Indian River Shores seeking bid from county on water, sewer

INDIAN RIVER SHORES — Still in a dilemma over where to get its water and sewage service after 2016, the Town of Indian River Shores has requested that Indian River County make its own pitch for the town’s business.

On Nov. 16, Shores Mayor Bill Kenyon sent a letter to Commissioner Bob Solari which listed several provisions that would need to be present in any proposal submitted by the County to the Shores.

Mayor Kenyon’s letter carried a request from the Town Council inviting the County to come up with a proposal for how it would take over from the City of Vero Beach in serving the Shores for the next 30 years.

But will this olive branch begin to soothe damage done by the seemingly botched proposal sent to the County in September?

 “We have and continue to openly invite the County to present its proposal for service to the Town. We would appreciate receiving that proposal at your earliest convenience since we have important decisions to make concerning service,” Kenyon wrote.

By contract, the Town needs to give Vero five years notice by Oct. 31, 2011 whether or not it wants to renew the current water-sewer franchise agreement which expires in 2016.

“The proposal should begin service at the earliest practical time, if a waiver of existing franchise terms can be obtained from the City of Vero Beach. If a waiver cannot be obtained, then service would begin in 2016 at the conclusion of the City franchises for water and sewer.”

The Vero Beach City Council appeared to have reached a consensus to give the County a waiver to begin negotiations with the Shores, but the idea of granting a waiver to terminate the franchise early has not yet come up.

Kenyon’s letter goes on to explain that Shores customers would need to be treated the same as existing County customers, that the County would need to pay legal fees up to $50,000, indemnify the Town.

The letter does not address some of the issues raised during a workshop on Nov. 10 at the Town Hall, including limiting the frequency with which utility rates could be raised to once per year.

At that workshop, County officials claimed they were not given a “level playing field” with the City of Vero Beach, based on the proposals sent out to Vero and the County by GAI Consultants without the Town Council’s review or approval of the documents.

The previous proposal contained provisions which made it legally impossible for the county respond, namely the requirement to close on the sale of the Town’s utility assets and start service by Jan. 31, 2011 when the Town has an existing franchise with the City of Vero Beach through Oct. 31, 2016.

At the Nov. 10 workshop, GAI recommended the Town enter into a contract with the City of Vero Beach, but Town officials maintain that they want the process to be competitive and they want to get the best deal for the residents of Indian River Shores.

Still looming over the process is the fact that GAI Consultants continues to work for both the Town of Indian River Shores and the City of Vero Beach.

“There are two issues that really need to be resolved before we go forward,” said County Commission Chair Bob Solari after reading the letter from Mayor Kenyon.

“Number one there is the conflict of interest with GAI working for both the Shores and the City of Vero, and number two, they’re asking for something which would result in the County customers subsidizing the Town of Indian River Shores and I’m not sure that makes sense from a business perspective.”

In GAI’s draft proposal, the Town is asking the County to purchase not only its utility assets at a cost of $2.59 million plus nearly $1.4 million in interest payments and something called “industry risk.”

All of this, when added together, equals the amount that Shores customers pay in a 10 percent surcharge to the City of Vero Beach on their monthly water and sewer bills.

As part of Vero’s proposal, instead of cash changing hands, Vero would waive that surcharge for Shores customers.

That would save about Shores customers $306,000 per year, or close to $4 million over the same 13-year period that the County — should it go along with the proposed price — would pay the Shores $306,000 per year for the Town’s utility assets.

County Utility Director Erik Olson has stated that GAI’s proposal, using replacement costs instead of a lower, depreciated cost he feels would reflect the true value of the aging pipes underground, is way too high.

In addition to purchasing the Town’s assets, the County would have to hammer out some sort of a deal with Vero to either use, lease or purchase the pipes and other water and sewer infrastructure that the City owns within Shores town limits.

GAI stated that the Town owns about 10 percent of the assets that are not privately held by John’s Island Water Management and Vero owns approximately 90 percent of the assets in Town limits that are not privately owned.

Olson said the county could glean some of providing service to the Shores, as it could spread its fixed costs of operating the system and treating the water and wastewater over more customers.

“There are some advantages based on an economy of scale in the situation we’re talking about,” Olson said.

Generally, water and wastewater are cheaper to treat per gallon the more volume being pumped through the system.

The County’s response to the Town’s letter and revised proposal is expected to be a topic of discussion at the Dec. 7 meeting of the Board of County Commissioners.

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