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Vero Council asked to revisit 2 controversies


Mayor Jay Kramer and newly elected Councilman Harry Howle are asking the Vero Beach City Council to revisit a couple of controversial items of business from last year.

Kramer suggested that city staff and consultants take another look at the $64 million price Vero countered with after Florida Power & Light offered $13 million cash to purchase Vero’s electric customers in the Town of Indian River Shores.

Howle is aiming to halt creation of a stormwater utility before the city spends any more on studies and experts who have been hired to devise a proposal to put to voters later this year.

The $64 million price tag Vero put on its Shores electric customers caused major sticker shock in its neighbor to the north, as the city had previously accepted an FPL offer of $100 million cash plus nearly $80 million in other considerations for the entire electric system.

Even more grumbling emanated from the Shores when the rationale behind the $64 million was revealed. Vero’s consultants were basically asking the Shores to cover all of what would have been the town’s share of the city’s fixed costs for 30 years after the town’s customers were gone from the system.

In a memo asking for a discussion item to be placed on the Jan. 5 agenda, Kramer hedged by saying he was carrying forward a request from the Town. Kramer and Shores Mayor Brian Barefoot met briefly in December to open a dialogue about how Vero and the Shores might resolve their tangled legal battle.

“Indian River Shores would like to have clarification on the valuation of the electrical system that involves the Town of Indian River Shores,” Kramer wrote.  “I am requesting from Council having (outside utility attorney) Schef Wright work with Indian River Shores to explain in greater detail the valuation that was done by our consultants.”

Shores’ rate consultant Terry Deason found several flaws in the city’s basic calculations. The Shores has also presented various scenarios whereby Vero could use the cash to pay down debt, to dig out of its nearly $40 million employee pension hole, or to invest in interest-bearing securities to cover the $600,000 per year the Shores currently contributes to the direct transfer into the general fund.

Though it’s unlikely the consultants will go back on their valuation, the fact that Kramer even made the request after meeting with Barefoot can be seen as encouraging.

Sources close to the negotiations say city officials have floated slightly more reasonable numbers in the $30 million range, which would at least give the parties somewhere to start trying to find a deal that could be perceived as equitable by both sides.

A sale of the Shores’ customers to FPL could well end the pending litigation against Vero, including a count alleging breach of contract by the city for charging “unreasonable rates” and a request for remuneration to the Shores of the difference between Vero’s rates – which at the 2009 height were 58 percent higher than FPL – and what could be deemed reasonable.

The Shores’ legal team claims the unreasonable rates resulted from the city’s mismanagement of the utility, despite Vero signing a 30-year franchise agreement with the Shores agreeing to responsible management and reasonable rates.

Judge Cynthia Cox refused to deny the Shores a trial on this count when she dismissed other matters in the suit relating to Vero’s service territory – questions she advised the Shores to take to the Florida Public Service Commission instead.

Vero’s response to the amended Shores lawsuit is due on Monday, and interrogatories and subpoenas are expected to follow soon thereafter – potentially calling nearly a decade of Vero’s elected officials and current and former paid staffers to account, under oath, for the decisions made with regard to managing Vero electric.

Howle’s request to nix Vero’s ongoing efforts to establish a stormwater utility are likely to be much more controversial than Kramer’s request to at least talk to the Shores.

During his reign as mayor, Councilman Dick Winger was very disappointed that Vero could not raise enough tax dollars to fund all of the public works projects he wanted to minimize stormwater runoff into the Indian River Lagoon.

The idea of creating a stormwater utility is basically just another way to charge residents a tax without it showing up on the annual property tax bill.

The cost – which is unknown, but could be between $5 and $9 per month on city utility bills – would be allocated differently than property taxes, theoretically shifting the cost burden to everyone within the city limits who will use the proposed stormwater system. Churches and other tax-exempt nonprofits would likely have to pay as well. The School District would likely challenge the city if gets a bill for a stormwater tax assessed on school lands.

Currently, stormwater projects are planned and installed by the city’s engineers in the Public Works Department, and Vero has made substantial headway in obtaining grant funding and in protecting its stormwater outfalls.

Engineers have also calculated the city’s average daily nutrient load into the lagoon, in preparation for regulations trickling down from Tallahassee with regard to limits on how much nitrogen and phosphorus municipalities and their residents can discharge into the lagoon.

Howle, in his request to revisit the policy of last year’s Council, called the scheme an “unnecessary creation of a new bureaucracy under the title ‘Stormwater Utility’.”

In bullet points, Howle also raised concerns about it being an example of “regressive taxation” and that a “budget process and department already exists to oversee stormwater projects.”

“It will create yet another regressive tax, just like the electric utility is. The percent of the cost for a poor person will be much more. It will increase in cost; it will also increase in the regression of pushing out the poor in our community, which I think we’ve done enough of already,” Howle said Monday.

“You’re starting a bureaucratic branch in the city that will not go away. It’s like the Transportation Safety Administration. And you have to have jobs to keep that going,” he said.

Howle said he’s seen estimates floating around the city that a minimum of six to nine jobs would be created once the stormwater utility was in full swing. “We already have a means of managing this function. Leave it with public works; leave it in the budget process. Don’t create another bureaucracy,” Howle said.

Initially, the stormwater utility revenues were to be used only for the projects, while the equipment, vehicles and personnel needed to complete those projects would be paid for via the regular city budget. Then over the summer the initial figures requested for capital purchases – including vehicles and equipment – by the proposed stormwater utility came in at around $1.2 million for the first two years the stormwater utility would operate.

The Public Works Department, which had experienced significant staffing cuts since the 2008 recession, also added personnel this year.

Should the stormwater utility be afforded a budget of $600,000 per year, that would equate to a double-digit property tax increase.