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Proposed settlement would mean higher water and sewer rates for South Beach

STORY BY LISA ZAHNER (Week of July 1, 2021)

Vero Beach Utilities customers in the unincorporated South barrier island would pay higher water-sewer rates under a proposed settlement between the city and the county – but those rates wouldn’t hit until 2027.

The proposed settlement is intended to resolve a dispute over Vero’s claim to a permanent water-sewer service territory in South Beach where other utility providers such as the county cannot operate.

The origins of the conflict date back four decades to a time when Indian River County contracted with Vero to provide water and sewer service to the South barrier island and other portions of the unincorporated county that it did not then have the means to serve.

For 30 years the unincorporated customers paid city rates plus a surcharge. Then, in response to complaints about high rates, they were shifted to the cheaper county rate schedule.

The county’s franchise agreement with Vero to provide water and sewer service to the area expired in 2017,  and Vero has been charging those customers county rates for service for the past four years.

Like the south island, Indian River Shores gets water-sewer service from the city under a separate 2012 franchise agreement which is up for renewal in 2027.

That agreement is the subject on a pending breach-of-contract lawsuit over reuse water rates and county officials want to extricate themselves from the fractured relationship between Indian River Shores and Vero because they say it’s not their battle.

After Vero officials formally objected to the county helping Indian River Shores complete a feasibility study to determine whether the Shores could leave the Vero utility system in 2027, a dispute resolution meeting was held on June 24.

At that meeting, County Administrator Jason Brown and County Attorney Dylan Reingold told Vero officials the county would not challenge the city’s utility territory if Vero agreed to several conditions.

The county proposed that a new franchise agreement would be executed for the unincorporated Indian River County residents on the Vero water-sewer system, including South Beach residents.

The county’s terms would be that the unincorporated residents remain on county rates with no city surcharge until 2027, then be converted to city rates. Additional rate increases could be capped at 5 percent per year for five years after that. Then, in 2032, the unincorporated county ratepayers on the Vero system would have to pay whatever the going city rates are at that time.

Vero rates are expected to increase over the next few years to pay for a new wastewater treatment plant – which is expected to cost upwards of $50 million.

But South Beach residents would be protected from major rate impacts for 10 years under the terms of the proposed agreement. In the short term, their rates would go up to some degree due to planned county rate increases, which county officials said would be implemented soon due to increased costs.

Vero Utility Director Rob Bolton said the proposed plan could make it tougher for the city to bond out the cost of moving the sewer plant off the river.

Despite Bolton’s concerns, Vero City Attorney John Turner and City Manager Monte Falls seemed encouraged about the deal.

If codified into a formal agreement, the county’s plan would leave Indian River Shores on its own to challenge Vero’s claim to a permanent service territory that includes the town.

Should the Shores decide to test the strength of its arguments and file suit, Reingold said the county would not actively defend it or hire outside counsel to get involved in the suit. “We would remain neutral,” he said.

Shores Town Manager Jim Harpring said on Monday, “Before the City and County settlement discussions took place, the town began to consider possible alternatives [for utility service]. We are currently evaluating a number of public-private partnership opportunities with private entities. And, based on the framework of the deal between the city and county, serious anti-trust concerns are present which can lead to investigations and litigation by the state as well as the Department of Justice and other federal regulators.”

The meeting between the county and the city was recessed until July 22 so the tentative plan could be developed into a formal settlement agreement.

“[The proposed settlement] looks like something that the parties can agree to,” Vero City Attorney John Turner said, but noted that whatever agreement the staff came up with would need to be vetted and approved by both the Vero Beach City Council and the County Commission.