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Will high exit costs chain Shores to Vero water-sewer pact?

STORY BY LISA ZAHNER (Week of June 10, 2021)

The City of Vero Beach’s claim to a permanent water-sewer service territory that includes the Town of Indian River Shores is still in dispute, but it might not matter if the price tag for the Shores to exit Vero’s system becomes a poison pill.

Vero officials last month talked about appraising the city’s utility assets in the town should the Shores try to break with Vero in 2027, determining an amount the Shores would have to pay for water infrastructure owned by Vero.

That exit cost would be on top of two other costs – the cost of the county running pipes under the Indian River Lagoon and the cost of increasing county utility plant capacity to serve the Shores. The Shores has hired a consultant to calculate those expenses, but they have not yet been determined.

“The third cost to find an amicable solution would be the cost to purchase the Indian River Shores portion of the Vero water and sewer utility,” Vero City Manager Monty Falls said.

If Vero can make it cost prohibitive for the Shores to leave Vero utilities by attaching a high price tag to its infrastructure in the town, then the matter of whether or not Vero indeed has a permanent service territory will likely become moot.

Sometime soon, Vero, the county and the Shores are expected to sit down to discuss these issues and Falls said “a full-blown appraisal” would give Vero the best negotiating position.

“This would include all the assets that would be the city’s assets that we would be giving up,” Falls said. 

Councilman Dick Winger said the city would also need to be compensated for lost utility rate revenue.

“So, you’re talking about a big number, a very big number,” Winger said.

Vero City Attorney John Turner, who will be part of the negotiations, said he doesn’t think the city needs a full-blown appraisal, but he and Falls do need a range of the exit costs, to see if the town is interested in proceeding with the separation.

Winger asked how much the consultant would charge for an appraisal. He doubts the Shores will be able to exit the city’s utility service and thinks paying a consultant could be a big waste of money.

“This is never going to happen,” Winger said. “You’re talking about a big number that the city would have to be paid, and you add that to what the county would have to pay.  I can’t imagine the county asking the existing customers to up the rates substantially for existing customers to help Indian River Shores. And I can’t imagine Indian River Shores being able to finance it.”

Mayor Robbie Brackett said he is against paying for an appraisal of Vero’s Indian River Shores utility assets because “by giving them a price, we’re actually indicating that we’re willing to do this.”

Vice Mayor Ray Neville said the first step, before doing an appraisal, is to have the court determine whether “permanent” means permanent in regard to the city’s utility service area. Turner said that does need to be resolved sooner than later because Vero is planning a new sewer plant with capacity to serve all of its customers, including Indian River Shores.

Winger gave the city a 95 percent chance of the court upholding its permanent service territory. He said staff needs to work with the county and find a resolution to the dispute over who will provide the Shores with water and sewer service. Councilman Bob McCabe concurred and said he wants a good relationship with the county.

Whatever the potential price tag to buy the town’s exit from Vero’s service turns out to be – if the city goes ahead with an appraisal and the town does decide to switch to county utility service – it would be far less than it was a decade ago, as Indian River Shores made some important changes to its contract with Vero when the town signed a new franchise agreement in 2012.

The previous franchise agreement dating back to the 1980s stated that all utility assets would revert back to the City of Vero Beach at the expiration of the franchise agreement, but the newer contract that expires in 2027 gives most of the utility assets to the Shores at the end of the contract term, with the city’s assets listed in detail.

The contract on Page 2, Section 3 states, “At the end of the franchise agreement, including any extension thereof, all water and wastewater facilities in Indian River Shores, unless specifically excluded, shall be the property of Indian River Shores.”

Excluded are the water storage tanks, the north river crossing and the transmission mains associated with it, the 18-inch water main along Highway A1A south of Fred Tuerk Drive, and any reuse water pipes installed at Vero’s cost.