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Three way water-sewer talks may ultimately end in consolidation

(Week of November 18, 2010)

As the Town of Indian River Shores decides whether to choose the City of Vero Beach or Indian River County utilities as a water-sewer service provider for the next 30 years, the choice might not matter in the long run.

The City of Vero Beach may be ready to consolidate its utilities with those of the County anyway.

“We are very anxious to work with the county to discuss the consolidation of the water and sewer systems,” said Vero Beach Mayor Jay Kramer, noting that he sees consolidation as a way to “drive the costs down.”

All four of the newly elected Vero City Council members said on the stump that they were in favor of consolidation if it would lower rates for the city’s residents.

Even Indian River Shores Mayor Bill Kenyon conceded that, if logic prevails, some sort of regionalized utility effort is not only inevitable but a pretty obvious solution, even to the uninformed outsider.

“If someone came here from Mars and took a look at the situation, they would say that these two entities (Vero and the County) need to get together,” Kenyon said.

Despite that looming reality, more than a dozen top-level staff, consultants, attorneys and elected officials showed up last week to go through the pros and cons of Indian River Shores opting to get its future water and sewer service from either Vero or the County.

But GAI’s Gerald Hartman, an engineering consultant who is recommending Shores residents cast their lots with Vero, glossed over two important factors -- the financial strength of the competing bidders and projected long-term rate stability.

GAI did not even raise the fact that Vero’s rates were slated to rise drastically over the next five years until the last City Council rescinded the rate increases. The decision was made with no financial analysis or modeling of the aging system’s capital needs going forward.

By the tone of the rhetoric (see related story), it’s clear that this scuffle over who is going to provide water and sewer services to Indian River Shores going forward is turning into one of those epic battles between the County and Vero Beach.

With the Shores caught in the middle and a high-paid consultant trying to explain away dubious invoices and entanglements, the nearly three-hour meeting did not settle many questions.

Getting everyone together in one room was an attempt to at least understand the divergent positions.

“I hope, when we look back on this five years from now, that we say this meeting is where the process got on track,” said County Attorney Alan Polackwich.

Polackwich was present, along with City Attorney Charles Vitunac, because the county put forth information to support the premise that it -- as a bidder on the job of serving the Shores with water, sewer and reuse water -- was not placed on a “level playing field” with the City of Vero Beach.

The county claims the Shores’ consultant, GAI, sent the county a proposal so riddled with legal quandaries and impossible deadlines that it could not even respond.

The proposal as written would have required the county to purchase the Town’s assets, purchase Vero’s assets in the Town and be ready to service the Town by Jan. 31, 2011, not withstanding the fact that Vero Beach still has a franchise to serve the Town until Nov. 1, 2016.

“We are surprised by this date,” said Commission Chairman Bob Solari, who added that it would be practically impossible to execute the contract and perform those conditions in that short turnaround time.

Solari directly connects the problems with the proposal sent to the county to the fact that GAI is working for both Vero Beach and Indian River Shores.

“We certainly do see it as a conflict of interest,” Solari said. “In any event, by any standard that I grew up with in New York and have come to understand in Florida, in no way you can say this is in any way a level playing field.”

Kenyon took offense at Solari’s accusations.

“Stop throwing rocks at us,” Kenyon said. “Get out of here.”

GAI, Vero Beach and Indian River Shores explained the arrangement by saying that it was a natural extension of the three-way utility talks that broke up earlier this year.

The county countered, saying that the three-way talks were about consolidation and the work GAI is doing for Vero and the Shores is about a specific franchise and asset purchase deal, which the county argues is a distinct project.

No action was taken, but the Town will continue to tweak the proposals and suggestions were offered that, since GAI is working for both the Town and Vero, the Shores should enter into a formal Request for Proposal process to ensure both bidders are treated equally.

“There’s nothing in my life that says I have a bias toward either side,” said Shores Mayor Kenyon.

“I have to get the best deal for my people.”

The only thing some members of the three delegations could agree upon is that the possibility of consolidation between Vero Beach and the County should be explored as soon as possible, given that all four new Vero Council members say they want to look at joining forces with the county.

Vero Mayor Kramer told those present that he would see that the item got placed on an upcoming agenda and got some serious attention at the city.

The next day, after having the chance to sleep on what occurred at the meeting, said he realized the pivotal position the new Vero Beach City Council is in to affect real change on this issue.

“The County wants to participate and the Shores wants competition,” Kramer said. “The city holds leverage over both of them.”

Vero Vice Mayor Pilar Turner, who was also present at the meeting, has requested 10 years of pro forma financial analysis on the city’s water and sewer utilities.

This should provide a definitive answer as to whether the city in fact needs the $13 million in rate increases recommended in 2009 by Public Resources Management Group.

Analysis:  All seek to shift blame in water-sewer conflict of interest

Then Shores Town Councilmen Gerard Weick and Mike Ochsner blamed GAI.

“We recognize that you were the choice of the joint committee and the county pulled out and both the City and the Town were interested in hiring you, but I naively assumed that whoever got you first got you,” Ochsner said.

Hartman attempted to deflect the issue back to the process, but Weick wouldn’t budge.

“On July 22, you came before us and it was also my understanding that the City had an interest in hiring you, but if we hired you first, you would work for us exclusively,” Weick said. “The next day I read in the paper, much to my surprise that you’d gone to work for the City. ”

Shores Mayor Bill Kenyon, who had previously defended GAI, seemed to shift briefly to the skeptic side and Councilwoman Fran Acheson also voiced her concerns.

“I think the Council thought it was putting you under contract just for us and we had no idea you were going to work for the City,” Kenyon said. “We feel a little bit as though we were blindsided.”

GAI responded that the Shores Town Council was just confused.

“I think it was very clear,” Hartman said. “I think it was a misunderstanding.”

Then Hartman explained it had been the plan from the beginning -- from the moment the joint Vero, Indian River County, and Shores committee broke up -- for Vero and the Shores to both hire GAI to continue working on water-sewer issues.

Vero Interim City Manager Monte Falls and Vero Water-Sewer Director Rob Bolton had also given that explanation privately prior to last week’s workshop.

Hartman and the Vero city staff seemed unaware that the admission of a pre-arranged relationship not disclosed to either the Shores or the county made the situation even less tenable.

Throughout GAI’s presentation to the Town, Hartman reminded council members and the audience of his four decades of experience, his credentials as a certified appraiser and his vast knowledge in the field of utilities. That only led critics to suggest Hartman should have known better than to write a flawed proposal to the county.

“The problem is that the way this was written, we can’t get an answer to the question,” Councilman Ochsner said.

The Shores Attorney Clem agreed, but placed the blame on the county for the current standoff. Clem said the county should have not only discovered GAI’s mistake, but should have taken the initiative to correct it.

Hartman also criticized the county utilities staff for not requesting all the records from the Shores, in Hartman’s words, to stay “on top of” the situation.

That angered County Commissioner Peter O’Bryan, who noted that GAI provided the Shores proposal to Vero Beach before any member of the Shores Council got a look at it.

“Your own Town Council didn’t even have knowledge of these documents before they went out,” O’Bryan said.