Is Vero Beach contemplating shrinking base of utility customers?

INDIAN RIVER COUNTY — As reported in our sister publication, Vero Beach 32963, the City of Vero Beach seems to be, for the first time, engaging the inevitability of defeat, and trying to spin it as a victory for city utility customers.

At a number of public meetings and in statements from top city leaders, Vero appears to be reconciling itself to the idea that come 2017, it may no longer be providing electric and water service to county and Indian River Shores residents, instead retreating to serve only customers within Vero Beach city limits. “Six months ago, they said this would never happen,” said Indian River County Utilities Director Erik Olson. “Now they’re finally coming to the realization that it probably will happen.”

When the issue is fully studied over the next few months, Olson said, a clear direction will emerge.

“I can imagine what it’s like over there. They are probably thinking, ‘The elephants are coming, let’s save what we can,'” Olson said.

Some say the strategy of pulling back into the city’s borders is an effort to mollify critics, hoping they’ll drink their county water, pay their lower electric rates and never come back to a Vero Beach City Council meeting.

County Administrator Joe Baird, a vocal opponent of the way the city runs the utilities, said the plan to abandon customers outside the city just might work.

“I think that will make everyone happy,” Baird said.

Instead of fighting to the last gasp to preserve its current water, sewer and electric service customers, Vero Beach appears to be thinking about what it would mean to shrink its systems when franchise agreements with Indian River Shores and the county expire in October 2016 and March 2017, respectively.

No one in the city is calling it a defeat, however.

“We like to think that Vero Beach is a cut above,” said Finance Director Steve Maillet, during a recent presentation to the city’s Finance Committee, outlining how the city could “pull back within the borders” to keep providing personal, first-class service to city residents.

Although some 61 percent of its utility customers and 38 percent of its water base would be gone, Maillet said the taxpayers of the city would be better off, should this occur.

He did not say exactly how the city would be able to afford this, in light of summer studies by consultants which predicted a 54 percent increase in water and sewer rates to meet operational costs and maintain the aging systems should the city lose the major part of its customer base.

The first indication that the city was contemplating the possibility that it might one day serve only Vero Beach customers came on Jan. 5, when the City Council decided to add a seat for a representative from Indian River Shores to its Utility Advisory Commission. At the behest of Councilman Brian Heady, the council included a clause that the seat would evaporate should the Shores no longer fall within city utility territory.

The Shores would have to notify the city by October 2011 whether it intends to continue buying water, sewer and electric services from the city. The county must issue its five-year notice by March 2012.

A county committee that deals with utilities in September approved a resolution asking commissioners to give the city notice, within 45 days, that the county intended to serve its own customers come 2017. But in the interest of diplomacy, commissioners tabled the resolution and instead pursued a joint meeting billed as the “Utility Summit” in October.

A joint commission of six with equal participation from Vero, the County and the Shores has been working on the issue and this week is scheduled to choose a firm to study the situation and make recommendations.

Vero Water and Sewer Director Rob Bolton is one of the city’s representatives on that committee, and has been a staunch opponent of any kind of consolidation with the county. On Jan. 19 during a meeting of the city’s Utilities Advisory Commission, Bolton announced that he would be proposing that the city freeze any capital projects outside the its limits until Indian River Shores and the County renewed their franchise agreements.

Over the summer during the water and sewer rate studies, Bolton had estimated all the capital projects on the slate to have a price tag of about $110 million. Construction of the $10 million deep-well injection facility to dispose of treated wastewater and wet weather discharge is going forward, leaving about $100 million in capital improvements on hold.

Maillet said preserving the utilities is not only a way for the city to control its own destiny, but also to have the flexibility of a revenue stream apart from property taxes. He said Vero residents have been dehumanized in all the talk about selling the power plant and consolidating water and sewer services with the county.

“Vero Beach city residents have been excluded from all the discussion of all these things,” he said. It is unfair, Maillet said, that the tenor of most of the proposals on the table requires the city residents to “give up” elements of their assets and their system.

“We should have Rob (Bolton) come in and speak about what would be involved in just pulling back inside the city limits,” Maillet said. “A lot of the future capital needs lie outside the city limits.”

County Commissioner Bob Solari agrees that getting out from under the city system – even at a cost – would be the best deal for county and Shores customers, considering the rate hikes already imposed, plus those coming down the pike.

“There are bigger financial issues that the city is facing, and they don’t have a pro forma to show what exactly the city is going to be facing,” Solari said.

If the day comes when the city’s utility enterprise funds are not subsidized by ratepayers outside the city, city customers and their elected representatives will need to decide whether they want to pay higher utility rates or higher property taxes.

Currently, the water, sewer and electric utilities pump nearly $11 million into the city’s general fund each year through direct and administrative transfers. Something is going to have to give, Solari said, and it will be left to the city to figure that out.

Councilman Brian Heady called a “brainstorming” meeting of the city’s Finance Committee to begin planning for tough times ahead and, in Heady’s words, “steer the ship in the right direction.”

At that Finance Committee meeting where a variety of cost-saving and revenue-raising suggestions were discussed, former Mayor Warren Winchester opened the door to looking at the city’s income from taxpayers and ratepayers in a different way.

“I think there’s a value to raising the (property tax) rate, which people can write off on their federal taxes, and lowering some of the other things, the electric rates and utility rates,” he said. Winchester reminded fellow committee members that the utilities currently provide a revenue stream which supports other city functions. “It would be very significant if we had to withdraw water and wastewater to the city limits of the City of Vero Beach,” he said.

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