HomeMy WebLinkAbout07/22/2021CONFLICT RESOLUTION MINUTES
Thursday, July 22, 2021-10:00 a.m.
CityHall, Council Chambers, Vero Beach, Florida
PRESENT: City of Vero Beach: Monte Falls, City Manager; John Turner, City Attorney and
Rob Bolton, Water and Sewer Director
Indian River County: Jason Brown, County Administrator and Dylan Reingold, County Attorney
The meeting opened at 10:03 a.m.
Mr. John Turner, City Attorney, reported that today's meeting is a continuation of the Indian. River
County and the City of Vero Beach meeting regarding Chapter 164 of the Florida Statutes
regarding dispute of the "1989 Territorial Agreement between the parties. He said we continued
the matter of the previous meeting to today's date to allow the City the opportunity to review the
proposal offered by the County at their previous meeting. Today they have the same participants.
Staff members are present. We also have the addition of Ms. Cindy Lawson, who is the Finance
Director and she will be available to answer questions regarding financial matters if the parties.
don't have any objection. Ms. Lawson wasn't listed in the notice of the individuals who were
going to be present; but we think she might be very helpful if financial issues come that we need
to address. He thinks what he would like to have is the City .Manager do a kind of review of their
discussions onthis, the County's offer that they were discussing last time and outline their position.
Mr. Monte Falls, City Manager, thanked Mr. Brown and Mr. Reingold for the .framework they set
out at the June 24"' meeting that outlined a possibility for settling the dispute. He said to go over
that and correct me ... I think that I have the points, but if I miss them help me fill those in, but
the first one, the County would agree that the Territorial Agreement was still in effect and the
County would remain neutral on any litigation involving the Territorial Agreement, the County
would not contest the validity of the Territorial Agreement, and the County would propose a new
franchise for South Beach that was silent on the Territorial Agreement. The County wanted to
have the same rates for South Beach as Indian River Shores (the Town of Indian River Shores)
has, which are County rates currently through 2027 or the point where the 15 -year out in the City's
Franchise with the Town comes about. He asked Mr. Brown if that was correct.
Mr. Jason Brown; County Administrator, answered yes generally and then I think thereafter for a
five (5) -year period there would be a Iimitation that after 2027 our proposal is that those residents
would go to City rates with outside surcharges or no additional surcharges with a five (5) -year rate
protection period where those rates couldn't be raised on those customers more than 5% a year for
five (5) years.
Mr. Falls said I'm sorry I did omit that, but I do recall that. He said so we have discussed it and
we are all of the mindset that we will no longer offer rates that do not reflect the cost associated
with operating our utility and we will agree to offer the same rates to all customers within our
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service territory, so in effect the residents of South Beach would get the same rates that the Shores
residents get. As rate setting is a legislative function for municipal utilities we'll be undertaking a
rate study to establish rates, fees, and. charges that are just. and equitable, which are based on the
cost of operating our utility. Once adopted, these rates will be implemented for all customers
within the service territory. 'The only difference that the customer would see would reflect
franchise fees, if any, or a utility tax. The ratemaking will be done in an open and transparent
process including a public hearing at which time all customers within the service territory will
have the opportunity.to be heard concerning the proposed rates, fees, and charges.
Mr. Brown asked so what is the timing of that exercise that you are proposing.
Ms. Cindy Lawson, Finance Director, said what we're looking to do is to undertake a rate study
starting probably in the fall with public hearings maybe towards the end of the first quarter next
year with rates that would go into effect either late this coming fiscal year or like the first part of
the next one; say like October or so and that's in conjunction with the timing of two (2) other
things that really affect the rate study and that is the beginning of the design for the Water
Reclamation Facility that should start later on this year. That would give us a better idea of what
the cost of that project is and the development of our financing plan for that project and the timing
of any bonds or borrowing associated with that. She said once they know those two (2) things
with better certainty it will allow them to make a better rate .study and better timing on when the
rate increase might take place.
Mr. Dylan Reingold, County Attorney, said I was just going to ask very simply is, are you telling
me publicly that it is not the intent of the City of Vero Beach to abide by the Franchise Agreement
that you have with the Shores, not just with reuse rates, and I know that's a separate lawsuit and I
don't expect you to talk about it, but with regards to water and wastewater rates through 2027.
-Mr. Falls said they intend on having a rate study and adopting rate seasoned charges that reflect
the operating cost of our utility.
Mr. Brown said so, I'm just trying to digest this because that's a significant change. He said yeah,
I'm filled with questions. One (1) of the things is obviously the franchise between the City and
the Town is not between the County and the City, but it sounds like, what I'm hearing is what Mr.
Reingold said the plan is the City is going to basically charge the Town whatever the City's rates
are based this rate study, at that time and not, and: again it's not our agreement so my rudimentary
understanding of that is that the City had said they would charge County rates during the term of
the franchise with the Town so the City's position has changed that you're not going to do that;
that you're going to charge whatever the City rates are based on whatever rate study is done.
Ms. Lawson said okay, so not whatever the City rates are because the City rates currently have not
had a rate study undertaken with regards to them in quite some time. What we're saying. is that
we're look at the cost of operating our utility for all the customers that our utility serves and we're
going to have a rate study that encompasses serving all of our customers rates, fees, and charges
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that are the same for all the customers that we serve based on our costs and not charging a pretty
substantial component of our customers rates that are based on someone else's cost of service
entirely, I think is more accurate.
Mr. Falls said let me add to that. After our meeting June 24'h your request was that we charge the
Shores rates ... the South Beach residents the same as we charge the Shores and then you qualified
that as County rates. We think that what you wanted was that your customers will be treated as
any other customers in our service territory and as we move toward settling the Service Territory
Agreement we are going to have rates in our service territory that reflect the cost of operating our
system.
Mr. Rob Bolton, Water and Sewer Director, added without any outside surcharges.
Ms. Lawson said without any outside surcharges, exactly.
Mr:. Brown said so, I have a couple of big points. My first thing is, I guess what would be
contemplated if we were to reach an agreement here today is, the County would agree for the City
to charge City rates in unincorporated areas, essentially right away whenever the rate study is done,
so we'd be agreeing to that, meanwhile I don't know what the Town's reaction is to tllis. That
may be to enter into litigation, I suspect it probably is, so I'm reluctant to enter into an agreement
that I think will probably be challenged. So this whole idea that our residents would be charged
the same as the Town residents, well you know; let's say for instance we meet an agreement and
the County says sure, we'll do that and then the Town sues the City and the City ends up making
some kind of settlement with the Town and says oh yeah we'll keep charging you the rates that
you wanted during that time period. He. said I don't think as we sit here today we have the ability
for the City to commit to being able to charge the Town those rates. The next concern that I have
honestly is entering into an agreement with an entity that has already entered into an agreement
with another municipality that you're just not honoring and so what can -make the County know
that whatever agreement we do enter into that the City,is going to honor that five (5) years from
now, 10 -years from now because it sounds like the City is saying, well that's what we entered into
in 2012 with the Town isn't really working for us anymore so we're unilaterally going to tear it up
and throw it into the garbage and do what we want to do. He asked how do we know that the City
is not going to do that to the County area five (5) years from now or 10 -years from now.
Ms. Lawson said I think, it's not that the City, and I'll give this back to the City Manager, that
we're saying it isn't working for us anymore. What we're saying is that, I don't know how we got
here, but we're in a situation where we're constrained to charge a large percentage of our customers
rates, fees, and charges that are based on someone else's utility costs entirely and that is a problem.
That's not proper rate making and you guys run a utility and you know that. I mean you wouldn't
take someone else's rates and fees just because your customers like them better and apply them to
all your. customers. You're rates are supposed to reflect what it costs you to provide service to
your customers. So I don't know how we got here, but we're at a juncture where we don't feel
like we can continue to do that, particularly since, and I know the Resolutions that are in effect,
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but to do that kind of ratemaking has put us in a spot. where we're charging rates based on our cost
of service.
Mr. Brown said, but the City got here by agreeing to do that for the Town. I mean we can talk
about we don't know how we got here, but I know how you got here because the County was
proposing serving the town back in 2012, the Town chose the City, no qualms there, but it was
based on a proposal from the City that said we'll charge County rates. That's how we got here.
Mr. Falls said we got to that point because the service territory was not brought up and discussed
back then so we are here today and previously because we had a territorial dispute. We think that
we have gotten close to solving that with the County. We thought the County wanted to have the
South Beach residents charged the same rates as we charge everyone else in our service territory
and that's where we're moving. We feel confident that we have the law on our side to be able to
do that and we are going to move forward with the rates study and in an open and transparent
process we're going to do that. We're going to have public hearings where every person in the
service territory will have the opportunity to comment.
Mr. Reingold said I. will. just say that this is a huge struggle for Mr. Brown and I to come back to
our. Board based upon this discussion. I mean, I've been told for a while now, why won't the
County honor an agreement from 1989 and what I'm hearing from the City is you won't honor an
agreement from 2012. Can you just help me understand why it's okay for you guys to no longer
abide by this agreement_ (2012), but I'm; stuck abiding by a 30 -plus year agreement. That makes
no sense to me.
Ms. Lawson said a couple of things, again the .City Manager pointed out, we're going to have that
separate conversation with Indian River. Shores. But, can I just offer thiscomment, a lot of the
County rate/City rate thing has revolved around this notion that somehow City rates are higher and
that is not true. It depends on who you are and the very fact that by adopting County rates for
those customers, we, the City collected exactly the -same amount of revenue at the bottom line as
we did with City rates will logically tell you that your rates are not less across the board. It depends
on how much water you use and some people pay less and some people pay more: It's just rate
making and I think that's been a partof the reason everyone's so concerned about going to City
rates that somehow they're higher and that's not the case. I. think part of this will unfold as we
said over the course of the next six (6) to nine (9) months as we do this rate study and we provide
everyone with the information they need to see how it aff. ects their particular circumstance. So
this is not something that's happening tomorrow.
Mr. Reingold said I absolutely agree with you. We have a different sort of rate structure. Ours is
more conservation based and yours is more, as I understand, sort of flat based. I get that. I think
we were looking for a sort of five (5) year transition. We were not looking for the City to be
permanently tied to the County rate structure. We were looking at this as kind of a we could help
you guys by agreeing with you on the territorial thing and in response we would have a phase in
to the City rates and then kind of a little bit of a cap for a couple years and then after that point
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your rate system governs. I'm just very disappointed to hear today that you're reluctant to allow
for even a phase in to get to that point. You want it to happen next year and be done.
Mr. Falls said well, we have a couple things that are going on that call for this to be addressed now
as rather than five (5) years from now. You both know, you've been in the utility business for
quite some time. You understand when you finance and bond for an improved project, you need
to have. rates that the bond can be backed up by and we are going to be in a process where we're
going to build a new Water Reclamation. Facility that is going to require some financing and some
bonding and to be able to do that, that's in the best interest of the customers that we serve we need
to be able to have one (1) rate for the customers to get the best financing package that we can get.
So if we waited and held off for five (5) years to phase in a rate, we would delay the construction
of the Water Reclamation Facility until then.
Mr. Brown said, I would say, our proposal was to transition to City rates, which would give you
that control long term. You know what our rates are today and I can tell you we are raising our
rates 3% on October Is'. We've got a provision where were able to raise our rates by a CPI
adjustment and I anticipate we'll be that for the next few years because our costs of providing
service is going up with the increased regulatory. environment. I believe you can structure a bond
issue today that contemplates maybe some constraints on your rates now with higher rates in the
future. You can structure your debt service to work through these things. I think that can be
worked around and the big picture, I think we came here last.month, the County presented the
terms of a settlement that I think the City was presently surprised by the fact that we were looking
to work out an agreement, but that agreement had to have certain terms. This agreement that you
are proposing today is just the same result we'd get if we went to court and you guys won. I don't
know what's benefiting it for the County. Our south barrier residents are pounding on us for even
having offered this. The Town of Indian River Shores has sent us information that they're
unpleased with our attempt to make an offer and I thought what we put on the table was a very
reasonable offer for the City. You'd be able to lock down one (1) portion of your customer base
quickly and resolve whatever you did with the Town as that process happened and I thought a
faster way because I keep hearing we're holding up the construction of the new Wastewater Plant.
I thought what we proposed was a faster way for the City to get to that certainty and again I believe
the rate transition is something that can be dealt with in the structure of a bond issue. With that I
don't know how the County can support anything like this. I thought that we had made a very fair
offer to the City and this is completely not in line with what we proposed. I can't see supporting
it, not to mention we've been presented today with the idea that the Town's really not going to
react well to this news and I think our position has been a dispute between the Town and the City
on the service territory. But, when you're starting to talk about making rate changes to an existing
franchise agreement, what good is a. franchise agreement and I'll go back to Mr. Reingold's point
again, I got a sermon the last time I was here about the County not cooperating and about the intent
of folks who many have passed on, that for an agreement that was done when I was in 9th grade,
meanwhile the City is, in my opinion in my mind what I'm hearing very clearly not honoring an
agreement entered nine (9) years ago when I was involved as the Budget Director in those
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discussions between the County, the Town, and the City. i don't know how we enter into any kind
of an agreement with the City at this rate.
Ms. Lawson said but, if I understand it correctly, I mean the goal here for you and for everyone is
to make sure that the South Beach customers or any of our customers pay the best rates and that
they're treated fairly and that. their rates are sustainable. Without having seen the results of our
rate study and with the comments you just made about programmed CPI increases, etc., it's kind
of hard to prejudge whether your rates across the next five (5) to seven (7) years are actually going
to be better for those customers than ours without having seen the results of our rate study and I
think we're all after the same thing, which. is to make sure "that your customers and our customers
get treated fairly and have bills that are reasonable and receive the right service for that amount of
money. That would be my only comment.
Mr. Brown said and again, I'm not claiming that the County rates are going to be cheaper than
City rates. That seems to be what the City is worried about because obviously if County rates are
higher than City rates in the future it should be no harm to the City. One (1) of the things that
we're looking at is certainty. It's the same issue with. Florida Power and Light (FPL), I hear this
"taxation without representation." They don't get to vote for City Council, the City gets to set
rates, there is a transfer, not just the GNA charges, the transfer from the utility to help subsidize
the operation of the City, which is something that creates concern for them. I appreciate that you
guys had an analysis done that talked about the potential rate impact of that. Thank you for sending
that over. I recall there being some increase in rates. It wasn't tremendous.
Ms. Lawson said it was like l0 -years of about $17.
Mr. Brown said okay, .$17. I did make a footnote in there that said this was based on City
ratepayers so I don't know what that meant for unincorporated areas and. the Town, what the
assumptions were. Was the assumption that all those rates would go to the City?
Ms. Lawson said it was broad-based for all ratepayers.
Mr. Brown said okay, because there was a footnote in there that seemed to indicate that it was City
ratepayers.
Ms. Lawson said it was based on the entire customer base.
Mr. Brown said so this would be a $17 raise assuming ...
Ms. Lawson said $17.66 I think it was, at a very high level across everyone without a detailed rate
study, yes.
Mr. Brown said and again, this isn't our rates versus your rates thing of who's higher or lower.
One (1) of the concerns of our constituents is they have no ability to affect the City Council through
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election and they are beholding to the City's rates and they know that they have the ability to
impact the County Commission if there is a rate situation there so it,goes back to the whole taxation
without representation. They feel that: they're not represented and they're beating up on us and
we're getting pounded by them. I have sympathy for them because they're saying nobody's
representing us and they're outside the City so that's natural, but I do also see kind of a lack of
consideration for their concerns is what they feel and I can't say that's wrong.
Mr. Falls told Mr. Brown that he didn't intend for him to feel like you got a sermon at their last
meeting. I really didn't. But with that being said, all the things that I brought to table the last time
we met were true and accurate. It was just a historical of how we got to where we were because
there were people. that were watching that don't have the same access to information that we do.
So I think it was important for them do that. Again, we thought when you said at the end of your
framework that you wanted to make sure that the South Beach residents paid same rates as the
Shores customers and we want all of our customers to pay a rate that reflects operating of our
utility. So, that's where we are headed and we're going to try to get there so that we can build this
Water Reclamation Facility. It is our understanding that, the whole community wants, not just the
people in our service territory. So, that's what our point is;
Ms. Lawson said I hear what you're saying too about them beating up on you and I will tell you
this, if I'm part of this, I know we can commit to making sure that rate making, that rate study and
all the conversation around it is completely open and transparent and involves you guys to
whatever degree that you feel is appropriate. That's not a problem at all and again, I wish we could
hold our comments about how that affects your ratepayers in abeyance. I think we have the same
rate consultant, in that you don't make one (1) giant increase and then level off and that kind of
thing. You do transition it in if there is going to be a rate increase so there is no shock to the
system for anyone. Certainly as we move through that process, I will commit to making sure that
it is open and transparent to those customers and to you and any of your staff as we can make it.
Mr. Reingold said what I have been told today is if the doesn't come to a resolution with us to this
164 I'm going to sue you for breach of contract and what you also said today is we're willing to
be sued by the Town of Indian River Shores for breach of contract for this deal. I just can't fathom
how you sit here and makes those arguments to us.
Mr. Turner said we're not here to explain out necessarily our legal position in the case, but these
are two (2) different issues. We're here on a 164 matter on the 1989 agreement and you're
agreement with the City as to the service territory and what our contract is with the Town of Indian .
River Shores is totally different. It's not the same.
Mr. Reingold said I agree, but the same principle ...
Mr. Turner said but your saying you want to enforce this and you want to breach that. Well they're
totally different legal issues .involved Mr. Reingold and I think you recognize that. I think it's
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totally unfair of you to make that accusation: We will. handle with the Shores our issue based upon
the law.
Mr. Brown said okay, now I got to say something...
Mr. Turner said I have the floor, thank you very much. We're going to make the same argument
on the position on the 1989 agreement based upon the law. That's the reason we're here and I
think it's unfair and 'improper for you to be waving around one (1) agreement and saying you want
to enforce this one,. but you want to breach the other one. That is not the case at all. We are here
to make sure that our rights are protected under the 1989 agreement, That's why we're here.
We're not here for the Town. We're not here on the rates for the Town, but we're here on the
agreement. That's why we're here.
Mr. Brown asked so do I have the floor now.
Mr. Turner answered yes.
Mr. Brown asked can I speak, thank you. He said I'm going to address a couple of things. First
the sermon that I mentioned was after the County made an offer that I thought that the City was
receptive to the general concept. We were trying to make a deal where we would set aside our
differences on the Territorial Agreement and after that we received a sermon about how the spirit
of cooperation had been lost recently. Apparently blame was assigned to the County on that in my
understanding of it. So we were there in the spirit of cooperation. To Mr. Turner's point, the
reason we are here is the 164 dispute. I agree and we came trying to make an. agreement, a
settlement to avoid. litigation. What the City has proposed now is ridiculous. It would be if we
lost the suit. I don't want to engage in litigation with the City. If this is the City's position we
have no choice but to litigate this. You can say all you want about the Town being something
separate. I think it speaks to behavior and I got to hear about how we weren't cooperating. I don't
know how you say that you're the ones that are cooperative when you're talking about not honoring
the agreement with the Town. So yeah, maybe legally it is something that you can say that isn't
relevant here, but it speaks to the overall relationship and again, I don't know how we enter into
anything with the City. I think we've tried to come up with something to avoid litigation between
the City and the .County because I don't think it's fruitful for us to both spend our taxpayer dollars
all of which your taxpayers are our taxpayers to fight each other, but with this position the City
gives us no choice so I don't see a path forward here..
Mr. Turner said thank you for that lecture. I'm assuming then that at this point we've reached an
impasse and that the next step would be scheduling a meeting between the effective governing
bodies. So, if there's nothing further to say... Mr. Bolton has wanted to say something so I
recognize Mr. Bolton.
Mr. Bolton said I understand the position that you're asked by County residents that there is no
say. That is not unique to Indian River County. It is all over the State. If you look at the City of
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Cocoa, they own a utility. They have 55 customers inside the City limits. Their total customer
base is 65,000. They charge a surcharge outside of 25%. The City's offer is simply one (1) rate
for everybody and charge everybody according to a rate study that is being done with no surcharges
so I don't think that this is unfair to the residents that are outside the City limits. I think it is proper
business to do what we're doing and that is to determine what the rates are that are fair and
equitable to everybody that is being served. Now I see.that everybody got upset and everybody is
bowing up, but keep in mind it's about the process of running a utility, not about egos. That's all
I have to say.
The meeting adjourned at 10:33 a.m.
/sp
Minutes were transcribed by Sherri Philo, Deputy City Clerk.
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