VERO BEACH — During simultaneous meetings Tuesday morning, the Vero Beach City Council and the Indian River Board of County Commissioners will both take a hard look at projected water and sewer rates for their constituents — but with different goals.
Vero council members have on the table a proposal to eliminate more than $13 million in cumulative rate increases that were scheduled to hit customers between now and 2015.
Those rate increases, if implemented, would have created a gap between the utility bills of customers on the Vero system and customers on the Indian River County water and sewer system ranging from 50 to 112 percent over the next five years.
The city has not disclosed how it plans to offset the revenues — $1.2 million in the coming year alone — that those rate increases would have brought into the enterprise fund of the water and sewer system. Vero Councilman Brian Heady said the staff had not offered a strategy to him prior to the meeting explaining how the city could afford to keep current rates.
County Commissioners will be hearing a presentation about those same rate increases and how they would impact county customers and the community’s economy as a whole.
In 2009, Vero Beach paid consultants Public Resources Management Group about $65,000 to analyze the revenue requirements of the system and to recommend rates going forward that would keep the utility afloat financially. The scheduled increases were recommended and adopted to meet the city’s ever-growing expenses, which include salaries and pensions for the 80-plus water and sewer employees, chemical and compliance costs for treating and testing water and wastewater in the system, capital projects and renewal and replacement needs of a system that is more than 80 years old — much of it which is more than 40 years old.
Officials of the Vero system, which currently serves customers in the Town of Indian River Shores and the unincorporated county on the mainland and on the south barrier island, are understandably trying to do whatever they can to keep those 38 percent of customers, who pay 10 percent more for service than city customers. That out-of-city surcharge on utility bills nearly completely funds an $800,000 transfer into the city’s general budget, keeping city customers’ property taxes artificially low. An estimated 44 percent of the system’s revenues come from customers out of the city, who have the right to pull out of the system when franchise agreements expire in 2016 for the Shores and 2017 for the county.
The county is also looking at rates and potential savings to customers in the run-up to its decision of whether to stay in the Vero system or build the infrastructure to service county customers. The county already has adequate water supply and capacity to process the additional wastewater from county residences.
Local activists Dr. Stephen Faherty and Glenn Heran are presenting their findings to the county. The presentation is based on public records pulled from both Vero and the county and assimilated into a package of spreadsheets, constituting a financial model plotting the rates of both systems.
Faherty said he sees the move by the city as strictly political. After spending several years looking at the figures and at the business model for the Vero system — which includes more than 85 percent fixed costs that do not vary with volume of consumption — he is left wondering how Vero can even maintain its system without the revenue from the increases.
“The PRMG rate consultant projected revenue requirement increases of about 26 percent for water and about 25 percent for wastewater from October 2010 thru 2014,” Faherty said. “Where have expenses been reduced in the future by that amount unless $38 million in capital expenses are eliminated, maintenance is deferred, and more loans are obtained for water-sewer operations?”
As to the reason for the timing of an effort to curtail the massive rate increases scheduled for the next few years, Faherty said he thinks Vero officials were jolted by the information he and Heran have been presenting to various groups around town, including the Indian River Shores Town Council.
“I would speculate that the City may have seen the rate comparisons we presented in the past couple of weeks showing the County water/sewer rates significantly lower than the City’s from 2010 through 2016 and the savings of nearly $22 million in water-sewer fees in that period if we had the County provide water/sewer services rather than the City’s,” Faherty said. “Maybe their political visceral reactions and desire for November 2010 reelection kicked in and this proposed resolution was their reaction.”
Should the Vero resolution ultimately pass, it will be up to the county and Shores officials to determine, in the long-term, if the current rates are sustainable or if, eventually, the city will need to increase revenues to offset its growing expenses.
The Vero Beach City Council meets at 9:30 a.m. at City Hall and the Board of County Commissioners meet at 9 a.m. at the County Administration Building. Both meetings are televised, on Vero’s Channel 13 and the County’s channel 27, and will be replayed on loop later in the week.