News Analysis
A piece of legislation intended to curb the financial excesses of municipal electric, water and sewer utilities has been watered down in the Florida House to the point that it offers no protection for Vero utility customers located outside the city limits in South Beach and Indian River Shores.
The mere skeletal remains of House Bill 1331, if it passes the Florida House, Senate and is signed into law, will only serve to limit municipal utilities that charge outside customers surcharges of more than 25 percent and transfer more than 10 percent of their utility revenues into their city general funds to keep property taxes low.
Though Vero once assessed a 10 percent surcharge on outside customers, that practice is a thing of the past. With regard to Vero’s direct transfers into the city’s general fund, the 6 percent currently transferred would be well beneath the 10 percent cap, which represents the average rate of return that investor-owned utilities are permitted to take in profits by the Florida Public Service Commission.
Even on the sliding scale delineated in the bill that reduces the 10 percent by “300 basis points” if more than 30 percent of customers reside outside the city limits, that would take Vero’s maximum transfer percentage down to 7 percent, so the current 6 percent transfer would be perfectly legal under the proposed bill.
The committee substitute bill now being circulated in Tallahassee no longer includes the need for a referendum of utility customers to set rates – that provision was too unwieldy anyway, and begged a number of questions such as who, on behalf of a business, would get to vote? Would the owner of a rental home get to vote, or the renter paying the utility bill?
Would a major customer like Piper or the Indian River Board of County Commissioners get one vote per utility meter or per account? Or just one vote?
The proposed bill reverts to the existing statute which only requires a noticed public hearing to set or change utility rates.
Where does this leave Vero’s outside customers in Indian River Shores and South Beach who were slapped with double-digit water-sewer rate increases in January, and who face another double-digit hike Oct. 1, and two more, compounded in the coming years?
Indian River Shores heads to appeals court on Tuesday against the City of Vero Beach, when the Shores hopes a panel of three judges will overturn a 2022 ruling by Circuit Court Judge Janet Croom. Croom ruled in Vero’s favor saying the city did not violate its 2012 utility franchise agreement with Indian River Shores when Vero refused to match Indian River County Utilities’ reduction of its reuse irrigation water rates in 2019.
The Shores wants the appeals court to uphold the clause in the 2012 contract whereby Vero promises to match Indian River County rates for published rate classifications.
Vero maintains that the city is in the right – and Croom agreed – because the city provides the Shores with on-demand “pressurized” reuse irrigation water, but the county charges a much lower “disposal rate” for dumping non-pressurized reuse irrigation water into retention ponds for sprinkling use. Croom agreed with Vero that the city could not cover its costs of providing the reuse irrigation water for the county’s published rate so there was no breach of contract.
Should the Shores prevail in its appeal, the city’s One Rate scheme will surely be called into question, as the newly imposed water and sewer rates are decidedly higher than Indian River County’s published rates. And Vero will likely appeal to the Florida Supreme Court because the issue not only impacts Vero, but it’s precedent-setting in terms of the city’s power to set its own rates, versus the authority of a franchise agreement.
Should the city prevail on the narrow issue of the “pressurized” reuse irrigation rates, the Shores will likely file a fresh breach of contract lawsuit challenging the One Rate plan.
The unincorporated county customers in South Beach have fewer options, and seemingly no legal recourse, as the Indian River Board of County Commissioners recently saddled them with a 30-year franchise agreement that recognizes Vero’s power as a monopoly utility provider, and includes zero rate protection.
