HomeMy WebLinkAbout3/19/1986 (2)Wednesday, March 19, 1986
The Board of County Commissioners of Indian River County,
Florida, met in Special Session at the County Commission
Chambers, 1840 25th Street, Vero Beach, Florida, on Wednesday,
March 19, 1986, at 7:30 o'clock P.M. Present were Don C.
Scurlock, Jr., Chairman; Patrick B. Lyons, Vice Chairman; Richard
N. Bird; Margaret C. Bowman; and William C. Wodtke, Jr. Also
present were H. T. "Sonny" Dean, General Services Director;
Charles P. Vitunac, Attorney to the Board of County Commis-
sioners; Joseph Baird, OMB Director; Terry Pinto, Utilities
Director; Jeffrey Barton, Assistant Utilities Director; and
Virginia Hargreaves, Deputy Clerk.
The hour of 7:30 o'clock P.M. having passed, the Deputy
Clerk read the following Notice with Proof of Publication
attached, to -wit:
VERO BEACH PRESS -JOURNAL
Published Daily
Vero Beach, Indian River County, Florida
COUNTY OF INDIAN RIVER: STATE OF FLORIDA
Before the undersigned authority personally appeared J. J. Schumann, Jr. who on oath
says that he is Business Manager of the Vero Beach Press -Journal, a daily newspaper published
at Vero Beach in Indian River County, Florida; that the attached copy of advertisement, being
a
in the matter of Y
In the Court, was pub-
lished in said newspaper in the issues of
Affiant further says that the said Vero Beach Press -Journal is a newspaper published at
Vero Beach, in said Indian River County, Florida, and that the said newspaper has heretofore
been -continuously published in said Indian River County, Florida, each daily and has been
entered as second class mail matter at the post office in Vero Beach, in said Indian River Coun-
ty, Florida, for a period of one year next preceding the first publication of the attached copy of
advertisement; and affiant further says that he has neither paid nor promised any person, firm
or corporation any discount, rebate, commission or refund for the purpose of securing this
advertisement for publication in the said newspaper. %%
i
Sworn to and subscribed befo met',a�dayof___j�/l� A.D. 19
(; ( usiness an r)
(SEAL) (Clerk of the Circuit Court, Indian River C u ty, Florida)
NOTICE OF PUBLIC HEARING
Notice is hereby given that tits Board of my
Commissioners of Indian River County, wil hold
a public hearing in the Commission Roo , In-
dian River County Administration Building, 840
25th Street, Vero Beach, FL 32960 on Wed
day, the 19th day of March, 1986, at 7:30 P.M.
consider the request of General Development
Utilities, Inc. for a sewer rate increase in the
Vero Beach Highlands and Vero Shores Water &
Sewer Division. At that hearing, the Commission
will consider General Development Utilities,
Inc.'s request for a continuation of the 1983
,Rate Case docket.
The rate ,increases will reflect the following
changes in the sewer rates currently paid by a
typical single-family residential customer using
5,000 gallons per month:
Present Rates Meter Size
%x W, 1,.
Sewer: Base Facility Charge 1.00 1.00
Usage (5,000 gallons)
$1.18 x 5 5:00 '5.90
Total 8.90 6.90
Proposed Rates
Sewer: Base Facility Charge
(includes $1.61
customer charge) 8.46 8.46.
Usage (5,000 gallons) 1
$1.88 x 5 9.40 9.40
Total 17.86 17.86
Proposed rates shown are based on 1982 oper-
ating costs and do not reflect full recovery of
current operating costs and return on capital re-
quirements.
All interested parties will be heard.
Dated this 4th day of March, 1986. j
BOARD OF COUNTY COMMISSIONERS
INDIAN RIVER COUNTY, FLORIDA 'I
Don C. Scurlock, Jr., Chairman
Mar.4, 11, 1986
BOOK 63 a"� 946
9 196
BOOK 63 Fkou 947
The Chairman called the meeting to order and announced that
it is basically a continuation of a previous rate hearing held on
November 9, 1983, at which time the Commission granted a portion
of the rate increase requested. He then explained the procedure
to be followed tonight, advising that he would ask the General
Development people to present their rate case first and enter it
on the record, after which the Utilities Department would make
their presentation, and then the meeting would be opened for
public comment.
Ned Shandloff, Corporate Counsel for General Development
Utilities, business address - 1111 S. Bayshore Dr., Miami, stated
that during the presentation he will refer to General Development
Utilities as GDU. Attorney Shandloff confirmed that they are
here tonight for a continuation of the 1983 rate case based on
the 1982 test year regarding sewer only. In the 1983 rate case,
water quality was an issue. GDU is addressing that issue by
connecting to the county system, and county water should be
flowing to their customers sometime this summer. GDU is here
tonight to concentrate on the sewer rate issue. Attorney
Shandloff noted that by law GDU is entitled to a fair rate of
return on their investment, but they are only requesting to break
even based on the 1982 test year re sewer service. He requested
that all witnesses be sworn in before testifying.
Attorney Vitunac swore in all those who would be presenting
testimony for the applicant, and asked that when they came up to
present testimony, they acknowledge they have been sworn in.
Attorney Shandloff then questioned Stephen Craig Wheeling,
both noting that they have been sworn in, and Mr. Wheeling
answered as follows.
Stephen Craig Wheeling, business address - 1111 S. Bayshore
Dr., Miami, advised that he is Director of Rate Regulation and
Planning for GDU. He primarily directs and oversees preparation
of rate cases for the utility and monitors and interprets new
rate legislation and its impacts. Re his qualifications,
2
Mr. Wheeling stated that he has a Master's degree in Business
Administration from Vanderbilt University; he worked as a senior
financial analyst for a major chemical company where he analyzed
business investments in excess of $100 million dollars; he has 6
years' experience with General Development Corp., the last 2
years being with GDU; and he has testified on utility rate
matters before the Glades, Hendry and Charlotte County
Commissions.
Attorney Shandloff asked if Mr. Wheeling has reviewed the
testimony, numbers, transcripts, etc., from the 1983 rate hear-
ing, and Mr. Wheeling confirmed that he has.
Attorney Shandloff then entered a xerox copy of the
Transcript of Proceedings of the rate hearing held by the County
Commission on November 9, 1983, as Exhibit "A".
(ALL EXHIBITS ENTERED ARE ON FILE 1N THE OFFICE OF THE
CLERK TO THE BOARD.)
Attorney Vitunac inquired if the residents had a spokesman.
William W. Davenport, Sr., informed the Board that he was
spokesman for the Vero Shares Home Owners Association, consisting
of approximately 155 homes, with about 105 active members.
Attorney Vitunac advised Mr. Davenport that he had the
option to look over the evidence being presented, but Mr.
Davenport did not -wish to take the time to do that tonight as he
believed there are hundreds of pages involved and he could not
make every member familiar with it. He was sure it would not
satisfy everyone tonight.
Attorney Shandloff then entered a copy of the original rate
case filing into the record as Exhibit "B".
Mr. Wheeling briefly reviewed the history of GDU's applica-
tion for this rate increase, explaining that in 1983, GDU filed
for water and sewer rate increases based on the 1982 test year's
expenses. The Commission denied the full rate request based on
3 p
BOOK 63 FADE 948
MAR 19 1966 sooK 63 F n 949
water quality and contribution level considerations, but allowed
a 40% increase, which was placed into effect by the utility. In
June, 1984, GDU applied for increases in sewer plant capacity and
main extension charges calculated at its 75% contribution level.
In December, 1984, the County approved the new extension charges.
In December., 1985, the utility filed for a sewer rate increase
based on the 1982 test year rate case, and that's why they are
here this evening.
Commissioner Lyons was not sure that everyone understood
what is meant by the 75% proportion for the impact fee, and'he
felt the Board's intent should be explained.
Chairman Scurlock explained that originally GDU had an
impact fee which paid for rendering service plant capacity to
each tap, and they basically recovered 50% of that plant capacity
in the impact fee and 50% from the customer's rates. The County
Commission's policy with their own utility is to put the burden
of new growth on new growth, and we try to recover more money
from the impact fee up front and less from the customer in their
monthly charges. Therefore, when GDU came in for an increase we
asked them to recover more out of their impact fee and less out
of their monthly charge to their customers, which would have the
effect of lightening the impact of the monthly bill on existing
residents.
Attorney Shandloff then presented a copy of present and
proposed rates to be entered as Exhibit "C", and asked Mr.
Wheeling if these are the proposed rates asked for tonight and if
so, are these the same rates requested in 1983. Mr. Wheeling
answered yes to both questions.
Attorney Shandloff asked that Mr. Wheeling describe the
sewer rate proposal and how it differs from the current rates.
Mr. Wheeling explained that for a typical 5,000 gallon
residential user, sewer rates would increase from $6.90 to
$17.86, an increase of $10.96, or 159%. Additionally, fixed type
charges have been split into a base facility charge designed to
4
recover fixed costs of operations incurred whether or not a
customer uses the service during the month, and this will be
reflected on the bill as a base facility charge.
Chairman Scurlock wished to know their typical basic usage
figure, and Mr. Wheeling stated that typically in the State of
Florida, it is 4-5,000 gallons. Chairman Scurlock noted that,
therefore, an average customer could expect to see a difference
of $6.90 going to $17.86.
Commissioner Wodtke asked if the $17.86 figure includes the
base facility charge, and this was confirmed.
Mr. Wheeling then reviewed the columns on a chart reflecting
GDU's sewer operations based on 1982 operating results. He noted
that the first column, which represents 1982 operating results in
thousands of dollars for the GDU/Vero sewer operation, shows
$50,000 in income and expenses of $176,000 for a net loss of
$126,000. The second column shows that the rates requested
tonight would give GDU $167,000 in income and $169,000 expense
for a net loss of $2,000. Mr. Wheeling pointed out that this is
based on 1982 expenses and emphasized that there are no profits
for reimbursement of interest expense included in these rates.
Commissioner Wodtke wished to know if their anticipation to
derive revenue of $167,000was based on the number of customers in
1982, and if so, how many customers there were in 1982.
Mr. Wheeling confirmed it was based on the 1982 customers,
at which time there were 893 connections; in 1985, there are 987
connections.
Commissioner Wodtke asked if the average usage is still
5,000 gallons, and Mr. Wheeling advised that they have not
performed a billing analysis for 1985, but they have taken a look
and done some pro forma analysis on the effect of these proposed
rates and it shows, because of higher expenses and plant
additions, GDU,would lose money even at the higher rates.
Commissioner Wodtke asked if this would be true even after
considering the 1984 increase in impact fees, main extension
5
6R 19 1986 Book 6 FBF 30
L-
MAR 19 -1986
Boa 6 3 r,�,r .9 5 1
charges, and different capitalization, and Mr. Wheeling stated it
would.
Attorney Shandloff asked what improvements have been made to
the sewer system since 1982, and Mr. Wheeling advised that
additions totaling more than two million dollars have been made
to the wastewater treatment plant and improvements have also been
made to the perc ponds.
Attorney Shandloff asked if the rates would be higher if GDU
based their rate increase on the current facilities with the
provision for a fair rate of return, and Mr. Wheeling stated that
they would.
Attorney Shandloff advised that he would ask Mr. Morris to
explain the facilities that were put in, but stressed that none
of those are included in this request. He then had Mr. Wheeling
identify the GDU Service Availability and Main Extension Policy,
which was approved in 1984 and which is currently in effect, and
entered same into the record as Exhibit "D".
Attorney Shandloff asked Mr. Wheeling what the above shows
re rates, and Mr. Wheeling stated that it shows sewer connection
charges calculated based on a 75% contribution level as directed
by the Indian River County Commission.
Attorney Shandloff asked Mr. Wheeling if the numbers shown
are true and accurate to the best of his belief, and Mr. Wheeling
confirmed that they are.
Curtis Morris, business address -901 Pruynville Rd., Port
St. Lucie, came before the Board, acknowledged that he had been
sworn in, and stated that he is Division Director for General
Development Utilities in their Port St. Lucie, Vero Shores, Vero
Highlands, and Silver Spring Shores Division in Ocala, and his
responsibilities are to manage the day to day activities of the
water and sewer facilities in those divisions. Mr. Morris cited
his qualifications of approximately 20 years experience in the
water and wastewater field for which he is licensed by the State
of Fl-orida.
6
Attorney Shandloff asked Mr. Morris if GDU is in compliance
with all state water and wastewater standards, and he confirmed
that they are. The Attorney then asked that he describe the
wastewater facilities as they existed during the 1982 test year
and as they currently exist.
Mr. Morris reported that the wastewater facilities that
existed during 1982 consisted of a 250,000 gallon activated
sludge package plant with effluent being disposed of through
percolation ponds. The collection system is pretty much the same
today as it was in 1982 with the exception of three lift stations
that were modified in 1983 and 1984. The collection system
consists of approximately 4 miles of force mains, 13 miles of
gravity collection system, and 8 lift stations. In 1982 there
were 893 connections served_by the facility. In 1984 additions
to the perc ponds were constructed and construction also begun on
the new treatment facility that was finished in 1985. The new
facility existing today has the capability of treating 850,000
gallons of sewage, and it was placed in service in August, 1985.
Chairman Scurlock inquired if they are asking the existing
rate payer to pay for capacity reserved for future growth.
Mr. Wheeling answered that they are not; they have kept all
the capital costs for the new sewer plant out of this particular
rate base, and if they did include the plant, it would be just at
the used and useful amount, or about half of the plant.
Attorney Shandloff informed the Board that GDU has now
presented its case and will be glad to answer any questions.
Chairman Scurlock reserved the right to ask questions later
on, and asked staff to make their comments at this point. He
believed one of the specific questions we need to address is
whether existing customers are being asked to pay for plant
capacity that is being reserved for the future.
Attorney Vitunac swore in members of the County staff who
might testify - Utilities Director Pinto, Assistant Utilities
Director Barton, and OMB Director Baird.
7
MAS rs BOOK �,� 9.52
� 6
BOOK 63 Fnut 953
Director Pinto confirmed that the improvements discussed by
GDU were made after the test year of 1982 and that during our
analysis re wastewater treatment, we determined that the plant in
existence at that time was 100% used, and, in fact, the existing
customers were exceeding its capacity. Director Pinto then
referred to the 75% capture of capital through impact fees dis-
cussed earlier and pointed out that will be a major,concern in a
future rate case because that is capital money that is contribu-
ted and it reduces the amount of money they can recover on the
amount of investment they make.
Commissioner Wodtke asked if there wasn't a moratorium on
any additional construction at the time of the 1983 rate hearing
because of the plant capacity, and Utilities Director Pinto
confirmed there definitely was.
Discussion continued re the fact that everything presented
by GDU is based on the test year of 1982, and Utilities Director
Pinto emphasized that we do not want future expense to be placed
in the rate base.
Chairman Scurlock asked when staff analyzed this, if they
found any administrative expenses that were high, and Director
Pinto stated that staff reviewed all expenses including salaries
of personnel, and they were not out of line.
Assistant Utilities Director Barton referred to his memo of
March 19th:
8
TO: BOARD OF COUNTY COMMISSIONERS DATE: MARCH 19, 1986
THRU: TERRANCE G. PINTO P
DIRECTOR, UTILITY SERVICES
FROM: JEFFREY K. BARTON, ASSISTANT DZRECTOR, UTILITY SERVICES ���►
JOE A.J. BAARD, DIRECTOR OMB
SUBJECT: COMMENTS ON GDU SEWER RATE INCREASE
General Development Utilities has filed an application for an increase in
rates. The increase requested is for the difference of the rates approved
at the Public Hearing of November 9, 1983 and the rate which was requested
at that time.
At that time the staff comments were that the rate request was justified.
approved. (Memo attached dated November 8, 1983).
The sewer rate approved at the Public Hearing of November 9, 1983 was
$1.00 Base Facility plus $1.18/1,000 gallons to a maximum of 10,000
gallons (this increase was from a flat charge of $6.00/month).
General Development Utilities are using the same 1982 Test Year in
requesting the balance of the rate increase which does not include any
capital expenses that GDU has spent since 1982.
Included are the following:
1) Chart showing the current and proposed sewer charges.
2) Copy of GDU main extension and service availability
policy including current impact fees da -ted July 24, 1984
and filed with County Utilities.
3) Customer Complaint Action Log.
Staff recommends the requested rate increase.
GDU SEWER RATE COMPARISON
Gallons used Current Rate Proposed Ratee
Base Facility (Zero Gal's) $1.00 8.46
1,000 2.18 10.34
2,000 3.36 12.22
3,000 4.54 14.10
4,000 5.72 15.98
5,000 6.90 17.86
6,000 8.08 19.74
7,000 9.26 21.62
8,000 10.44 23.50
9,000 11.62 25.38
10,000 12.80 Max 27.26 Max
9
MAR 10 1986 Uilu I Ata 95
MAR IS 1966 BOOK 63 rtjE 9,55
General Development Utilities. Inc.
+�++SOUT►+BA33'31 YS"OREDRIVE 1305 ]SO•t33�
M+AM.. FL
July 24, 1984
Honorable Don C. Scurlock, Jr. - Chairman
Indian River County Commission
1840 - 25 Street
Vero Beach, FL 32960
Re: Request for Public Hearing pertaining to the General Development
Utilities, Inc. Service Availability and Main Fxtension Policy
for Vero Beach Highlands and Vero Shores Water and Sewer Division
Dear Mr. Scurlock:
Pursuant to Section 17, of a Resolution dated April 5, 1960, filed
for record on April 17, 1964, titled "General Development Utilities,
Inc. Water and Sewer Franchise" as amended, General Development
Utilities, Inc. hereby gives notice that the Company deems it necessary
to amend its Main Extension and Service Availability policy for its
Water and Sewer Division for Vero Beach Highlands and Vero Shores.
The present charges for plant capacity, main extension charges and
meter connection charges and those proposed are reflected below.
Water
Plant Capacity
Line Extension
Impact Fee
Meter Connection (3/41#)
Meter Connection (1")
Meter Connection (1�11)
Meter Connection (2")
Present
$ .50 per GPD
$ 5.00 per Front
Footage
$100.00
$150.00
$250.00
$300.00
Provosed
$ 1.58 per GPD
$ 6.51 per Front
Footage
$388.00 per ERU
$150.00
$200.00
$300.00
$400.00
Sewer Present Proposed
Plant Capacity $ .75 per GPA S 2.48 per GPD
Line Extension $ 12.00 per Front $ 15.77 per Front
Footage Footage
The effect on a single family residential unit with a 5/8" x 3/4"
Water Meter and PO feet fronting on the water and sewer mains, for
example, is as follows:
Present Proposed
Water $ 675.00 $1,399.00
Sewer $1,222.50 $1,758.00
These charges are non-recurring charges to be paid once by each
new customer at time of connection.
A document entitled "Service Availability and Main Extension
Policy" has been submitted to Mr. Terry Pinto Utilities Director, for
his review and will be submitted by him to the County Commission prior
to the public hearing. I am enclosing a copy for your information and
use with the changes underlined with present and proposed rates high-
lighted.
We request that Section 14 of the original franchise resolution
as amended be further amended to include the proposed increased
charges and that the policy set forth in the aforementioned document
be made a part of the franchise granted to General Development
Utilities, Inc. by the Board.
Ten copies of the application are submitted with the original for
distribution to the other County Commissioners, the County Attorney,
the County Administrator, County Clerk and Utilities Director.
If you have any questions, please advise.
Sincerely, 1 /`
� / 1
GENERAL DEVELOPMENT UTILITIES, INC.
Nancy,H. Roen
Corporate Counsel A.,=
CUSTOMER COMMUNICATION
ACTION LOG
COFFEE, JIM
Complaint - Poor quality water.
Response - Flushed lines.
DAVENPORT, WILLIAM
Complaint - Water quality poor. Hydrant needed replacing.
Response - Flushed hydrant. Hydrant repaired.
HINZMAN, TERRY
Complaint - Water quality terrible.
Response - Contacted customer. Flushed line and hot
water tank.
OPALKA, STANLEY
Complaint - Rusty Water.
Response - Problem caused by galvanized service line on
customer's property. Advised customer to
replace line from meter to house to eliminate
problem.
PEIL, WILMER & SHIRLEY
Complaint - Water quality bad.
Response - Contacted customer. Flushed water heater.
RANCOR, FRED
Complaint - Quality of water terrible.
Response - Message left. Re -contacted customer, flushed
water heater.
SAMMARTANO, ANTHONY
Complaint
Response
WILLIAMSON, MARY
Complaint
Response
WRIGHT, HELEN
Complaint
Response
- Quality of water poor - yellow.
- Flushed lines - contacted customer. Collected
samples for bactee analyses. Test results
negative.
- Low pressure.
- Replaced old galvanized service line from main
to service line.
- Water taste terrible.
- Flushed lines.
CUSTOMER COI-TLAINT ACTION LOG
11
MAR 19 1986 BOOK 6 3F, � 6
MAR
19
1986
�oK
97
Assistant Director Barton noted
in that at the prior
hearing, the Board authorized a 40% increase in rates. Prior to
that, the average household was paying a flat fee of $6.00 a
month for sewer. The authorized rate at the time of that public
hearing was a two part rate - a base facility charge of $1.00 a
month and 1.18 per thousand gallons, and that is where we are
today. The proposed rate has a base facility charge of $8.46
plus $1.88 per thousand gallons. At the request of the Chairman,
Director Barton then proceeded to review the chart on the GDU
sewer rate comparison, pointing out that in the past i'f you were
an absent owner, you would be rendered a bill for $1.00, and
under the proposed rates, you would receive a bill for $8.46,
which is the base facility charge. He explained that the base
facility charge represents the utility's current fixed expenses
spread over the entire customer base - their fixed cost of
operation.
Chairman Scurlock further clarified that it represents the
capacity they have sitting there reserved for each customer and
the cost to operate the system while that customer is gone.
Assistant Director Barton stressed that 1982 is the base
year; any improvements since that test year are not included in
the capital amounts they have invested in the utility; and GDU is
not asking for a rate of return on those subsequent additions.
Chairman Scurlock asked if the fact that we have increased
the impact fee percentage would help mitigate future rate in-
creases caused by new growth.
Assistant Director Barton stated it would affect rate years
after 1984 when the impact fee was imposed. He confirmed that as
people pay to connect onto the system, whatever they pay, whether
it is called contribution in aid of construction or impact fee,
reduces the utility's carrying value and accordingly, reduces
their investment by whatever is paid.
Commissioner Bird asked if staff in analyzing GDU's figures
and expenses found anything out of line relative to a system of
12
this type and size, and Assistant Director Barton stated that
they did not find anything out of line in 1982 and still do not.
Commissioner Wodtke wished to know if staff was able to
separate the cost for the water operation, and Assistant Director
Barton advised that GDU did provide the actual cost of operating
each system.
Chairman Scurlock asked if staff checked for any possible
duplication, and Assistant Director Barton noted that staff did
not go into their actual books.
Commissioner Wodtke addressed the average usage figure of
5,000 gallons, and Mr. Wheeling stated that in 1982, the usage
was slightly higher than 5,000, but he used the 5,000 gallon
number because Mr. Morris indicated that usage has gone down
subsequent to 1982. Assistant Director Barton confirmed that
this is in line with what we are experiencing with our system.
Commissioner Bird inquired about GDU's ability to come back
and request another rate increase after we taken action tonight.
Assistant Director Barton advised that they can do it at any
time, but they would have to bring their operating expenses,
etc., up to date and use a different test year.
Mr. Wheeling informed the Board that GDU has no intention of
filing another rate case in 1986 in the sewer area if they
receive the full rate increase tonight.
Chairman Scurlock opened the floor to the public and asked
anyone who wished to give any testimony to stand up and be sworn
in. About thirteen people stood up and were sworn in by Attorney
Vitunac.
William Davenport, Sr., representing the Vero Shores
Homeowners, came before the Board and confirmed that he was under
oath. Notice of the public hearing with attached letter and
newspaper article was submitted for the record and marked Exhibit
"A" Public.
Mr. Davenport asked the GDU people if they have a utility
franchise with the county, and if so, when was it issued.
13
MAR 10 1966 Bou 63 in'A'15YS
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MAR9 198 ��
1 � B00lf �� PAGE 959
Attorney Shandloff believed the original franchise was dated
1961, and it is a 30 year franchise, which would take it to 1991.
Mr. Davenport asked if GDU has any intention of surrendering
that facility to the county at the end of the franchise.
Mr. Wheeling did not have any knowledge of what the
company's intentions are at the end of the franchise.
Mr. Davenport asked if the county is furnishing a pipeline
of water to General Development and whether GDU will be buying
treated water from the county and selling it to Vero Shores.
Attorney Shandloff agreed that they will do so, and stated
that he wished Mr. Wheeling to clarify another point.
Mr. Wheeling explained that while GDU will not ask for a
sewer rate increase in 1986, they will ask for a pass through of
the differential between their rates and the County rates after
they are connected to the county.
Chairman Scurlock pointed out that we are not talking about
water tonight, but Mr. Davenport believed water and sewer go hand
in glove.
Allen Reynolds, civic liaison officer for Vero Shores,
acknowledged that he was under oath. He advised that he is a
small contractor and he does believe developers should pay impact
fees. Mr. Reynolds stated that his family consists of two
persons; their water usage runs about 5-6,000 gallons a month;
and he believed the average runs higher than stated.
Chairman Scurlock noted that the breakdown indicated that
the average was higher than 5,000 gallons in 1982.
Mr. Reynolds stated that being a contractor, he saw a lot of
construction by GDU in 1982; so, he felt that 1982 being a test
year is a little bit out of context and could sway their figures
to look better.
The Chairman pointed out that if GDU went to a later test
year, such as 1984, they would be able to include additional new
capital of almost 2 million, which would inflate the increase,
14
i � r
and also the rate of return on that obviously would be higher;
therefore, he felt Mr. Reynolds' statement was incorrect.
Mr. Reynolds believed inflation rates are coming down, and
this is a private company whose proposed sewer rates are higher
than the city's and close to those of the county. He felt that a
private company can do things much cheaper than the government,
and he wished to make the point that a private company's costs
should be much lower than what they are showing. Mr. Reynolds
then read into the record the letter which is a part of Exhibit
"A" Public entered into the record earlier, as follows:
% Board of Indian :aver County
Commissioners
County Administration Building
1840 25th Street
Vero Beach, FL 32960
Vero Shores Homeowners' Ass
c/o Allen Reynolds
Civic Liasion. Officer
473 22nd Place SE
Vero Beach, FL 32962
March 17, 1986
Dear County Commissioners,
(The following statement is in rebuards to the request of General
Development Utilities for a sewer rate increase for Vero Beach Highlands
and Vero Shores :Dater and Sewer Division. It is scheduled for your con-
sideration ":arch 19, 1986 at 7:30 PM.)
0The Vero Shores .jomeowners Association claims that General Develop-
ment is a land developer "first, last and always". And that General De-
velopment uses their utility franchise to assist in financing its' new
construction and land development. The 1982 operating costs that General
Eevelopment ;tilities uses as a basis for their proposed rate increase
happens to be the same period of time General Developw�unt, the land devel-
oper, built several hundred homes in the Vero Beach `iighlands. And.guess
what? Their operating costs soared. Gereral Develop::ient is now using
Lhese 1982 out of context costs to justify a 2u0 o �uewerare rate .increase
per 5000 gallion water usage.
General Development is a land developer with :More then 30 years ex-
periance in betting things its' way by deliberatly desi,-,niag manQuvcrs to
gain every advantage.
The Vero Shores Homeowners' Association believes General Developtaent
Ut-ilitics failed to penalize General Dev.elopment "the aeveloper" when they
built a tre,,iendous number of homes in the early 19801s. General Develop-
ment in a conflict of interest, is using -1962 statistics to back their
claim for such an exorbitant rate increase in a time now of near zero in-
flation.
Finally, common sense should tell us a long established private com-
pany should be able to provide its' customers with water and sewer costs
much lower than any city or county oovernm::ut utility could provide. The
15
BOOK 63 N, ";E -9 0
B00!( 63 FHGE
Vero Shores Homeowners' Association also believes General Devdiopmeut is
really using its' utility franchise for its' further economic r0al estate
;ain and it should real.Ly be contributing fur the privilege; and not be try-
ing to increase its' customers water.and sewer rates. General Development
had profits of ;;22.6 --aillion in 1965 equal to ::,3.'D1 per scare.
.:c of the Aero Beach Association reccowmend the.County Com-
ffissioaeDsD� a raise :increase without any further consideration.
Respectfully,
Alort' Reynolds, ;,ivic Llaslon ' 'ficcr
Allia, Davenport Sr, =
e
Mr. Murphy stated that his main concern is the 159% in-
crease. He still doesn't know where they get that figure because
if you divide $6.90 into $17.86, you get 258%, and if you divide
the original $1.00 base facility charge, you get 846%, which is
another unrealistic figure.
Attorney Shandloff explained that you have to subtract what
the current rate is from what the new rate would be and then
divide that by the current rate in order to get your rate of
increase, and Commissioner Wodtke agreed that it is similar to
markup on cost or markup on retail.
Debate continued re mark up, percentages, etc., and Chairman
Scurlock noted that percentages can be computed in a lot of
different ways, which is why we had staff prepare a chart setting
out just what the users will be paying for specific gallonages.
Attorney Vitunac asked Mr. Murphy if he had any problem with
his sewer service, and he did not complain of any.
Daniel Fourmont, 900 5th Ave., SE, acknowledged that he had
been sworn in. He emphasized that the proposed increase would be
the third increase in seven years. Mr. Fourmont stated that in
1979 they were paying $3.71 for a typical usage of 5,000 gallons;
in 1980 this went up to $6-.00, an increase of 62%; and in 1984,
it increased to $6.94, another 15%. The proposed increase from
$6.90 to $17.86 would be 159% and from the original charge of
$3.71, that is an increase of 381%.
Attorney Vitunac advised that neither the number of
increases given in the past nor the percentages from some former
rate are legally relevant, and it therefore, is a waste of time
dealing with percentages based on some former figure.
Chairman Scurlock wished the public to be aware that the
County Commission has chosen to regulate the utilities in our
county rather than let the Public Service Commission do it. We
still have certain laws we must abide by, however, and that is
why we are having this very formal procedure with a court
reporter, sworn in testimony, etc.
17
MAR 19 1986 BOOK �� r;�UE 969
MAR 19 1986 BOOK 63RA UL
Commissioner Lyons further noted that tonight we are looking
at something that has bothered this Commission for a number of
the years, which is that many of the developers in the past used
water and sewer rates as a loss leader to make it palatable to
come live in their subdivision. As a consequence, you finally
come to the day of reckoning when you have to face the cost of
doing this business and charge rates accordingly. Now when we
have a new franchise, the Commission tries to assure the rates
charged are as near realistic as possible so we don't have this
kind of situation where you suddenly go from imagination to
reality and it is really tough.
Robert Rathbun, Vero Shores resident, acknowledged that he
had.been sworn in. He believed a comment was made by staff that
the base facility charge was intended to cover basically fixed
expenses consisting of depreciation.
Mr. Wheeling advised that the largest dollar amounts in the
base facility charge are for depreciation, property taxes and
billing of customer accounts. These are continuing expenses.
Mr. Rathbun continued to question the figures re
depreciation and stated that he was trying to determine what
proportion of the base facility charge is truly fixed and how
much is variable. He pointed out that we are looking at a
differential in the base facility charge, which has gone from
$1.00 to $8.46. This increase is covering an expense which GDU
has indicated is fixed in nature. He, therefore, found it
perplexing that there can be an 8 -fold increase in an element
designed to cover a fixed expense which would not be expected to
vary over a period of time, and he wished to know if there is
something he did not understand about that original $1.00.
Director Pinto explained that what happened is that in the
rate case presented in 1983 when the Board gave an order for a
40% increase, the base facility charge was fixed at $1.00, not
based on anything, but just to establish the methodology.
18
� r �
W
r
Attorney Vitunac further noted that the base facility charge
is a charge that doesn't change just because a customer discon-
nects and goes north for the summer, but that doesn't mean it
stays the same year to year.
Director Pinto explained that what the County Commission is
charged with approving on a rate increase is not a specific
breakdown of rates, but a revenue requirement to operate the
utility, which in this case is $169,000. He clarified that a
utility comes in and says we need "X" amount of dollars to
operate; the Board then determines whether or not those are
legitimate expenses; and if it is determined that they are, these
expenses are then distributed in some fashion through ratemaking.
Director Pinto noted that the Board had some influence on how
these costs were distributed in telling GDU we would like to see
a fixed portion of the bill in a base facility charge so that the
customer who is there for 12 months a year does not pay the
burden of all the fixed cost of facility that is there for the
availability being reserved for the person who is away on
vacation.
Albert Visca, resident of Vero Shores for thirteen years,
acknowledged that he had been sworn in and stated that on Feb.
4th he received a bill of $21.29 for 11,000 gallons plus a
charge of $12.80, or $33.09, and if you divide that by 11,000, he
pays $3.30 per thousand gallons for water. He wished to know
what his bill will be if GDU gets the raise.
Chairman Scurlock pointed out that today we are only talking
about wastewater, not water; so, it would be related back to a
cap of 10,000 gallons, which is the maximum gallonage charged for
on sewer. Therefore, according to the chart, , the charge would
be $27.26 for 11,000 gallons sewer.
Mr. Visca stated that his sewer bill would run higher than
what he uses for the whole house and wanted to know why they
19
MAR 19 1996 gal F E 9 6 4
I
MAR 19 196
BOOK 63 PA-- 965
advertise that the bill is according to the amount of water going
through your meter.
Chairman Scurlock explained there is a 10,000 gallon cap on
sewer usage because they figure anything over that amount
probably would be for outside irrigation, etc. and not for
domestic use.
Commissioner Wodtke asked if Mr. Visca uses much water on
his lawn. Mr. Visca stated that this month he used it twice, and
he could not understand why they say he will pay $1.88 per
thousand gallons when he is paying $3.30.
Assistant Director Barton believed that Mr. Visca is adding
the charges for his water and sewer together and offered to
explain this to him.
Attorney Shandloff advised that company representative,
Peter Welch, is present and will be glad to help anyone resolve
any questions about billing.
Richard Barton, Vero Shores, wished to know whether all this
business of the income requested based on costs, etc., is based
on the local utility here or on all of the GDU facilities.
Mr. Wheeling stated that it is based primarily on the test
year 1982 for the Vero Beach Highlands facility with some G&A
expenses included.
Chairman Scurlock explained that this is a separate rate
case which stands on its own merit. Some G&A costs were
allocated back to this utility, and he felt sure our staff has
analyzed any G&A charges to be sure they not out of line.
Director Pinto confirmed that when staff analyzed the G&A
charges, only costs related directly to Indian River County were
allowed to be included. Staff even went to the point where some
employees shared with the Port St. Lucie facility were propor-
tioned out to the exact amount of time they spent in Indian River
County. He asked if Mr. Barton had any complaint with the sewer
system, and Mr. Barton did not.
20
L�
Chairman Scurlock asked if anyone has had problems with the
sewer system.
Mrs. Perez, Vero Shores, stated that she had a problem with
sewer odors, and there are times she has had to close their
bathroom door.
The Chairman asked if she had placed a complaint, and Mrs.
Perez said that she had not.
Fred Rankel, 2044 5th Ct., acknowledged that he had been
sworn in and wished to state for the record that there was no
moratorium on building in 1982; he felt it was 1976. He stated
that there are just two in his family and they use an average of
4-5,000 gallons for personal use winter and summer, but he has to
sprinkle his lawn, and he did not feel they should pay sewerage
rates for water that is put on the lawn. He knew the County does
this, but that doesn't make it right.
Chairman Scurlock noted that they don't have a separate
meter for irrigation, and further noted that he personally had a
well dug for that purpose.
People in the audience stated they can't dig wells because
of the salt water intrusion.
Commissioner Wodtke asked if there is any option in the Vero
Shores area to have a separate meter for the house and for the
irrigation system.
Mr. Morris agreed it is a possibility, but stated that he
could not speak for management. He felt it certainly could be
accomplished through an additional line as long as the costs were
reimbursed, but there would be two base facility charges so there
might not be any advantage.
Commissioner Lyons believed it will be found that the
utility does not expect to treat all the water delivered to a
house and that the rates are based on an experience factor.
Director Pinto pointed out that this again is where you have
to understand what the company is asking for in their rate
hearing. It costs a specific amount of money to operate the
21
MAR 10 1986 BOOK 3 D0.+` E ��
rp,--
MAR 19 1986
BOOK 63 P°;E 9
plant. They are predicting they are going to sell a certain
number of gallons, and based on that, they establish a rate per
thousand gallons. If you install meters on gallons used for
irrigation and it reduces the amount of flow sold for sewerage,
the cost per thousand gallons will increase to match the costs
needed to operate the system. That is why most utilities
nationally have a 10-12,000 gallon cap.
Chairman Scurlock confirmed that if you decrease revenue in
one area, you have to have an increase in revenue to meet that
revenue requirement somewhere else.
Mr. Rankel felt it is just a way of collecting more money.
He informed that Board that he formerly lived in Long Island
where they had a very large treatment plant and there he only
paid $100 a year for sewer.
Chairman Scurlock believed the Long Island plant is a public
facility and most likely subsidized by ad valorem taxes.
Mr. Rankel stated it was not subsidized by anybody. When
they put the sewer in, it cost the people; it cost him $2,500 to
hook up. It also cost him when he hooked up to this sewer - he
had to pay around $750, or more, and he did not feel all those
$750's that the residents paid are showing up in the income.
Chairman Scurlock assured him that these fees were included
and are a part of the rate case; every time someone purchases a
home under the present rate structure, they pay for 750 of that
capital GDU can't.recover the depreciation on.
Mr. Rankel asked whether General Development pays this fee
when they build a home or whether it is paid when the home is
sold.
Mr. Morris stated that the company pays -the same fee any
developer does. He did not know exactly when they pay it in the
Vero Highlands area, but in Port St. Lucie it is paid at approxi-
mately the stucco stage of construction and before the C.O.
Mr. Rankel noted that the same workers work both on water
and sewer, and wished to know if their salaries are separated.
22
l
r
Mr. Morris agreed that the employees used in Vero Shores do
work on both the sewer and water systems and this is kept
separate through charge numbers which identify whether it is a
water and sewer project; records are kept on a daily basis; and
their salaries are drawn against the particular project.
Director Pinto again confirmed that staff has looked at that
aspect. In regard to the Long Island sewage treatment plant
referred to, he believed it probably was as much as 90% federally
funded which leaves the capital cost that much less to cover, and
in that case, the charge to the customer actually is higher than
it is here.
At this point Attorney Shandloff wished to clear up a point,
even though this is a sewer case and water to water someone's
lawn is being discussed. He referred to Page 90 of the
transcript from the last rate hearing wherein former County
Attorney Brandenburg was quoted as saying: "You can use your own
well, of course, for irrigation purposes."
Mr. Davenport wished to summarize the position of the
homeowners of Vero Shores, but commented on the absence of the
Vero Highlands people.
A lady from the audience interjected that people were
present from the Highlands, and Chairman Scurlock confirmed that
notices were sent out to them and there was a legal ad.
Mr. Davenport believed the notice sent was regarded as a
glossy throw -away section of the bill. He did agree there was a
legal ad, but no further publicity. Mr. Davenport continued that
it appears from the case presented by General Development that
they have trebled the sewerage capacity at their present plant.
He then referred to a copy of an article from The Miami Herald
submitted earlier as part of Exhibit "A" Public, as follows:
23
BOOK 63 P,1Iu 968
MAS 1 S'
Bou 3 F u,c 969
uesday, March 18,1986 The Miami Herald SectionD r�
ru ing
Jud.cre. s
P.allid
Aft"*.'
..
O O 0
-Y
3y MARY JO TIERNEY
farad staff writer
PORT ST. LUCIE — Circuit Judge Philip Nourse's ruling that
come. mandatory water hookups, .ip Port St.,.Wcte.,.Wete Illegal .
,ould affect General Developmeat Uiiutj� s' . plag$ for future '
!xpansion, officials said Monday.
The ruling also could affect
ether municipalities that want to `" Sl away said there was no
tet up a centralized water ser- Florida law on the Issue. so
rice. Nourse's ruling could set a
"This could have far-reaching precedent.
effects:" said attorney Ernie Both St. Lucie County and the
Rdaway. who represented the Fort Pierce Utilities Authority
31ne Port St. Lucie residents who have discussed establishing a,
sued Port St. Lucie for trying to ' centralized water syetent ' with,
•
!orce them to hookup to GDU's mandatory' hookups 'for those
water system when,they slrealtly with homes and business where
sad Individual wells. • ::gin the service •wasavailable. . • .••.:L
In his ruling issued last week,. "This (Nourse's rulingl • is
4ourse said that the city's law on ` something we may be consider-
uandatory hookups was not a ng down the road," Fort Pierce
'valid exercise., of. the city's Jtilities Director Harry Schiulte-
police power."' but was "a tette Bald:
3eavy-handed. unreasonable ef•
In the past two years, Port St.
tort to promote the economic .ucle had forced more than 300
welfare of General Developm nt"• someowners. who already had.
Utilities.,, t••. ! wells, to hook up with GDU's
' Assistant City •Attorney Roger .ystem, charging them an aver-
Urr said that the City Council ige of $800 each just ln,lnitlal
will have to decide whether to tookup fees.
appeal Nourse's ruling. : • Curtis ..Morris, GDU Qlvislon
The law 'was"enacted"141110 nanager, said Nourse's ruling ,
• early 1960s because it was not ould affect the company's long -
"economically feasible!' for GDU ange plans for water system
to extend Its water lines unless Zpansion.
the mandatory b"Itops vrere In, ,
effect, he said.
Orr said the city had been
working toward a centralized
water system because It wanted
to assure that residents would .
have safe. potable water.
But Sidaway * a former assist-
ant Port St. Lucie attorney, said
that It was not Port St. Lucie's
responsibility to assure a safe
water supply. He said the county
health department can monitor
wells. just as it does city water
system.
Over the years. he said that
General Development Corp..
which owns GDU. had an "inor-
dinate influence" over city offi.
cials.
"It's been a compa� - for
a long time; •.. It's
Si4O�Y said.
•:4 �7
' •General •Develgpry,�enT�
Earns' -$22.'6 Milli-
eneral Develop 10 it?`'Corp:'']'i vA
-"��a•,3r;z1�R����Ir:@gB.t�'�+����bi7i%rihYr:;".`
lion, or $3.01 a share, for the:year
ended Dec. 31;1985. '
• - Results for the year rgflect a non-
- ,recurring• .$2. 41MtlltoiiN te441i3
chargg ($.1$ per share) on the.dis-f,
=w iositlOn` of •the`il ripany1i;*tiVgOl�`* •F '
John • utility:. systerp Apr:t6f =first 5
.quarter of 1935.
.• a y::•c ;:►, .. _ ..;..QEF, ••�••beR'3Fa+'�a'"�ty%��Ptj�i i
In 1984, the company earned#;;
$22.9 million or $3.05 per share.',:,'.`i
Total"1985 revenues were $346.6"�
'million compared with $335,7 mIl- `i
:. lion for the full year 190.,, y ;•
J .-;iP•�:rti%•••ry•``�:r;:,Ri•sM�„i''•i ..: •.4.':l;rc;!�1"�•�:1•�+�,7'•.
'Strong performances were re
ported in all of the operating divi. ,•
sions. Hr wesite sales were the
highest In history,'totaling $156.5;
millton.,.a.14•.p 994t_ i09 0 'e'ver
t=~t'Y�':�<$137:8'�miilIQ�'ii►�i$�5���4t$biig��
sales were .$138.8's..'adIllon,: com-
pared with $153.1'fid lloie In'the
same period a year earlier, a.9 per-
cent:decrease• . : -;; . ':' ; •G ;1: , s y �.
1".t'Ti .a F''� �' M15'� �1 y''4• '
Mr. Davenport emphasized that General Development's earnings
for 1985 were 22.6 million dollars.
Chairman Scurlock asked if that is the development company
OW
or the utility, and Mr. Davenport stated it is the development
company and it reflects the fact that they are going to continue
to make a profit for their stockholders. He noted that Port St.
Lucie's utility rates are higher so at least Vero Shores has
something to be thankful for, but he felt it would appear from
the scenario here tonight that this Commission has pretty well
made up their minds. He stated that they look to Commission
Wodtke as their representative, and these rates are gouging into
them to pay for a facility General Development was going to have
to provide for their customers anyhow. He noted that in 1991 GDU
comes up for renewal of their franchise and wished to know when
they first started 35 years ago, if the county had any such thing
as a franchise or did they just say go ahead and now are they
just saying go ahead?
Commissioner Scurlock advised that the answer as to whether
we are going to require a franchise is yes because that gives us
a mechanism to make sure they require the necessary escrow
monies, etc., to have an on-going system. In the past we have
seen systems in the county that have failed and the developers
have taken a hike, and we are not going to let that happen.
Mr. Davenport stated -that General Development is not going
to take a hike; they have it good, and if they do sell all their
lots, they are going to need all this facility that the people
are paying for now. He continued to speak about decreasing
inflation and stated that today's market does not permit this
kind of exorbitant request.
The Board recessed at this point for a short period so that
the court stenographer could change her tape.
Mr. Davenport again took the floor and stated that he was
informed during the break that objections to a rate increase
should be predicated against the service a utility is giving,
but prior to the requested increase, they increased the sewerage
capacity from 250,000 gallons up to 850,000 gpd at the new plant
so there probably is no cause for complaint.
25
BOOK 63 ucE 979
MAR 19 1986
r-- I
MAR 1 S 198690oK F'GE971
Chairman Scurlock did not believe Mr. Davenport understood
the fact that there is not a dime in these considerations
associated with the expansion of the plant, and considerable
discussion followed wherein it was explained that the original
Imhoff plant installed in the late 60's was phased out in 1978,
at which time the 250,000 gpd plant, which has since been
modified, was constructed.
Mr. Davenport asked how long we have been on line with the
new 850,000 gallon plant, but Commissioner Lyons did not believe
that was pertinent since it was later than 1982.
Mr. Davenport believed it was pertinent since they don't
have any complaints to attack this case because the new plant is
already there, and they are going to have to pay for an old one
they are not even using and which should have been amortized.
Chairman Scurlock emphasized that statement is absolutely
wrong. The expansion was of the existing 250,000 gpd plant,
which was specifically designed to be expandable, and that plant
is there, still receiving flow, and still treating.
Mr. Davenport felt the rates are expandable also, and
Chairman Scurlock could not believe that anyone who ever operated
a business or was employed didn't ever hope or expect that their
salary would go up or that their business would have additional
increases to meet additional expenses. That is a fact of the
business world. The Chairman stated that there was absolutely no
question in his mind that the staff has demonstrated that the
rate case has been justified, and he therefore, intended to vote
for the increase.
Mr. Davenport reiterated that what he learned during the
break is that if the people don't complain about the service,
they cannot effectively fight this rate case.
Chairman Scurlock confirmed that inadequate service is one
basis to fight the rate case, and the homeowners also can pay an
outside accountant to attack the figures submitted by GDU if they
26
desire; although the county already has paid our professional
staff - Mr. Pinto and three accountants - to analyze this.
A man from the audience believed that the County put up
$5,000 in the Moorings rate case to have an outside agency look
over the problems they had there, and Mr. Davenport felt the
county should offer them help as well.
The Chairman pointed out that our utility staff is available
at any time to answer any questions the people may have, and he
believed some did come in and ask questions.
Director Pinto addressed the comment that the County put up
$5,000 in The Moorings case and explained that if the Commission
does order an outside consultant to come in and make a study,
that becomes part of the rate case cost and the users of the -
specific system will pay for that expense. In this case, he felt
confident that not only was staff competent but that their
analysis was in depth enough that it would not be necessary to
incur the extra expense. Director Pinto further emphasized that
staff cannot make a recommendation to the Commission that is
wrong and liable to end up in court. He noted that there have
been occasions where staff has advised the Commission not to
grant an increase, and he would very much like to be able to do
so now, but the numbers just don't justify it. When this same
applicant requested an increase before, it was not the numbers
but the quality of service that held up the increase.
Mr. Davenport did not believe the Board will receive any
complaints about sewer service because of the new facility but
stated he could complain about water quality.
The Chairman noted that will be considered when a rate case
on water is presented.
Mr. Davenport wrapped up his presentation by saying Vero
Shores emphatically asks this rate case be denied for all the
reasons stated tonight.
Attorney Vitunac swore in Oria Fletcher, 15 year resident of
Vero Highlands, who also attended the last rate hearing. She
27
MAR 19 1986 BOOK 6 3 ca, UQ720
r-- I
MAR 19 1986BOOK 6 P c 973
noted the Commission has stated developers deliberately set low
rates to lure people to their development and wished to know if
there is any way to prevent this.
Chairman Scurlock advised that we now have a franchise
agreement which identifies right up front what the rate structure
will be and makes sure it is high rather than low because we
don't enjoy going through a procedure such as tonight's. As to
what was done back in the 50's and 601s, we have to work within
the legal parameters we are given.
Mrs. Fletcher felt it is apparent that the Commission
already has decided the requested increase is justifiable; so,
she did not see the purpose of everyone coming to this meeting
and stating their feelings, which she felt is just a waste of
time the same as the last hearing.
Commissioner Lyons explained that it is possible some fact
might be brought out at this meeting that has not been considered
and we want to explore all possibilities, and Chairman Scurlock
pointed out that the people have enjoyed two years of lower rates
just because of that last hearing.
Mrs. Fletcher asked what the people could possibly have
brought up, and Commissioner Bird informed her that the Board had
a hearing on a cablevision franchise in the North County where
staff said the rates were justified. At that hearing the people
bombarded us with complaints about poor service, outages, etc.,
and we did not grant the increase but instead put a lot of
pressure on the company to improve their service. That same
thing could have happened here tonight if the Board had heard the
service was that bad. He stressed that governing these rates is
not a pleasant activity for the Commission, but unfortunately we
have a job and must work under the franchise law, which says the
company is entitled to enough money to maintain and operate the
system and also to receive a reasonable rate of return.
28
Mrs. Perez of Vero Shores noted that she complained about
sewer odors, and she wanted to know if the Board members already
had their minds made up when she made her complaint.
Attorney Vitunac pointed out that when Mrs. Perez was asked
if she had reported this problem to the company, she stated she
had not, and it cannot be held against the utility company that
they have not responded to a complaint that was not made.
Mrs. Perez asked if the Board will hold up the increase
until they have checked on her complaint, and Chairman Scurlock
stated that one complaint out of the many customers would
certainly not justify that.
Attorney Vitunac swore in Ken Henry of Vero Highlands. Mr.
Henry had a question re some units in the Highlands that are on
septic tanks and wished to know if it now will be mandatory for
new houses to go on the sewer system.
Director Pinto advised that there are certain areas that
were approved based on being served by a septic system, and there
are certain areas that will have to make connections when they
are developed to a certain percentage and lines are extended.
When central sewer becomes available, it is state law that you
have to connect. Most of -the new construction has been in the
area that doesn't have central sewer. If multi -family is built,
it will not have any option but will have to go on the system.
Attorney Vitunac swore in Mrs. Cositore, who commented that
she understood that the Board's "impartial" staff member who did
the analysis, Mr. Pinto, formerly worked for General Development;
so, she wished to know how he can be considered impartial.
Director Pinto wished to reply to Mrs. Cositore. He pointed
out that actually he had an advantage in making the analysis
because he knew all the areas to look at, and he emphasized that
he certainly did not feel any obligation to a former employer.
Robert Cooper, resident of the Highlands, stated that he
lives on the "raceway" in the Highlands. As to statements made
re future growth, he felt this is not happening in the Highlands
29
MAR 19 1986 Box 6 Pt 974
GEAR
19
1986
Boa
63 PAUE975
and that
it will be a long time in the future before
it is a
factor.
The Chairman determined that no one else wished to be heard.
ON MOTION by Commissioner Lyons, SECONDED by
Commissioner Bowman, the Board unanimously closed
the public hearing.
Commissioner Lyons noted that he has had the analysis made
by our staff; he has not heard anything new at this meeting that
adds any further facts to the analysis; and as he understands the
law on our franchises, it says we are required to give the
franchise holder sufficient funds to run his business.
Commissioner Bird reiterated that this is the hardest job
the Commission has; he has both close relatives and friends who
live in Vero Shores; and while he realized that to disregard the
facts and deny the increase would make him very popular, unfortu-
nately we are playing catch-up here. The county sewer rates,
however, are higher than those being requested tonight so he did
not feel we are picking on the users of this particular system.
Chairman Scurlock again stressed that the power to regulate
these rates could be transferred from this Board very easily.
It would be much easier to let this all be handled by the Public
Service Commission and just blame them, but the Commission,
urged on by Commissioner Wodtke who felt local control was
important, decided to keep on with this unpleasant task.
Commissioner Wodtke stated that as a representative of the
district in question, who is up for re-election this year, he
will have no problem making a decision that is not a political
decision. He pointed out that he must reach a decision based on
the law, and the law says we cannot take the utility system and
join it with their development system. He emphasized that these
rates are a problem that arises now from the past, and also
pointed out that the cost of these rate hearings is considerable.
30
Commissioner Wodtke felt that public hearings are extremely
important and valuable, especially since he has not had any calls
at all from anyone in the area in regard to this rate increase,
and this hearing, therefore, is the first time he has had an
opportunity to hear from those in the area. Since he has heard
nothing, he would assume there was not any particular problem
with the service.
Commissioner Wodtke continued that we had a rate situation
that came before the Board where, based on the quality of the
water and the quality of service, we denied the increase. The
legal ramification of that denial was that the utility went to
court, and the judge after hearing much testimony did uphold the
position of the Board of County Commission. The Court in their
Stipulation, however, ordered the County to tell the company what
they had to do to improve that service, and stated that when they
did, we then had to give them a rate that would provide them an
11.2% return on every dollar invested - not zero percent. That
company added into their investment $42,000 for legal, accounting
and consultant fees for the court case and the rate case.
Chairman Scurlock believed the state approved rate of return
now is between 12.4% to 14.4%, and Commissioner Wodtke agreed the
increase is tremendous. He assured those present, based on his
12 years of experience in dealing with similar cases, that the
numbers presented are on the fixed costs, not any expansion, and
he believed the problem is the magnitude of the increase that
comes all at one time. Commissioner Wodtke asked if the Board
felt there was some way we could phase in this increase.
Attorney Vitunac stated that the Board would have to have a
basis for finding that the full increase is not justified now.
He asked if GDU would voluntarily go along with phasing in the
increase, and Attorney Shandloff pointed out that the rates they
asked for did not even give them a return.
31
MAR 19 1986 Boot{ 63 FA:,k-97
MAR 19 1966 BOOK 63 Fr,r 977
Mr. Wheeling estimated that the cost of the rate case this
is around $4,000 as they tried to keep expenses down by filing
the previous case and working in-house.
Commissioner Wodtke continued to discuss phasing because of
the size of the increase, and Director Pinto commented that he
attended a seminar on rate making and learned the rest of the
country has recognized what they call "rate shock." This is
where the utility comes in with a very justified request, but
from the social aspect, there is tremendous shock because of the
percentage increase. Many regulatory authorities have taken it
on themselves to fix what the increase will be in a reasonable
amount over a period, ending up with the total amount that was
requested, but all those cases involved companies receiving a
substantial rate of return.
Attorney Vitunac inquired if any court in Florida or rating
agency has used "rate shock" in their deliberations, and Director
Pinto believed the Public Utility Commission has recognized it.
In this case, however, we have zero rate of return, and he did
not believe any court would cause a company to collect less than
its operating costs.
Chairman Scurlock noted that if the Board had approved a
higher percentage earlier, there would not be so much shock now,
and Commissioner Bowman commented that one way to reduce the
shock is for the people to reduce their consumption.
Mr. Davenport wished to know over what period of time this
new rate is going to last to bring this net loss down to zero -
or is it forever?
Director Pinto again explained that the rates are structured
on the 1982 test year, and Commissioner Wodtke clarified Mr.
Pinto is saying that GDU could come in tomorrow with a rate
increase request based upon a test year of 1985, for instance,
and we are dealing with something based on 1982. Four years have
passed, their operating results could be tremendously increased,
and we could be looking at the same thing again.
32
Attorney Shandloff believed GDU has stated that they would
not be back for a sewer rate increase during this calendar year.
Commissioner Bird stated that he would like to have found
some way to phase in, but he believed our Attorney has indicated
we cannot do it unless we can justify it based on fact. He,
therefore, did not feel, under the law, we have any choice but to
grant the requested increase which has been proven justifiable.
MOTION WAS MADE by Commissioner Bird, SECONDED
by Commissioner Lyons, to grant the rate increase
requested by General Development Utilities based
on the 1982 test year.
Question arose re an effective date. Director Pinto
discussed billing cycles and then stated that the new rates would
be effective for consumption after the next meter reading, which
is to be the third week in March or early April.
Commissioner Wodtke continued to discuss the possibility of
phasing in the increase. -He believed that GDU has the option of
accepting the phasing, and if they did not wish to, they could go
to the courts for relief.
Chairman Scurlock noted that if GDU chose not to accept that
option, we then would have to deal with court costs and legal
fees, as well as whatever the judgment is, and Attorney Shandloff
stated that they do feel they are entitled to everything they
have asked for and that they have justified the increase.
THE CHAIRMAN CALLED FOR THE QUESTION.
It was voted on and carried 4 to 1 with
Commissioner Wodtke voting in opposition.
33
MAR 19 1989
BOOK 6 3 P,.IJ. E i`
MAR 19 1986 BOOK Fr',UE 979
There being no further business, on Motion duly made,
seconded and carried, the Board adjourned at 10:20 o'clock P.M.
ATTEST:
Clerk
34
MI -Y W,42
- N - 2 5 %P�4
Chairman
_I