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Vero prepares to hit Shores with big utility hike

STORY BY LISA ZAHNER (Week of September 8, 2022)

Utility consultants have recommended that Vero Beach press ahead next month with steep utility rate hikes that will let Vero collect as much as possible from Indian River Shores residents for sewer and reuse irrigation water before the town’s franchise agreement expires in 2027.

An early peek at the draft results of a water-sewer rate study to be considered next week shows Vero nearly doubling sewer rates in six years, and doubling reuse irrigation water rates in nine years.

After city officials announced that proposed water-sewer rate increases to pay for the city’s new sewer plant would be announced just weeks before the rate hikes were set to go into effect, Vero Beach 32963 requested copies of email correspondence between city staff and the rate consultants.

The 34 digital files of public records show that on July 19, rate consultants sent Finance Director Cindy Lawson a schedule of three options for water, sewer and reuse water increases over a 10-year period.

All three options recommended front-loading rate increases in fiscal years ending in 2023, 2024 and 2025 while Town of Indian River Shores residents will still be Vero utility customers.  So even if the Shores prevails in a federal antitrust lawsuit and is able to exit Vero’s utility system in 2027, the town’s utility customers will fund a sizable share of the debt service on the new sewer plant.

Raftelis rate consultants recommended the city go with Option Three, which would increase water rates 7 percent, sewer rates 23 percent and reuse rates 21 percent this fall.

Then, if the plan is adopted, rates would go up the same amount in October 2023 and again in October 2024. Beginning in 2025, annual rate increases would be 2 percent for water, 2 percent for sewer and 2 percent for reuse irrigation water.

When those rate increases are compounded, by 2031, water rates will have increased about 40 percent. Sewer rates will have increased 113 percent, and reuse irrigation rates by 103 percent.

According to the city emails, the new sewer plant is set to cost $80.7 million plus interest, for a total of $158 million, most of which will be funded by utility ratepayers.

But the project is still in the design phase, and no bids have been sought or received for the construction of the plant, so the actual cost could come in much higher than $80.7 million. When asked when the city plans to go out for bids on the new plant, Water-Sewer Utility Director Rob Bolton responded, “No set schedule for bid at this moment.”

The consultants project the Vero utility’s payments on the bonds will be between $3.9 million and $4.7 million per year based upon that $158 million total – but that will rise if the price tag of the plant goes up, or if the city cannot get a favorable interest rate.

The figure being used for constructing the new plant does not include decommissioning the old plant, or any environmental cleanup of the riverfront site. Bolton said there would be a “separate bid and contract for demolition.”

The Vero Beach Utilities Commission will review the results of the rate study on Monday morning, then the City Council will discuss the rate consultant’s recommended rate increases on Tuesday morning.

City Clerk Tammy Bursick said: “From what I understand they will go on the Council meeting sometime in October for first reading and a public hearing.”

Indian River Shores Town Councilman Bob Auwaerter serves on the city’s Utilities Commission representing the Shores water-sewer customers. After looking over the rate consultant’s recommendations, Auwaerter said he would have many questions for the city staff, and for the consultants on Monday.

“I think for anybody seeing these kinds of numbers, it’s a kick in the stomach,” Auwaerter said of the double-digit rate increases recommended for 2023 through 2025.

“On top of all the inflation this is tough,” Auwaerter said, referring to Vero’s many small businesses that will see their water and sewer bills spike those first three years.

Indian River Shores has a franchise agreement wherein Vero Beach agreed to charge the Shores the same rates as Indian River County Utilities customers pay through Sept. 30, 2027, but Vero Beach City Manager Monte Falls put the Shores on notice several times that Vero would no longer charge rates that do not cover the city’s cost of providing the service.

“That’s why we’re spending the money on the lawsuits,” Auwaerter said of a pending federal antitrust lawsuit slated to go to trial in January, and a state circuit court breach of contract lawsuit over reuse irrigation rates, which is now in the appeals process in the Fourth District Court of Appeals.

Customers in the unincorporated south barrier island communities south of the Vero Beach city limits do not have a valid franchise agreement to regulate their water, sewer and reuse irrigation rates, as the city and county have been unable to agree on contract language.

The consultants are expected to prepare a presentation showing how the proposed rate hikes will impact the typical 5,000 gallon per month customer in dollars and cents, but customers can do a rough calculation using their own utility bills.