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Shores to appeal court’s ruling for Vero on reuse water rates

STORY BY LISA ZAHNER (Week of May 26, 2022)

Circuit Court Judge Janet Croom has ruled in favor of Vero Beach in a three-year-old utility dispute with Indian River Shores over reuse irrigation water rates, saying portions of the town’s water-sewer franchise agreement regarding rates may be unenforceable.

The Shores sued Vero for breach of contract after Vero did not match Indian River County Utilities’ rates for reuse irrigation water after the county reduced its own rates substantially in 2019.

The Shores’ 2012 water-sewer franchise agreement with Vero required that Vero match published county rates – a deal struck to undercut an Indian River County Utilities’ pitch for the Shores water-sewer business.

Shores ratepayers expected to see reuse irrigation water rates go down from 67 cents per 1,000 gallons to match the county’s new rate of 21 cents per 1,000 gallons on March 1, 2019. When that did not happen, the parties entered into informal talks, followed by a lengthy, state-mandated dispute resolution process which failed, landing them in civil court.

Vero’s legal team argued, successfully, that the city-owned utility could not deliver pressurized reuse irrigation water to the Shores for only 21 cents per 1,000 gallons, and that charging the Shores a rate which did not cover its operating costs would force the city’s other customers to subsidize the Shores. Vero claimed that type of rate inequity would be illegal under Florida law, and the court agreed.

“Allowing the Town to demand a rate not based on the legislative process of the City would violate public policy and would be unenforceable,” Croom wrote in granting summary judgment.

The ruling in effect seems to strike down the section of the Shores’ franchise agreement requiring Vero to match the Indian River County Utilities’ published rates – if charging those rates pushes costs onto other utility customers.

“The city maintains broad legislative authority to set its utility service rates pursuant to Florida law, such rates are presumptively reasonable, and the Court may not enforce the Agreement in a way which would cause discrimination among other consumers of Utility services,” Croom said.

Town Manager Jim Harpring on Friday said the Shores will fight on.

“The town plans to take an immediate appeal from the Circuit Court’s ruling. The town believes the court’s ruling is clearly erroneous on both the facts and the law,” Harpring said.

Still pending is a lawsuit in federal court filed by the Shores, alleging that Vero’s claim of a permanent utility service territory – under a 1989 agreement with the county, which denies Indian River Shores the opportunity to seek competitive rate proposals from other service providers – violates federal antitrust law.

“The city’s contention that it is free to ignore contractual promises made to the town in the water franchise agreement underscores the importance of invalidating the market allocation agreement which the city contends prevents the town and county customers in the South Barrier Island from obtaining water services from the county,” Harpring said, referring to the federal antitrust dispute still in play. A ruling on Vero’s motion to dismiss that lawsuit is expected soon.

Vero announced publicly in the summer of 2021 that the city would no longer charge utility rates that did not cover its cost of providing service. The city has commissioned a rate study and plans to impose new rates on all of its water-sewer customers beginning Oct. 1.

Those rates would encompass the estimated $70 to $80 million or higher cost of constructing a new state-of-the-art wastewater treatment plant at the Vero Beach Regional Airport property, and decommissioning the existing plant on the Indian River Lagoon. Also included in the rate structure would be the ongoing costs Vero will pay to comply with new state and federal environmental regulations. 

The city’s “one rate” plan – should it go forward – would charge all customers the same rate, whether inside or outside the city limits.

Croom’s ruling, if not overturned on appeal, seems to set the city up to enact the “one rate” plan despite the 2012 franchise agreement’s terms requiring Vero to match Indian River County rates for Indian River Shores customers.