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Shores takes utility dispute with Vero to federal court

STORY BY LISA ZAHNER | NEWS ANALYSIS (Week of September 2, 2021)

Indian River Shores has asked a federal court to strike down the City of Vero Beach’s claim to a permanent water-sewer service territory as null and void, to settle a dispute over whether or not the Shores must remain on Vero’s utility system after its water-sewer franchise agreement with Vero expires in 2027.

Hand in hand with that petition, the town’s attorneys have also asked the court to prevent the City of Vero Beach from taking actions that violate federal antitrust law.

Attorney Bruce May of the Tallahassee-based Holland and Knight law firm last week filed a lawsuit on behalf of the town in the Fort Pierce division of Florida’s Southern District federal court, triggering a conflict resolution process that gives the Shores and Vero a chance to settle their differences and avoid a protracted trial.

Florida Statute mandates this out-of-court process to save taxpayer funds whenever two government bodies or agencies have a legal dispute.

Vero’s claim to a permanent water-sewer service territory hinges on a 1989 agreement by which Indian River County and Vero split up the county into areas they had the capacity and willingness to serve at the time.

In the 1980s, the county’s fledgling water-sewer utility had no way to serve the South barrier island or the town of Indian River Shores.

But since those areas were adjacent to Vero’s city limits and Vero could serve them, they both went into Vero’s territory.  Vero says the old lines are immovable, despite the expansion of the county’s utility system and growth in capacity over the past 30 years. Indian River Shores sees this as a monopolistic power grab, and argues the town should be able to leave when no longer under contract to stay.

The Shores is seeking “declaratory and injunctive relief,” meaning that the town wants the court to declare the 1989 Market Allocation Agreement between Vero and Indian River County unlawful because it perpetuates a monopoly.

“City defendants should be permanently enjoined from monopolistic and anticompetitive acts against the town in violation of antitrust law,” May wrote on the Shores’ behalf.

The Shores petitioned the court to bar Vero from asserting claims of a permanent service territory and from “engaging in any other noncompetitive conduct that would prevent the town and its residents from obtaining essential water services from the county or otherwise.”

The town was not a party to the 1989 agreement, but Vero says the town benefited from having water and sewer service in place to promote development. Vero has invested for 30-plus years in infrastructure built to serve the Shores, but Shores customers helped pay for all that infrastructure via their utility bills.

Vero needs certainty as to the size of its customer base so the city’s utility can plan capacity for the next 30 years. Shores officials say Vero has not dealt honestly with them in the past – the topic of a separate breach of contract lawsuit pending in state circuit court. The Shores wants the option to break from Vero when the town’s contract is up in 2027 to form a better union with another provider. No one can move forward without an answer on the service territory.

Vero is being represented by the Gray Robinson law firm’s attorneys Thomas Cloud and Gary Carman plus City Attorney John Turner, who said on Monday, “We will vigorously defend and will prevail on all issues.”

The town has been studying its options for water-sewer service once its franchise agreement with Vero expires in 2027, since the Shores has long said nothing bars it from contracting for services with Indian River County or even a private utility provider after a 15-year franchise agreement with Vero signed in 2012 expires. The town must give Vero notice of its intentions by October 2023.

Shores Mayor Brian Foley said on Monday, “The Town of Indian River Shores was forced to file this action to protect the rights of its citizens and taxpayers to have a voice in who provides critical water and sewer services to the Town.

“Without this lawsuit, the Shores would in effect be conceding that the City of Vero Beach has the sole authority to say from who, how, when, where, and at what cost the Shores’ citizens will obtain its drinking water, irrigation water, and sewer services in perpetuity. This was not something the Council could accept,” Foley said.  “We look forward to an impartial judicial determination as to the legality of the COVB’s anticompetitive actions.”

Indian River County has been providing information to the Shores about water-sewer capacity and the county’s ability to serve the Shores, from a technical and financial perspective. Vero took offense at the county participating in the Shores’ study of its options, landing county officials in a separate set of dispute resolution meetings with Vero in June and July.

Those talks fell apart after City Manager Monte Falls stated publicly that the city will increase utility rates in 2022 under a new “one rate” plan to pay for a proposed $70 million sewer plant and other system improvements.

The next step is a joint meeting of the Vero Beach City Council and the Indian River Board of County Commissioners on Sept. 8 at the Indian River Charter High School as a neutral venue. Indian River Shores is not a party to that dispute, though Vero’s claims extend to Indian River Shores as part of the permanent service territory as well as to the residents of the unincorporated South barrier island from the southern part of Castaway Cove to the St. Lucie County line.