Vero Beach advisory committees urge caution, appraisal of utility

VERO BEACH — The Vero Beach Utilities and Finance Commissions gathered Tuesday to identify strengths, weaknesses, opportunities and threats related to the city’s water-sewer system and potentially selling it or merging with Indian River County.

The upshot of the meeting was that – without a lot more study, appraisals and number crunching – the city should maintain the status quo.

Mayor Jay Kramer had called the meeting, he said, to ask committee members what they were thinking. Kramer has been resistant to a push to negotiate a takeover of the city’s system by Indian River County and he said he wanted to make sure the tactic he’s taking wasn’t “off in left field” from what the small advisory committee thinks is the right thing to do.

A plan was put forth earlier this month by utility activists Dr. Stephen Faherty and CPA Glenn Heran proposing that Indian River County should take over all the city’s water-sewer utility assets and its debt and run a regional system. Heran estimated that the city has about $27 million in debt incurred to build the system, including $11 recently borrowed for the deep injection well and some operations buildings hardened for hurricanes.

One of the central merits, according to Heran and Faherty, of the plan, would be having everyone – no matter whether they live in Vero, the County or Indian River Shores – on county rates. County rates are currently lower than Vero Beach rates for combined water-sewer customers, unless the customer uses a very large amount of water.

Kramer and Utility Director Rob Bolton have estimated the value of the utility as $47 million net of the utility’s debt and estimates as high as $100 million have been floated. Kramer has said repeatedly that allowing the County to take over the system would be “giving it away” and he’s been seeking other options, including privatization and a utility authority.

The utility currently infuses about $1.5 million per year into the General Fund. This, combined with the nearly $8 million transferred from the Electric Utility is more than double the $4.1 in property taxes levied on city residents each year.

The city keeps the millage rate of $1.93 per $1,000 of taxable value artificially low by using utility revenues from customers who live outside the city. About 61 percent of electric customers and nearly 40 percent of water-sewer customers live in the County and the Town of Indian River Shores. County and Shores customers pay 10 percent more than city customers on their monthly bills, directly subsidizing property taxes and city operations.

Bolton estimated this week that city property taxes, which account for roughly 10 percent of homeowners’ total tax bill, could jump as much as 22 percent if Vero lost the stream of revenue from the water-sewer utility. That assertion has yet to be discussed or dissected in a public meeting.

Indian River County Utilities does not transfer dollars into the general fund of the county.

Advisory committee members and staff are deeply concerned about losing that revenue and urged caution before the City Council makes any decisions about changing the city’s utility business plan.

The brainstorming session did not put forth hard numbers or any financial analysis, but merely tossed out ideas of things the city should or could do.

Finance Committee Member Dick Winger said he thinks the city should have the water-sewer system appraised and that it should seriously look at a utility authority to run the system.Former Vero Councilman Bill Fish agreed, with one caveat. Fish was on a City Council which saw huge consultant bills for projects which started out small.

“It’s really nice to see what your assets are worth, but if it’s going to cost a lot of dollars,” Fish said.

No estimates were given about how much the appraisal might cost, but Vero is currently under contract with GAI Consultants for $84,900 to appraise and evaluate just the part of the system on the South Barrier Island.

Bolton also said he had received a proposal from GAI Consultants for an “Optimization Study” designed to identify inefficiencies in the system and suggest solutions to reduce costs. That proposal or its cost was not available from City Hall on Tuesday.

In 2009, a rate study performed by Public Resources Management Group which took several months and cost the city about $80,000 ($35,000 of that just for water-sewer) recommended that to have rates sufficient to sustain the system long-term and provide for maintenance and capital needs, Vero would need to phase in about $13 million in rate hikes beginning in 2009.

The rates were slated to go up exponentially through 2013 and then have small annual increases. The new rate structure was approved but later repealed by the Vero Beach City Council.

Critics have expressed skepticism that Vero can continue to exist without the expenses contained in the PRMG rate study and that rates will go up in the near future.

The Finance and Utilities Commissions will meet again to continue this conversation on April 5. The Vero Beach City Council also meets on April 5.

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