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Vero’s water fight with the Shores takes a new twist

(Week of September 22, 2022)

In a major plot twist to a dispute between the Town of Indian River Shores and the City of Vero Beach over Vero’s claim to a permanent water-sewer utility territory, Vero has given Indian River County the city’s written permission to strike a deal with the Shores to provide utility service to town residents in 2027.

The Shores has filed a federal lawsuit asserting that the 1989 document dividing the county up into Vero and County utility service territories violates antitrust law because it deprives the Shores of the opportunity to benefit from competing proposals from multiple service providers. Vero tried to get that lawsuit dismissed but U.S. Circuit Court Judge Eileen Cannon rejected all of Vero’s arguments, meaning the case will proceed to trial in January.

If the letter from Vero City Manager Monte Falls to County Administrator Jason Brown was an effort to make that lawsuit go away, it does not seem to have had the desired effect.

“The town and its legal counsel are currently evaluating the letter received by Mr. Falls as it raises many questions. However, it does not resolve the issues as the city still maintains it has a permanent monopoly on the provision of water services to the town,” Town Manager Jim Harpring said on Friday.

One obvious question is how the decision was made to send the letter giving the county “permission” to negotiate a utility deal with Indian River Shores. The Vero Beach City Council took no such vote in a public meeting.

The council did hold a “shade” meeting two weeks ago with its attorneys to discuss legal strategy, as permitted when there’s a pending lawsuit, but allowing Indian River Shores customers to potentially exit Vero’s utility system is a major decision and no public input on the matter was solicited or given.

The Indian River Shores Town Council has its monthly business meeting scheduled for 3 p.m. today, prior to the public hearing of the town budget, but noting about the letter from Vero, or the federal lawsuit, is on the agenda.

“I do not have anything under my report,” Harpring said. “If it does come up I would imagine it would be in passing to merely acknowledge the status of the claims. But again, we don’t have any specific discussion planned.”

Brown said he “did not expect to receive anything directly from the city” related to the territorial issues that are in dispute. Brown and County Attorney Dylan Reingold maintain that the legal matter is between Vero and the Shores and the county wants to stay out of it – a position supported by Judge Cannon, who ruled that the county is not an indispensable party to the federal antitrust lawsuit, despite being a signer on the 1989 agreement with Vero.

Though he forwarded Falls’ letter to the five elected members of the Indian River Board of County Commission to make them aware of the correspondence, Brown said he does not have plans to schedule a discussion on the matter anytime soon.

“The town has let us know that they want to run this through their outside counsel before moving forward,” Brown said.

Is Vero trying to draw Indian River County into the dispute to make litigation more complex and costly?

Vero charges its legal fees for utility disputes to the water-sewer utility, so both Indian River Shores and unincorporated Indian River County residents pay a portion of the expense through their water-sewer bills, but Indian River Shores must pay its own attorneys out of the town’s general fund to fight Vero. Also the town is facing an Oct. 1, 2023 deadline to give Vero its required four-year notice that the town will not renew a utility franchise agreement that expires in 2027.

Vero officials have said they’d be willing to extend that notice period, but the scenario suggested would be to extend the deadline by one year if the Shores needed the extra time, but then to add one year onto the existing franchise agreement. That would mean the Shores can’t exit Vero’s utility system until 2028 – likely a non-starter for the town.

It is possible that city officials genuinely want to resolve long-standing differences with their neighbors in Indian River Shores. Vero is embroiled in so many legal battles right now, and Indian River Shores promises to be a perennially disgruntled and litigious customer as long as Vero and the Shores remain chained to each other.

It’s also possible that Vero is calling the county’s bluff, so to speak, banking on the fact that the Shores will suffer a major case of sticker shock when town officials find out how much it will cost to connect to the Indian River County Utilities system. If that cost is too steep, sticking with Vero might seem the prudent course of action – even if that means paying higher monthly rates.

Vero officials have repeatedly stated that the county does not have the capacity in its system to serve the Shores, so the true extent of the county’s utilities capacity can only be borne out if the Shores is free to make a bona fide business deal with the county – not just a hypothetical feasibility study.

Brown explained that it’s not a matter of building more physical capacity, as the county utility system has excess capacity to handle 10 to 20 years of growth. But the county would need to acquire more permits to take a larger volume of water out of existing potable water wells, as it’s approaching its maximum 12.8 million gallons per day permitted by regulators at the St. Johns River Water Management District and the Florida Department if Environmental Protection.

Brown said the county has plenty of high-quality wells in place to supply adequate drinking water, and that county staffers have already begun discussions about expanding the utility’s “consumptive use permit” for water due to growth throughout the county.

Indian River County Utilities would also need to expand its water distribution and wastewater collection infrastructure to connect with existing treatment facilities. The cost of doing so could be hefty, but Shores residents would need to weigh that against the prospect of much higher rates under Vero’s new “one rate” plan to pay for at least $82 million in capital upgrades to Vero’s utility system needed to move the sewer plant off the river.

Earlier this month Vero unveiled preliminary rate increase recommendations from its utility rate consultant showing double-digit annual increases for the next three years, coupled with unknown rate increases in the future should the cost of the new, “state-of-the-art water reclamation facility” project swell when the city finally puts it out to bid.

Meanwhile, as rate increases and debt payments on the new sewer plant swell the Vero utility’s operating budget, Vero plans to increase the money it transfers into the city’s general fund from water-sewer revenues by at least $700,000 per year. Subsidizing Vero’s property owners in this way – Vero calls it the city’s reasonable rate of return on its investment – has been a huge bone of contention for Indian River Shores residents.

What rate increases does Indian River County Utilities have planned?

“We have the ability to increase rates based upon changes in the CPI up to 3 percent. It is not automatic as the County Commission must approve any increase during the budget process,” Brown said last week.