the water-sewer utility fiscally sound and Councilman Dick Winger has gone so far as to brand the Vero system a “cash cow.”

The water-sewer system is projected to be left with only $847,000 in cash to re-invest in the system this year, after it makes payments on its debt and transfers $1.8 million to the general fund in direct and administrative payments.

Only time will tell whether the utility will have met those projections by the time Sept. 30 rolls around. What does seem clear is that the City of Vero Beach will not be able to afford – now or later – the tens of millions of dollars it would take to build a new sewer plant at the airport and to dismantle the eyesore on the river.

Another strategy in the optimization plan is to drastically reduce the water-sewer department staff from the current 71 employees to around 40 over a decade or so. One way this will be accomplished is to have personnel who work at the plant that produces the drinking water do double duty – in the same day, on the same shift – at the plant that processes the sewage.

Despite what will most certainly be assurances from top staffers that this does not pose a public health hazard, the ratepayers and the City Council might not find that idea so palatable when it comes time to implement it.

As more of GAI’s “expert” recommendations for optimizing the Vero water-sewer system in “defensible, easily understood, equitable and just” ways are vetted, the Vero Beach City Council – and the Town of Indian River Shores – may come to the realization that the only way to ensure stable rates for generations to come is to join forces with Indian River County.