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Shores near key vote on water contract

STORY BY LISA ZAHNER, (Week of January 19, 2012)

After nearly three years of discussing options, the Indian River Shores Town Council will meet at 9 a.m. Monday to compare – and perhaps decide between – two concrete proposals for water and sewer service.

Both the City of Vero Beach and Indian River County have had many months to submit and re-submit their best offers to lure the Shores as a customer for the next 30 years.

The Indian River Shores council decision is important because its decision will determine whether the City of Vero Beach should plan to operate a water-sewer system that includes the Shores, or a system just for city residents that would bring in 25 percent less revenue.

In effect, the Shores decision very well could determine whether the city is left with no realistic choice but to take a good, hard look at regionalization.

As it stands now, the issue actually represents a failure of the entities to come together in a cooperative way to form a countywide utility system.

Shores officials hoped consolidation would happen on its own, but it did not materialize. The process broke down. Vero and county staffers went back to their respective corners.

County officials then made an offer to take over the Vero system, including the $24 million in debt, in exchange for the pipes, pumps, plants and customers. The county promised low county rates and access to affordable reuse water. It promised the sewer plant on the river would be gone in about three years. About one-third of the Vero utility employees, mostly rank-and-file workers, would get jobs at the county.

What sounded to many like a once-in-a-lifetime opportunity fell on deaf ears at Vero Beach City Hall.

Critics, led by then-Mayor Jay Kramer, former utility Commission Chairman Herb Whittall and then-Finance Commission member Dick Winger, described the pitch as an attempt to "steal" the system out from under the residents of the City of Vero Beach.

Instead, Vero Beach paid GAI Consultants about $175,000 to appraise the Vero system and come up with 350 pages of recommendations on how Vero could keep its stand-alone utility without going broke – a plan that would keep the sewer plant on the river for a dozen or more years. GAI came back with a laughably high value for the Vero system of more than $100 million, galvanizing those opposed to consolidating with Indian River County.

The November election ousted Councilman Brian Heady, who could have helped move a joint effort with the county along, and replaced him with Castaway Cove resident Winger. Winger says he wants the plant off the river, but he also says he has immense faith in GAI Consultants, in the opinions of GAI's leader Gerry Hartman, in Hartman's appraisal of the system and in the recommendations put forth in the "optimization study."

Winger has stated publicly that any buyout of Vero's water-sewer system by the County would have to be rich enough to pad the city’s general fund for close to two decades, so Vero doesn't have to trim the size of government. That figure, which Winger calls the "break-even" sale price, would be somewhere in the neighborhood of $75 million.

Winger does not take into consideration the main benefit of consolidation -- stable rates for all the county's residents and businesses. In order to pay $75 million for the Vero system, Indian River County would have to jack up current Vero customers' rates with a surcharge of 30 to 40 percent.

Utility activist and CPA Glenn Heran, a proponent of consolidation of utility systems, has called Winger and GAI's break-even theory ridiculous.

“What Mr. Winger is trying to do is to give government a big check, which shows his motivation to preserve the institution of government at the expense of the ratepayers," Heran said.

"The opponents of regionalization continually fail to recognize that ratepayers and taxpayers are the government," Heran said. "They don't recognize that the fair market value of a utility is driven by what the purchasing utility charges, not by the higher rates imposed by Vero."

Vero's new City Manager Jim O'Connor has said repeatedly he wants to form a utility authority. Just last week, he reminded Vero's Utility Commission that he thinks a countywide utility authority is still the solution.

There are two big problems with a utility authority, not least of which is that the county views it as a non-starter.

County Utilities Director Erik Olson has said the county is not interested in joining a utility authority with Vero because county ratepayers have nothing to gain by it.

Olson has claimed the idea lingers because it's the only way that Vero's water-sewer administration staffers, namely water-sewer director Rob Bolton, might end up with jobs in the new utility authority.

Olson has said he would keep 30 to 40 of the lower-level Vero utility workers to service lines and customers, but that he's got the administration and engineering positions covered with his own people. In a utility authority, each system – Vero and the county – would bring staffers in across the board, from management to plant worker to meter reader.

The second reason why a utility authority is not a great solution is it does not ensure that everyone in the county will pay the same rates and fees. In a utility authority, all the members contribute assets and have decision-making power and votes on the utility board.

Utility bills could still be different, depending upon whether the customer lived in Vero, the Shores or the unincorporated county. Plus, Vero and county officials on the utility authority board would need to reconcile vast differences in management styles and philosophies with the county folks.

On Monday, the Shores could begin to put an end to the issue.

By signing on with Indian River County for the next 30 years, the Indian River Shores Town Council would force Vero Beach to take another look at consolidation. When the Shores exits the Vero system, it will take about $4.5 million per year, inclusive of reuse water sales, out of Vero's pockets, reducing revenues by roughly 25 percent.

That option will cost the Shores, which would pay higher city rates and a 10-percent surcharge until 2016 – almost $1 million a year – while it waits to join the county.  But politically, it could be well worth it the decision gets Vero and the county to the table to consolidate the systems.

Shores Councilman Dick Haverland said he's looking for the best overall deal. He said the issue of whether he and his neighbors can vote for the officials who govern the utility means less to him than having what he describes as a "watertight" contract.

"Price is an issue. I personally am inclined to believe -- based on history, financial stability, management -- that the price from the county will not deviate significantly from what they quote," Haverland said. "Because Vero has issues regarding history and current financial conditions, I would look for absolute long-term price guarantees."

The different approaches to the ultimate ownership of the assets, Haverland said, could be a deciding factor for him.