Does conflict of interest stink?
Consultants driving Shores toward water and sewer deal with Vero
The Town of Indian River Shores must make a 30-year, $95 million decision on where residents are going to get their water and send their sewage before Halloween 2011.
Yet, despite last year’s public outcry over the way the City of Vero Beach handled a $2 billion contract with the Orlando Utilities Commission, consultants – not elected officials – seem to be driving the deal.
Driving the deal, it would appear, right to their other client, the City of Vero Beach.
In mid-September, the engineering firm the town retained, GAI Consulting, sent 30-year proposals for water, sewer and irrigation water off to both the City of Vero Beach and to Indian River County. GAI, which also is retained by the City of Vero Beach for advice on similar issues, neglected to provide the Shores’ Town Council a copy.
Both deals place a $4 million price tag on the Town’s utility assets and give the buyer 13 years to pay. If the Shores were to go with the county, that $306,000 per year would come to the Town in the form of cash. For Vero, it would come from waiving the current 10 percent surcharge on Town customers’ water and sewer bills.
Neither proposal includes any guarantee that rates would not skyrocket in the future -- only that the provider would give the Town a 90-day notice of any rate increases.
“So that means you could raise our rates every 90 days?” asked Shores Town Councilman Gerard Weick from the public podium at the Sept. 21 Vero City Council meeting where he got his first glimpse of his town’s proposal.
In reality, under the terms as written, Vero could raise rates every 30 days for the 30-year duration of the agreement, as long as it kept a rolling 90-day notice of rate increases streaming to the Shores.
This has sparked a heated debate about the future stability of Vero utility rates. Vero Councilman Brian Heady voted against the proposal, saying that the city still needs to investigate consolidating systems with the county to ensure low rates for all the ratepayers.
“If you look at the rates, we’re considerably higher for 6,000 gallons,” Heady said.
A household with an average usage of 6,000 gallons per month now pays $55.94 on the county system, while Vero residents pay $61.96 and Shores and county residents on the Vero system pay $68.20 as they are subject to a 10 percent surcharge. The difference, depending upon usage and location, for the average or small user ranges from 11 to 28 percent.
Not needing Heady’s vote, Vero approved the proposal last week but added a clause allowing the city to sell out its system to a “qualified provider,” meaning that, in choosing Vero, the Shores could end up being serviced by the county anyway should a future City Council decide to strike a deal to consolidate.
As for the county, the way the consultants wrote the proposal – that the deal had to close by Jan. 31, 2011, a full five years before the current Shores’ contract expires with the city – guarantees the city will be the only entity authorized to some to an agreement during that time with the Shores.
“The County is very interested in providing water and wastewater, including reclaimed water, service to the Town,” County officials wrote in a letter.
“However, the draft agreement calls for a closing in early 2011. As you know, the Town has an existing franchise agreement with the City of Vero Beach until 2016. The County cannot interfere with the City’s existing franchise rights.”
Serving two masters?
GAI consulting is currently working for both the Town of Indian River Shores and the City of Vero Beach on issues related to water and sewer services. The Town is initially paying GAI $25,000, with more charges to come, and the City has approved a scope of services starting at $85,000.
GAI ran both proposals through a three-person negotiating committee at the Shores made up of former Mayor Tom Cadden, Town Manager Richard Jefferson and Town Attorney Chester Clem -- none of whom is elected.
Cadden defends the way the proposal was sent and the fact that GAI is working for both Vero and the Shores, saying that GAI is not working on Shores-related issues for Vero, but rather on the question of the South Beach residents who might peel off and join the county utility system in 2017.
Town Council members Weick and Ochsner have stated publicly that they have a problem with GAI working for both parties.
Regardless of GAI’s strategy, the proposal was sent before theTown Council had received even an initial report from GAI on its analysis of the value of the Town’s water-sewer system or its determination of who owns various assets.
The Shores has also not presented publicly any sort of financial analysis comparing what residents’ utility rates might be under the Vero system or the county system over the long haul.
Another OUC deal?
For locals, the actions hearken back to lessons learned too late after the Orlando Utilities Commission contract was signed - with high-paid consultants involved, negotiations out of the public eye, and little backup data presented for elected officials to consider.
County Commissioner Bob Solari, a Vero city resident who was appointed county liaison to the city on water-sewer issues, expressed his concerns during public comment at the Sept 21 Vero City Council meeting.
“Just as the OUC contract, this agreement has all the feel of a rushed, backroom deal -- horribly rushed,” he said. “There is no indication that any of this has been reviewed by the legal department and there’s no financial detail or analysis by the city staff.”
Solari also cautioned that the Shores residents would have no guarantee that rates would remain stable under the franchise agreement. He concluded by saying that “the residents and businesses of the City of Vero Beach cannot survive another OUC-type deal.”