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County opts to let Vero keep providing South Beach water

STORY BY STEVEN M. THOMAS, (Week of September 19, 2013)

After nearly three years of bitter negotiations and looming lawsuits, the county appears to be dropping its bid to supplant the city of Vero Beach as water and sewer supplier for thousands of customers on the south island.

At the Sept. 10 county commission meeting, commissioners agreed with former county attorney Alan Polackwich that going to court to resolve the intractable dispute does not make sense.

Polackwich, who emerged from retirement to walk commissioners through a memo he wrote on Aug. 1 summarizing the history of the controversy, said in his opinion the county is in the right on the matter but that he could not recommend a lawsuit because “the public, with good reason, has no tolerance for protracted, expensive litigation between two local governments that exist to serve the public interest,” and because the location of the territory would make it hard for the county to provide service without city cooperation.

He suggested – and the commission concurred – that the county cede the issue to Vero Beach with the caveat the city agree to charge county rates for water and sewer service and reduce its so-called “equalization fee surcharge” from 6 percent to 3 percent. As its part of the deal, the county would also reduce its franchise fee from 6 percent to 3 percent, so south islanders would pay the same rates as other county residents.

Whether this proposal ends the long-running dispute, however, remains to be seen.  While current county attorney Dylan Reingold is drafting an agreement that can be presented to the Vero City Council, Vero city manager Jim O’Connor said the city would not reduce its surcharge because the county charges Sebastian 6 percent, and Vero Beach wants no less.

The commission did not specify what it would do if the city declined to reduce the surcharge.

The roots of the dispute go back to March 1987. At that time, the county, which did not have a well-developed utility system, granted the city a 30-year franchise to provide water and wastewater service to the south island and other unincorporated mainland areas adjacent to the city.

The city successfully provided services but by 2009 the county utility system had become larger than the city’s and was charging lower rates. Residents asked the county to look ahead and plan to take over service when the franchise agreement expires in 2017. On April 5, 2011, the commission voted to take over service when the franchise period ends, and notified the city of its intent.

Less than two weeks later the city responded with a letter from an outside utility attorney saying despite the 30-year period of the agreement, the city can continue to serve the areas of the county it now serves forever. “I am of the opinion that the City’s exclusive right to provide water and sewer service to the South Beach area exists and will continue to exist unabated whether or not the County’s franchises terminate,” Thomas Cloud of the Gray Robinson law firm wrote in a memo to Vero Beach Water and Sewer Director Rob Bolton.

The county hired its own outside utility attorney who concluded the opposite.

Trying to work around the dispute, the county broached the idea of buying the city’s water and sewer system to merge with its own, but the city wanted $50 million more than what the county believed the system was worth.

Part of the valuation disagreement revolved around differing opinions about what water and sewer infrastructure the city actually owns on the south barrier island.

According to Polackwich’s memo, “The city paid for and constructed very little of the infrastructure, particularly the infrastructure within the subdivisions along A1A, which was constructed by developers. The City does not have bills of sale or other evidence of ownership for most of the infrastructure. The City Manager claims that by maintaining the infrastructure over the years, the City has become the owner [but] the County’s position is that maintenance does not equal ownership.”

After the merger talks collapsed, Polackwich continued to negotiate with the city to reach an agreement about who will provide service to the south island in 2017 and afterward.

In January, the county asked residents whether they wanted city or county service after the franchise agreement ends and, according to Polackwich, “76.6 percent of those responding indicated they want to receive service from the county.”

Despite the poll, Polackwich said City Manager O’Connor’s position “hardened” in June.