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Unearthed decade-old letter could be key in fight over water rates between Vero and Shores

STORY BY LISA ZAHNER (Week of February 18, 2021)

The outcome of the Town of Indian River Shores breach of contract lawsuit against the City of Vero Beach Utilities could hinge on an October 2011 letter clarifying Vero’s position on rates for reuse irrigation water rates.

A statement released to Vero Beach 32963 last week pursuant to a public records request lays out the reasons why Shores officials feel confident they will prove in court that Vero has not honored the terms of a 2012 franchise agreement for water, sewer and reuse irrigation water service.

In 2012, Indian River County and Vero Beach were competing for the town’s lucrative utility customer base, with Indian River County offering what the town saw as better rates, but Vero having the advantage of being the town’s provider since the 1980s.

Building out the infrastructure to switch to county service would have taken several years and the cost of taking over the existing equipment could have been expensive.

Then-city manager Jim O’Connor proposed a plan that gave the Shores an easy way out of the dilemma – Vero promised to match Indian River County’s rates if the Shores re-upped its franchise agreement with Vero for another 15 years.

One huge benefit was drastic, immediate relief from high irrigation water rates for Shores customers. The fact that city rates were more than three times county rates for the treated wastewater used to irrigate lawns and golf courses had been a major issue for town officials. The rate-match agreement saved residents, homeowners’ associations and club communities in the Shores about $1 million per year.

The current dispute began when the county reduced its reuse irrigation rates drastically in March 2019 and Vero did not reduce the Shores rates to match the new county rate. The Shores cried foul and after 18 months of informal talks, the town sued Vero for breach of contract.

In the course of negotiating the 2012 franchise deal, town officials sent questions to the city about what would happen under various scenarios, including questions about reuse irrigation rates. The response to these questions in a letter from O’Connor to then-Shores town manager Richard Jefferson is being interpreted by the Shores to favor its case.

O’Connor wrote to Jefferson, “The city will match Indian River County’s water and sewer rates. The rate for reclaimed water for non-pressurized customers will also match the county’s rate structure. Since the county does not have a pressurized reclaimed water system, or a rate for this customer class, the city rate for pressurized service will apply.

“If the county should adopt a rate for this customer class based upon a rate study conducted in accordance with American Water Works Association procedures then the city will honor the county adopted rate,” O’Connor wrote.

According to Shores officials, “This October 21, 2011 letter confirms that COVB understood and agreed with the Shores’ position in this dispute. The bottom line is that COVB agreed there was no distinction in rates charged for pressurized versus non-pressurized reuse water.”

Vero City Attorney John Turner, when asked Monday to respond to the content of the O’Connor letter, said, “I cannot comment on the matter while the litigation is pending.”

Vero’s attorneys argue that Vero was not required by the contract to lower irrigation water rates in March 2019 after the county cut its rate from 67 cents per 1,000 gallons to 21 cents per 1,000 gallons because the county’s 21-cent rate does not cover Vero’s cost of providing pressurized irrigation water to the Shores.

Court records show that Vero also argues the Town of Indian River Shores lacks the standing to sue, but town officials dismiss this. Not only is the town a party to the franchise agreement, but the town is also a direct reuse irrigation water customer. The city supplies irrigation water to both the town hall complex and the cemetery located within John’s Island, and the town pays for that reuse irrigation water.

The Shores states, “COVB’s public statements by its agents and in its court filings are disingenuous and misleading to the point where correction is necessary for the public to know the real facts underlying the dispute,” and goes on to say, “As the discussions, mediations and now COVB’s formal reply to the lawsuit unfolded, the Shores has become increasingly concerned that COVB utilities staff is presenting patently untrue and misleading facts in an effort to essentially tear up the Franchise Agreement and ignore the contractual promises made to the Shores.”

Vero attorney Paul Berg of the Vocelle and Berg law firm is representing the town, along with lawyers with specific utility experience from Holland and Knight, the law firm that worked on the Shores’ efforts to push for the Vero electric sale.

Thomas Cloud, the head of Gray Robinson’s utilities law division, is representing the city, along with Turner. Should the town and the city not be able to settle the case before trial, the dispute is set to be heard by Circuit Court Judge Janet Croom. No hearing dates were set as of press time.