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Shores, Vero declare impasse in federal lawsuit

STORY BY LISA ZAHNER (Week of January 27, 2022)
Photo: Mediator Howard Marsee of Maitland.

After nearly two hours of talks refereed by a mediator, attorneys for the Town of Indian River Shores and the City of Vero Beach have reached yet another stalemate in a federal lawsuit in which the Shores alleges that Vero’s claim to a permanent water-sewer utility territory violates antitrust law.

Several proposals were tossed out by the mediator and by Vero’s negotiating team, including two deals that would have extended the amount of time the Shores would be tied to Vero’s utility system. But as the Shores’ attorney Kevin Cox from the Holland and Knight law firm explained, none of the scenarios pitched did anything to address the town’s biggest immediate concern – the fact that it cannot pursue competitive options for an essential service.

One rejected proposal would have kept the Shores on Vero’s system until 2042, then provided for an amendment to the service territories. To that, Cox pointed out the insanity of that proposal from the town’s point of view.

“So if we would be willing to be subject to anticompetitive conduct for another 15 years and not complain about that anticompetitive conduct for another 15 years, then after that we would be freed from that anticompetitive conduct?” Cox asked rhetorically.

To that, Vero Beach City Attorney said, “We have a very good defense.” Vero has touted the strength of its case, including documents and testimony from the 1980s when the territory map was drafted by city and county officials.

Vero’s most pressing concern is knowing how many water-sewer customers will be on its system in four to five years when its planned, state-of-the-art wastewater treatment plant at the airport is completed and goes online, to replace the sewer plant on the river. Those customers would pay for the $60 million-plus cost of the new plant and other system upgrades.

Indian River Shores’ current water-sewer franchise with Vero expires in 2027, and town officials want to negotiate the best possible rates for town residents by letting providers compete for the town’s business.

Vero claims that a 1989 agreement between the city and Indian River County carved the county into permanent utility service territories with Indian River Shores being drawn into Vero’s territory. The town says that 1989 agreement should be declared invalid because it violates federal law protecting consumers from anticompetitive business practices.

Mediator Howard Marsee of Maitland – a last-minute substitute for retired Judge Paul Kanarek who had been scheduled to mediate the Jan. 20 session – warned the Shores that he doesn’t think there’s enough time to get a ruling from a federal court before the Shores would have to put Vero on notice in October 2023 that the town will not renew its existing water-sewer franchise agreement in 2027. Marsee said that in his experience, federal court cases take at least two years to resolve, plus time for an appeal.

Marsee asked the Shores’ negotiating team what the town would do if the clock runs out, October 2023 rolls around and they still don’t have a ruling from the federal court. There was no ready answer to that question.

It’s not even clear if Indian River County has the ability or desire to take the Town of Indian River Shores on as a utility customer. The Shores says the county has been constrained from negotiating in earnest about a proposal for serving the Shores due to threatened legal action from Vero.

Vero has taken issue with the county assisting the Shores with a water-sewer service feasibility study. That study, the results of which were due out last fall but are now expected by Feb. 1, should provide approximate costs of hooking the town up to the county’s potable water and sanitary sewer systems.

Indian River Shores Town Attorney Pete Sweeney said after the mediation session that Marsee will notify the federal court that no agreement was struck, then the parties will proceed with the next steps in the case.

Meanwhile, Vero is proceeding with a utility rate study to set new rates for customers inside and outside the city in October. Vero officials have said that all of its utility customers – including Indian River Shores – will be subject to a rate that reflects the city’s cost to provide service.

Through October 2027, the franchise agreement that Indian River Shores sign with Vero in 2012 ties town customers’ rates to Indian River County rates. The new rate structure is expected to re-ignite another pending lawsuit in state court in which the town has sued Vero for breach of contract over rates.