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Consultants say Vero water system wins by ditching South Beach

STORY BY LISA ZAHNER, (Week of September 1, 2011)

Vero Beach’s utility consultants have concluded that the city would be better off financially if it was no longer providing water and sewer services to the Moorings and other customers south of the Vero city limits.

GAI Consultants say the exit of the unincorporated county residents in the South beach area from the Vero water-sewer system -- projected to happen in 2017 when the 30-year franchise agreement between Vero and the county expires -- would cut city revenue by $3.57 million per year, but would also decrease city expenses by $3.63 million per year.

The net revenue change would be put Vero $61,000 to the good.

If Vero was able to phase in every element of an “optimization plan” proposed by GAI, the city could make money off the South beach over time by cutting staff by 30 percent throughout the utility and running the system more efficiently.

Vero City Council Member Tracy Carroll, when contacted, had not had a chance to fully digest the 300-plus page report, but noted that it had “no easily readable summary” and said she had a lot of questions.

Vero Utilities Commission Chairman Herb Whittall also found the report a tough one to engage.

“I found it hard to use because the references are very poorly done,” Whittall wrote in an e-mail to City Clerk Tammy Vock and to the Vero Beach City Council on Aug. 23.

Whittall concluded by asking for some kind of executive summary. “I would vote to send the report back to GAI and get it completely redone into what I have always expected a report to look like. To me, it is a bunch of facts, but not a completed report.”

The “bunch of facts,” which now befuddles officials, cost Vero $80,000 and was designed to show the city how it could stay in the water-sewer utility business and become competitive with the Indian River County utility.

The study was also supposed to tell the City Council what would happen to the system if it lost the Shores and South beach customers.

Despite the confusing charts and trying to flip back and forth to piece information together, Carroll said she found GAI’s projections enlightening.

“I have been told by many people in the community that the city is overstaffed and the report reiterated that concern as it recommends cutting 21 jobs over 10 years,” she said. “I was surprised they recommended cutting a substantial amount of people.”

The GAI plan calls for cutting two administrative jobs and 19 rank-and-file workers.

Regardless of whether a plan to join forces on water-sewer service takes place, Indian River County has given notice that it intends to bore pipes under the river to provide water and wastewater service to the 2,300 or so South beach customers when the franchise agreement with Vero expires in March 2017.

Vero water-sewer Director Rob Bolton has stated that Vero intends to continue to serve the South beach customers outside the city limits until told not to by a court. The city’s hired experts say the territory was permanently granted to Vero by the county and not limited to the franchise period.

County Attorney Alan Polackwich has examined the background and meeting minutes associated with the county granting Vero a franchise to serve South Beach in 1987 and he’s confident he can prove the county only intended to award the territory for the duration of the 30-year franchise agreement due to expire in March 2017.

It’s Vero’s position that the county would be required to pay a dear price to take over serving the South beach customers in 2017. Bolton has floated a price tag of $10.2 million he thinks the county would need to cough up for lines and equipment Vero has installed over the years to service South beach customers.

Former County Attorney Will Collins, however, took the position that not only would the county not be required to buy the aged piping Vero has in place on the south barrier island upon termination of the franchise agreement, but that the county could potentially force Vero to rip up the old stuff at city expense.

While the whole matter seems ripe for costly litigation, if the consultants are correct, it costs the city more to deliver water and sewer services to the southernmost reaches of the Vero system than it nets in revenues.

Part of the reason is that a good percentage of South beach customers have either an irrigation well or a septic tank – or both.

Only about half the South beach water customers on the Vero system also subscribe to sewer service and roughly 10 per cent use city water for irrigation – both big money-makers for the city.

By comparison, about 80 per cent of Indian River Shores customers are on the Vero sewer system and the town’s communities buy millions of gallons of reuse water for irrigation daily.

Vero makes a profit of just under $1 million per year from serving the Shores, which explains the recent full-court press to ink a new franchise agreement with the Shores – even if it means matching lower county rates.

Moorings resident Dr. Stephen Faherty, a citizen-activist on utility issues for more than three years, urged the city to let the South beach customers go if long-term service to the area would not be profitable.

“The county board, supported by the South Beach Property Owners Association, sent a letter to the city stating the county wanted to take over the South beach for water-sewer-irrigation services by 2017,” Faherty said. “If it is to the financial advantage of the city, county and/or Shores to make decisions earlier than 2016-2017 on who provides what water-sewer-irrigation services when the franchise agreements expire, then why not proceed now with an orderly early termination of the franchise agreements?