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Vero’s sweetheart water deal with Shores goes to council

STORY BY LISA ZAHNER, (Week of April 12, 2012)

Getting Indian River Shores to agree Monday to a new 30-year agreement to obtain water, sewer and irrigation services from Vero Beach at up to a 40 percent discount from current rates took nearly a year, but that could be the easy part compared to getting agreement to this sweetheart deal from city residents and the Vero Beach City Council.

The rub is that the Council is being asked to approve lower rates for Shores residents than what Vero plans to charge its own city residents, according to City Manager Jim O’Connor – a novel approach that may explode into the year’s hottest political controversy when the Vero Council takes up a review of the agreement at its April 17 meeting.

The deal with the Shores calls for Vero to match the county’s lower rates for water, sewer and reuse water as of October 1, when the new agreement takes effect.  That would save Shores residents between 20 and 40 percent per month, depending upon whether they live in a house or a condo, how much water they use and whether they are hooked up to the sewer system.

But the Vero city government apparently plans no comparable reductions for its own residents.

“There are no proposals that I am aware of to switch all city customers over to county rates," O’Connor wrote in an e-mail last week.  Thus, before the end of the year, Vero Beach property owners and their tenants would in effect be subsidizing the water, sewer and irrigation water bills of the wealthy enclave of the Shores.

If the deal is not approved by the council, Vero cannot enter into the new water-sewer agreement with the Shores. If the Council approves the deal, giving Shores customers better rates than residents of the city, it seems certain to become a major issue in the November election in which three seats – those held by Mayor Pilar Turner, Vice Mayor Craig Fletcher and Councilman Jay Kramer – are up for election.

It also would appear that Vero Beach city customers would not be able to appeal a decision to charge them higher water and sewer rates than the city is offering others by complaining to the Florida Public Service Commission. When presented with the situation last week, the PSC responded that the matter is not within its jurisdiction.

“The commission has no authority over any municipal or county water or wastewater system.  I believe you were thinking of the limited jurisdiction that the commission has over rate structure for electric municipal utilities.  Florida statutes govern pricing for customers outside the city limits,” said spokeswoman Cynthia Muir, in response to a query about whether Vero city customers could seek a legal remedy via the PSC.

The law on the books notes that rates for customers outside the city be "just and equitable and which are based on the same factors used in fixing the rates, fees, and charges for consumers inside the municipal boundaries." It also details surcharges the city is allowed to charge customers outside the city and when a public hearing is required to set or change rates.

The law thus appears designed to protect customers outside the city from being discriminated against – and apparently its authors never anticipated the need to protect city residents from being gouged by their own utility.

Short of filing a lawsuit, it seems customers inside the city limits have only the council as a defense against being charged at a higher rate than their counterparts in the wealthier Shores.

Stuart Kennedy, a local Realtor and 10-year Vero Beach resident, has been vocal about utility issues in recent years, but he did not rush to judgment when he learned the city has no plans on the table to convert city residents to the lower rates when Shores customers switch over Oct. 1.

"At the end of the day, it is the government's job to do what is best for the community at large," Kennedy said. "We elect the officials and it is up to them to determine how to do that. I would hope that, whatever they decide, they are able to justify the decision and to say how it makes sense for the entire community."

Kennedy agreed that for him and his Central Beach neighbors, paying water and sewer rates somewhere in the neighborhood of 20 percent higher than rates that the city is offering Shores residents would be tough to swallow if there was not sufficient financial analysis to show that keeping the Shores as a customer helps keep rates down for Vero Beach Utilities as a whole.

That kind of information has been, unfortunately for customers and for decision makers, hard to come by despite council demands for answers. The draft proposal to the Shores passed by a narrow 3-2 margin with Mayor Pilar Turner and Councilwoman Tracy Carroll voting against it because they said they had seen no financial analysis which demonstrated the deal would be good for Vero.

Turner said publicly that despite the fact that she very much wants to keep the Shores in the Vero system, she will not vote in favor of the deal without adequate data showing that offering the Shores cheaper county rates won’t bankrupt the city’s utility.

County Administrator Joe Baird said last month that he expects to be able to reduce expenses by another 10 percent over the next nine years and therefore reduce water and sewer rates to county customers. Vero would then need to further reduce rates to the Shores, even if  what Shores residents were paying didn’t cover the cost of service.

Vero Attorney Wayne Coment, when asked to go on record, said nothing in Section 180 of the statute prevents the city from charging its own residents more."This statute was originally enacted in 1970 to help ensure that utility consumers who live outside of a municipality are protected from excess charges for delivery of such utility services by the municipality.  I do not anticipate the provisions cited as having a negative or preventative affect since the rates established for consumers in IRS would still be based on the same factors used in setting rates for City of Vero Beach residents," he said.

County Commissioner Bob Solari said Vero’s inequitable application of rates would only strengthen the county’s case for taking over service to South barrier island and mainland county customers on the Vero system in 2017.

Solari said he suspected that if the Vero utility gets into financial hot water over the next six years, it will increase the current 10 percent surcharge on South Beach and mainland county customers in an effort to make its books balance. Water-sewer director Rob Bolton pointed out to the city council last year that Vero has every right to charge up to a 25 percent surcharge.

County Attorney Alan Polackwich said Monday he had not researched whether the statute could be construed to possibly limit Vero’s ability to charge two completely different sets of rates, but that by not offering the lower rates to city customers, the city could be pushing its luck.