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Solari: Time to end water-sewer equalization charge

STORY BY LISA ZAHNER (Week of February 13, 2014)
Photo of County Commissioner Bob Solari

A proposal by County Commissioner Bob Solari for the county to stop tacking on a six percent fee to Sebastian water-sewer customers’ bills could spark a whole new round of infighting between Vero Beach and the County – with Indian River Shores and South Beach customers squarely in the crosshairs.

When the county took over Sebastian’s water system in 1995, it imposed a six percent “equalization fee” on Sebastian’s 900 customers, plus all future customers.

Over the next few years, the county spent more than $23 million to assume the system’s debt and to build capacity to serve what now amounts to more than 11,400 customers. Those added customers paid hook-up charges and impact fees on top of their monthly rates, so 19 years later, Solari asserts there is no longer any justification for the six percent fee, which brings in $203,000 per year to the county general fund.

“At the time, the charge may well have been appropriate. Now, many years later the County still charges this fee, which goes to the County general fund,” Solari wrote in a memo to his fellow board members to be included in Tuesday’s agenda packet. “It has been suggested that all has been equalized between the County and the Sebastian customers, that the “Equalization Charge” is no longer just, and that it is time to end the fee.”

The fee might have never gotten a second glance if it hadn’t recently become the focal point of Vero’s plan to convert South Beach and mainland county water-sewer customers served by Vero to the county rate structure.

Vero officials say they’re willing to do that, and that they’re willing to stop charging a 10 percent surcharge for those outside customers, but that they’ll add in a six percent “equalization charge.”

The justification Vero offers is a rather circular argument hinged on the Sebastian charge. Number one, Vero says, the county charges it to Sebastian. Number two, Vero charges it to Indian River Shores, so it’s only fair that South Beach and mainland county customers pay it – just like Sebastian customers do.

When Indian River Shores re-negotiated its water-sewer franchise agreement four years ahead of the 2016 expiration date to keep Vero as its provider but get Indian River County water-sewer rates,  Vero tacked on a six percent equalization charge and said it had the right to, invoking the Sebastian precedent.

The Shores Town Council had in 2012 tasked the town’s manager and attorney with making that fee go away in closed-door negotiations with Vero staff prior to a final draft coming back for the council vote and the mayor’s signature, but the six percent somehow remained in the contract and has been paid by Shores customers for nearly a year and a half.

The fee has been a bone of contention for then-Mayor Tom Cadden and Vice Mayor Jerry Weick ever since.

“They based our rates on the Sebastian rates, which included the equalization charge. If the county does away with the equalization charge for Sebastian, they would have to do away with the equalization charge for us. That's in our contract,” Weick said.

“That's what Jim O'Connor told me when I asked. I argued that with Jim O'Connor several times,” Weick said. “They (Vero) threw that in at the end and when you read our contract, it says that we would pay the county rates and so the city went with Sebastian rates because they had the equalization fee.”

“I do not doubt that the County has the power to continue placing the ‘Equalization Charge’ on the bills of our Sebastian customers.

The proper question though is, do we have the right to do so; is it the just thing to do?” Solari wrote in his memo.

The bigger question to emerge, should Solari be able to sway two of his colleagues to vote with him in ending the fee, is whether or not Vero Beach would have to follow suit by repealing the fee it charges the Shores. The Shores franchise agreement ties Shores rates to county rates.

City Manager Jim O’Connor said “from my standpoint, as long as they (the County) are charging a franchise fee to their customers, we would not have to take it out.”

O’Connor admitted that he referred to Sebastian numerous times in explaining the equalization charge in the Indian River Shores franchise agreement.

“I also said it’s what the county charges its customers, and what it charges its customers is that charge.

If you look at the county customers north of Indian River Shores, they also pay that charge,” O’Connor said. “I just used Sebastian as an example, but the example is all their customers. It was based on the county rates and their numbers, but I just used Sebastian as an example.”

So if the county is attempting to toss a political hot potato back in Vero’s lap by getting Shores customers and leaders riled up, according to O’Connor, it will not result in capitulation by Vero on Shores rates.

“The bottom line is that we’re going to charge the customers in the unincorporated areas the same thing the county charges their customers – you take the typical county customer and that’s what we’re going to charge is the revenues from a typical county customer,” O’Connor said. “We weren’t basing everything on Sebastian, just the county customers. But I think that would be good for them to take that off of Sebastian.”

Regarding the plan to convert the South Beach and mainland county customers on the Vero system to the county rate structure, does O’Connor think the six percent “equalization charge” legally, or at least politically, needs to be stricken there as well?

“No, I don’t,” O’Connor said. “We’re doing this unilaterally, we’re not required to under contract.”