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Board of County Commissioners February 5, 2014 Page 2 of 3 On January 21, 2014, the County Attorney presented the Board's proposal to the City Council. At the meeting, the City Council voted to unilaterally charge County rates and eliminate the 10% surcharge. The Council, however, rejected the split of the equalization charge and franchise fee and the County's operation of the utilities in the event the City could no longer maintain County rates. Thus, although the City Council voted to eliminate the 10% surcharge, the City intends to charge a 6% equalization charge. The City Council directed City staff to negotiate a water, wastewater and reclaimed water agreement with the County that is similar to the agreement between City and the Town of Indian River Shores (the Shores Agreement"). The County Attorney now seeks guidance from the Board as to how to proceed with negotiations with the City. The County and the City have significant differences of opinion as to the ownership of the utility facilities, the value of the City's water and sewer and reclaimed water utility system and the right of the City to serve the Unincorporated Areas after 2017. The City Council's decision leaves the Board with three options. The first option is to enter into a new franchise agreement with the City that is similar to the Shores Agreement This agreement would bind the City to their unilateral decision to charge County rates and eliminate the 10% surcharge. The franchise agreement would also require the City to match the County rates, even if such rates are modified by the County in the future The franchise agreement also would include the ability to terminate or renew the agreement after 15 years. If the Board chooses this option, I recommend that the franchise agreement should include whereas clauses that acknowledge that the City and the County disagree with respect to issues of ownership and the permanent ability of the City to serve the Unincorporated Areas and that the franchise agreement in no way is to be deemed as a waiver by either party's right to raise those issues in the future The second alternative would be to authorize the County Attorney to pursue the appropriate litigation to resolve the key disputed issues. Both the City and the County have received legal opinions from their respective outside counsel that support each side's position. Such litigation could be lengthy and costly for both the City and the County as it will most likely involve both parties hiring outside counsel with specific expertise in utilities law. The final option would be to take no action at this time. The franchise agreement is not set to expire until 2017. Although the constituents in the Unincorporated Areas would not have the protection of a franchise agreement that could be used to enforce the City's unilateral decision, the County would not be bound by a long term franchise agreement. RECOMMENDATION. The County Attorney recommends that the Board authorize the County Attorney's Office to negotiate a franchise agreement with the City that is similar to the Shores Agreement. The franchise agreement however should include whereas clauses that acknowledges that neither party is waiving its rights to their respective positions with regards to ownership of the utility facilities and the City's alleged right to permanently serve the Unincorporated Areas. Such a franchise agreement would bind the City to its commitments to our constituents and at the same time avoid protracted, expensive litigation between the two public entities. F:1Ananwyt inda1GENERALIB C CLlgenda MemoslU+ilisies(Water & Sewer Issues) 1-19-14.doc 91