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Vero and Shores still very much at war over water

STORY BY LISA ZAHNER | NEWS ANALYSIS (Week of October 6, 2022)

After a glimmer of hope last month that the Town of Indian River Shores and the City of Vero Beach might settle a federal antitrust lawsuit over Vero’s claim to a permanent service territory binding the Shores to Vero Utilities, a flurry of feisty letters exchanged by the parties’ legal teams show Vero and the Shores are still at odds over basic issues.

In dispute is whether a 1989 territorial agreement between Vero and Indian River County dividing the county into exclusive water-sewer utility service areas violates federal antitrust law. Vero petitioned U.S. Circuit Court Judge Aileen Cannon to dismiss the Shores’ lawsuit, but Cannon forcefully knocked back each of the city’s arguments.

Over the next two weeks, various city, county and town officials and experts are set to be deposed, starting today with County Administrator Jason Brown. The county objected to the list of documents Vero asked for as being “overbroad and unduly burdensome” as the city issued the subpoena on Sept. 29 for Oct. 6 depositions and some documents that date back decades.

The Shores must notify Vero by Oct. 1, 2023, if the town intends to renew its 2012 utility franchise agreement with Vero. Shores officials want the freedom to entertain competitive proposals for utility service – with the natural alternative provider being Indian River County Utilities.

In June 2021, Vero objected to county staff assisting the Shores’ consultant’s feasibility analysis of the Shores joining the county utility system. Dispute resolution sessions proved fruitless, and according to County Attorney Dylan Reingold, the matter is still in abeyance.

Then on Sept. 13, City Manager Monte Falls wrote a letter to County Administrator Jason Brown giving the county the city’s “permission” to negotiate a deal with Indian River Shores to provide utility service to the town starting in 2027. But county officials want Vero and the Shores to iron out their differences first.

Holland and Knight, the Shores’ counsel on the antitrust suit, wrote to Vero’s lawyers at GrayRobinson asking them to clarify the meaning of Falls’ Sept. 13 letter.

“In light of the city’s ‘approval,’ can you clarify if the city acknowledges that the Market Allocation Agreement is not enforceable with respect to the county providing water, wastewater and reuse water services within the town?,” Attorney Bruce May wrote, giving the city five days to advise the town on the matter.

“Unless and until you advise otherwise, the town will be left to presume that the city continues to assert rights to enforce the Market Allocation Agreement with respect to the county’s service to the town in the future,” May wrote.

Two days later, Vero’s attorney responded to the Shores saying Vero expected a response from the county, that the Shores was only sent a “courtesy copy” of correspondence with the county and, in so many words, that it’s none of the town’s business. “Your response on the issue presented by the city to the county is therefore gratuitous,” attorney Gary Carman wrote back to the Shores.

However, Carman went on to explain. “Let me be clear. The city does not have a ‘new position.’

“The city has never prohibited nor blocked the county and town from discussing the possibility of providing utility services. If you have any written evidence of the city, blocking or preventing the county in town from discussing that possibility, please present it to us within five days after the date of this letter,” Carman wrote.

“Unless you advise, otherwise the city will be left to presume you admit the city has never blocked nor prevented the county and town from discussing the option of supplying such utility services.”

Five days later, Holland and Knight responded, saying, “With all due respect, the city’s recently stated position – providing ‘approval,’ while not agreeing that the Market Allocation Agreement is unenforceable – is in fact new, and was formulated only after the court rejected the city’s assertion of immunity from antitrust liability.”

The Shores’ attorneys also cited the Vero Beach City Council’s June 1, 2021, resolution to launch dispute resolution proceedings against Indian River County for assisting with the Shores’ feasibility study as evidence “of the city blocking or preventing the county and the town from discussing the possibility” of the county water-sewer utility serving the town.

Holland and Knight’s letter quotes extensively from that city resolution and then summarizes it. “In short, the city threatened the county with costly litigation to enforce the alleged permanence of the Market Allocation Agreement, and to restrict the county from providing essential services to the town without the city’s consent.

“Moreover, it reflects classic bullying tactics of a monopolist designed to chill franchise competition,” Holland and Knight wrote.

The letter concluded by again asking the city to clarify whether or not the issue at dispute in the federal antitrust suit – the city’s claim to a permanent utility service territory based upon the 1989 agreement – has been resolved.

Two days later, at 3:46 p.m. on the same day Vero Beach 32963 reported Brown saying that Indian River County Utilities indeed has enough excess capacity to serve the Town of Indian River Shores, Brown and County utility Director Sean Lieske received subpoenas to be deposed four business days later, and to produce a vast array of documents at those depositions. Vero is interested in all historic and recent correspondence between the Shores and the county about utility matters.

Reingold added an emergency item to this past Tuesday’s Indian River Board of County Commissioners agenda to update the board on the Shores vs. Vero federal lawsuit and the county’s objections to the subpoenas.

Indian River Shores plans to depose Vero Mayor Robbie Brackett, Utilities Director Rob Bolton, Finance Director Cindy Lawson, and Falls, who penned the Sept. 13 letter.

Vero has subpoenaed Shores Mayor Brian Foley, Councilman Bob Auwaerter, Town Manager Jim Harpring and the town’s human resources staffer, as well as experts the town plans to call as witnesses.

It’s possible that Vero is still trying to drag Indian River County into the federal lawsuit with some new-found evidence, despite the fact that Judge Cannon rejected the city’s prior attempt to make the county an indispensable party. The county’s entry might delay the January trial, increasing pressure on Indian River Shores, and narrowing the time the Shores and the County have to negotiate a deal before the town’s deadline to notify Vero of its intentions in October 2023.

During mediation, Vero officials offered to push out that deadline by 12 months by extending the town’s franchise agreement by 12 months to October 2028. Every month Vero can keep Indian River Shores on its utility system is a month the city can collect rates from Shores customers to help fund nearly $160 million in expected debt the city will take on to build its new wastewater treatment plant at the Vero Beach Regional Airport.

Last month Vero announced plans for severe, double-digit annual utility rate increases, front-loaded during the next three years – the time the city is certain that Indian River Shores will still be on the city utility system.