MINUTES OF THE MEETING OF THE BOARD OF COUNTY COMMISSIONERS

BREVARD COUNTY, FLORIDA

January 24, 1996

The Board of County Commissioners of Brevard County, Florida, met in joint session with the City Council of Cocoa, on January 24, 1996, at 5:30 p.m. in Cocoa City Hall Council Chambers, 300 Brunson Boulevard, Cocoa, Florida. Present were: Chairman Mark Cook, Commissioners Truman Scarborough, Randy O?Brien, Nancy Higgs, and Scott Ellis, County Manager Tom Jenkins, and County Attorney Scott Knox; Mayor Michael Hill, City Councilpersons Phyllis Churchill, Alex Greenwood, and John Lee Blubaugh, City Attorney Richard Amari, and City Manager Stephen Bonczek. Absent was: Councilman Rudy Stone.

Mayor Hill opened the meeting, and turned it over to Chairman Cook.

Chairman Cook expressed appreciation for the opportunity to meet with the City of Cocoa Council on the water rate issue; and advised the County Attorney will explain the issues.

County Attorney Scott Knox advised the City?s prior action kept the County?s water rates 25% above the City residents? rates; and the 1994 legislation says it was not a valid act. He stated the County is interested in taking part in the lawsuit; and in order to do that, the Board had to come to the Council to negotiate a settlement imposed by law. Mr. Knox stated last night the City Council equalized the rates between City and County residents; and tonight the Board is here to discuss whether it can intervene in the lawsuit to preserve the integrity of the legislation.

Carl Larrabee, Jr., Utilities Administrator for the City of Cocoa, explained areas served by the City, the historic water demands, customer growth, activities required to meet demands of the growth predominantly outside the City, wellfield expansion, permits, plans for expansion for adequate capacity, and estimated costs.

Mayor Michael Hill advised they are proud of the aquifer storage recovery system; and the City helped to pioneer that technology. Mr. Larrabee advised the City of Cocoa was one of the first in the State to try that technology; and explained the process. Mayor Hill advised the City does not want to be adversary or outside the law; it is in the business of providing water and has done a good job; it stands on its reputation that the rates it charges in comparison to those provided by other municipalities are the lowest inside and outside the City limits; and Council feels the rates are extremely fair, but is willing to talk and listen to the County?s position.

City Attorney Richard Amari advised prior to the 1994 legislation, Cocoa?s rate setting mechanism was established pursuant to Florida Statutes, Section 180.191; it applies to all water suppliers throughout the State; it sets up a mechanism and procedure to establish rates; and that mechanism and procedure take into account that if they are providing service to water users outside the municipalities, there are factors involved that would justify charging users outside the City an amount greater than that charged to users inside the City. He stated there are several factors to take into consideration: (1) risk that the municipal water supplier incurs when it develops the water system; (2) risk of infrastructure; and (3) cost of developing the infrastructure. He stated the City of Cocoa spent a lot of money to improve its water system, acquire new well sites, and battle landowners to acquire property rights and the ability to provide a water supply to customers for years to come. Mr. Amari advised there is incremental cost to serving customers outside the boundaries of the City for water mains across rivers, pump stations for adequate pressure outside the City limits, and the difficulties and extra expense to construct the infrastructure to provide that supply from Titusville to Melbourne and the beaches; and that justifies an increased rate. He stated if Cocoa is charging 25% to outside City users, that is not a 25% profit because of the extreme expense to serve outside the City; and the City?s obligation is to the bond holders to provide a revenue stream to repay the bonds. He stated if the City finds the expense is great to service outside City users, it can charge in excess of 25% by advertising and holding a public hearing and providing justification showing its rates are just and fair, as long as it does not exceed 50%. Mr. Amari advised Senate Bill 30-74 deals with distribution differential surcharge; they read it many times and got more confused each time; it is not clear what the Legislature intended; and if the City wanted to comply with the spirit of the statute, it would not know how to comply or have assurance that it would not be sued by people complaining it is not complying. He explained what the City could do and not violate Senate Bill 30-74; stated Florida Statutes, Section 180.191 had a lot of forethought when it was developed, makes sense, and works; and Cocoa?s rates are the lowest in the County, and the quality of water the best in the State. He stated the only resolution they were faced with was to challenge the law; and that is what they have to do, and that is why the lawsuit is pending. He stated he hopes the County looks at the law and comes to the realization it is not as simple to comply with.

Chairman Cook inquired what is Mr. Knox?s understanding of the current law requirements; with Mr. Knox responding with the exception of the vagueness, it is like Mr. Amari described it; and they can set rates under Florida Statutes 180.191, except the law requires a study for anything above the 10%. He stated there is a provision to go above, if they comply with Florida Statutes 180.191, but he does not think it is as vague as Mr. Amari says. Chairman Cook inquired what is the City of Melbourne paid.

Commissioner Higgs advised in 1993, when they talked about South Brevard Water Authority, the issue was clear about rates, differentials, and supply sources; and in 1994, they did not believe the differentials for customers who live outside the cities were fair, but given a rate study, they could charge that differential. She stated she does not take exception to the ability of any city to adequately cover the cost of the system?s investment, risk, or whatever; the City of Melbourne embarked on a rate study; it adopted a 10% differential; and most everyone felt they were served by the process. She stated if the City of Cocoa feels its rates are justified at 25% or 50%, the law allows it to justify that by a rate study.

Mayor Hill inquired what was Melbourne charging the beaches; with Commissioner Higgs responding 30% differential. Mayor Hill advised 30% of their base rate is hefty; Melbourne?s system is inverse of Cocoa?s system; most of its customers live in the City and not outside of the City; so there is an adverse effect to Cocoa because the majority of its customers are outside of the City limits. He stated the law cannot be applied evenly because the impact is not the same. Commissioner Higgs stated no one is questioning whether any utility can cover bonds, risks, etc., but justify the rate through a study; and that is all the legislation requires. She stated it is not complicated or unclear; it is very clear; and she supports the legislation because it has Countywide implication and does not stop suppliers from having a fair rate to cover their costs.

Mr. Amari advised if the City chooses to charge a rate under Florida Statutes 180.191, and holds a public hearing, it could do that without complying with the local law; the only thing it would have to do is justify its initial base rate charged inside the City; and once it does that, it can go up to 50% without justifying the differential.

Assistant City Attorney Brad Bettin advised Florida Statutes 180.191 states the city will set rates by the same methods for people in town and people out of town; whatever the rates for people out of town are, the city will be able to charge a 25% surcharge on top of that; and the only cap is it cannot be more than 150% of the in-town rate. Commissioner Ellis stated the City would have to do a rate study to do that; with Mr. Bettin responding they would have to provide justification for setting the rate and use the same method of calculating the rates, but it does not have to hire a consultant and is not required to support it by a rate study. Mr. Amari stated Melbourne?s 30% surcharge and Rockledge?s 10% surcharge is justified by a study.

Discussion ensued on differential rates, approach the City chooses to treat all the same outside and inside the City, pending legislation, and rate study.

Mayor Hill inquired how the Board perceives the equalization by the Council?s actions last night. He stated that was the only thing they could do; there is no rate differential; and the City offered to share its concerns when it talked to the Brevard Legislative Delegation, but there did not seem to be a willingness. He stated now that the City has equalized its rates, its concern is with the state law and taking appropriate steps to test it in court. He inquired what basis would the County have now; with Mr. Knox responding the County has an interest, as a consumer of water and having citizens served by the City?s system, in seeing that legislation is maintained in tact; there is an indication that the Resolution the City passed last night was a temporary measure until the litigation was resolved; so there is a possibility that the rate could go back to where it was yesterday.

Commissioner Ellis inquired if the City?s contention is that the new legislation is in conflict with the old legislation; with Mr. Amari responding the new legislation allows the City to proceed with the State Statute. Commissioner Ellis inquired if the City is looking for a declaratory judgment; with Mr. Amari responding it is looking for a declaration; the initial approach under the litigation is that they feel it is unconstitutional for many reasons; but if the court determines that it is not unconstitutional and is a good law, they intend to ask the court to set parameters. Commissioner Ellis inquired if the City is seeking a court decision and legal interpretation of what the Legislature wrote, and if it will go all the way to the Supreme Court; with Mr. Amari responding it will begin in the Circuit Court. Commissioner Ellis inquired if the City is looking for a judicial interpretation, why would the County intervene; with Mr. Knox responding to preserve the law because there is a possibility it could be declared unconstitutional and the rates can go back to 25%.

Chairman Cook advised part of the process is to meet with the City if the Board decides to intervene; he wants to assure the rates outside the City are fair and equitable and stay as low as possible; and if the Board finds the law is a mechanism that will help that to take place, it may want to intervene as a party to the suit.

Discussion continued on why the County would intervene in the lawsuit, and the possibility of other municipalities intervening on behalf of the City of Cocoa.

Mayor Hill advised other counties and cities are interested in the outcome of the lawsuit; Cocoa water rates are extremely fair; and they are willing to help solve the problems, provide super good water quality and volume, and continue the leadership of prior councils. He stated they understand the Board?s concern, but feel their actions are in good faith. He advised of coordination with the City of Melbourne to provide water for the Suntree area; indicated there is a relationship starting to form; and recommended approaching growth problems on a Countywide basis.

Mr. Amari advised Chairman Cook mentioned his desire to see his constituents? rates stay low which is understandable; but even if the law is valid, that will not result in rates outside the City coming down; the City does not have the ability to do that because the loss of revenue would be too much; so the City would be forced to increase inside rates if it had to bring the rates closer together.

Commissioner O?Brien advised he and Mayor Hill discussed his concern that the outside users have no representation on the City?s water board, yet they compose the majority of the users; and the people in Cocoa Beach, Port St. John, and Merritt Island should have a voice on that Board.

Commissioner Ellis stated if the outside users take the majority of that Board, they could bankrupt the City; with Commissioner Higgs responding it is an advisory board and would not bankrupt the City.

Mayor Hill advised he and Commissioner O?Brien shook hands on that issue; he agrees with the theory and brought it back to the Council; at that time it was not in favor; but they have come to an agreement to add two seats to the Utilities Advisory Board and allow the County to appoint two members from the user areas. He stated the final decisions are made by the City Council; his reason for supporting it was the knowledge that could be gained; and if they get representation from Merritt Island or Cocoa Beach to help solve the workings and value of the product, that will alleviate concerns that Cocoa is the big bad water system. He stated when customers outside the City do not pay their bills and get their water cut off, they call the Commissioners; so he understands the situation. He stated it has not been brought up to the new Board; and instructed Mr. Amari or Mr. Bonczek to redistribute that information. He inquired how many members are on that Board; with City Clerk Beth Dabrowski responding five. Mayor Hill advised adding two would make it a seven-member Board and would not give the outside customers the majority, so he is still in favor of that and sees it as a positive way to get the true information out.

Commissioner O?Brien stated it would be a positive action of the Council to include those people.

Mr. Amari inquired if the Council were to decide to amend its rules and provide for outside representation on the Utilities Advisory Board, would the County consider not intervening in the lawsuit and not taking a position; with Commissioner O?Brien responding the Board is not here to trade; they are two different issues; and joining the lawsuit is a legal issue the Board will look at. Chairman Cook stated it could be a consideration, but they are two separate issues and the Board has not made a decision on whether it will or will not intervene.

Commissioner Scarborough stated the Legislative Delegation created the law; if it was created with ambiguity, they should meet with the City and County and talk it through; otherwise a judge will make the decision, and nobody may be happy with it. He inquired if the Council would hold its suit in abeyance until the Board proceeds to the next step rather than making a decision whether or not to intervene. Mr. Amari stated they could put the lawsuit on hold, but whether the Council would is a policy issue. Commissioner Scarborough requested Mr. Amari ask Council if it would be willing to meet with the Board and Legislative Delegation to clarify where they want to be.

Commissioner Higgs stated a better way is to get the legislation into a position that may not require settlement by a lawsuit, and have the staff work with others than to have 20 people discussing it. Commissioner Scarborough stated the Legislative Delegation has the authority to redraft how it would work. Commissioner Higgs stated the County and City Attorneys could work on it and see if they can all agree on which way to go.

Commissioner O?Brien stated challenging the law is costly; however, to discuss it with the Delegation in concert with the Board may find a way to amend the law rather than go through the court system all the way to the Supreme Court.

Councilman John Blubaugh inquired if Commissioner O?Brien believes in the legislation; with Commissioner O?Brien responding yes, the object is to regulate rates from suppliers for customers outside the City. Councilman Blubaugh advised the City of Cocoa?s rates are the lowest; with Commissioner O?Brien responding the customers outside the City have to be convinced; they do not know what the rates are elsewhere; and as long as they are getting a fair deal, they will be happy, but most of them resent being charged 25% higher than the customers inside the City limits.

Mr. Larrabee expressed concern about delaying the lawsuit because of the bond authorization for 30 million dollars. He stated they have the consumptive use permit and the schedule will be tight to get the plant on line; and if this is not cleared up, it will affect the bond rating and interest rate which would increase the cost to customers in the long term. Commissioner O?Brien stated some bond companies try the same tactics and say the rating will change when it may not change.

Mayor Hill advised to secure the water, the City had to make a deal that requires it to pay whether it draws the water or not; the City does not want to pay for something it is not using, so it is not dragging its feet; and it needs to know where it stands. He stated that is the reason for the declaratory action. He stated if Council talks about going forward or not, it will be a closed session; he wants to find out where the City stands, and will take advice from the City Attorney; and it may shed light in other areas.

Commissioner Scarborough stated he had nothing to do with the way the legislation reads, but he has constituents that say it cannot be more than a 10% disparity; they do not have trouble with that; he would prefer the Legislative Delegation that created it and was involved in the language solve it rather than the County intervening on something it did not create; but if the Delegation does not take action, he will support Mr. Knox intervening.

Mr. Larrabee advised early versions of the bill had water and sewer and 10% cap; sewer went away, but there are customers paying 25% more for the sewer system; and the issue should come up to the Legislative Delegation for the citizens of the County and be discussed.

Mr. Amari advised Florida Statutes 180.191 had forethought; a court case with the City of Cocoa ruled the statute constitutional; and suggested the Board read the language of that case. He stated the Legislature wrestled with the problem many years ago of rate studies justifying equalization of rates; the court said it cannot be done even under sophisticated accounting techniques; the Legislature recognized that and said 25% works for everybody; and those are the problems the bill does not take into consideration.

Chairman Cook inquired what justifies the 25%, and is it because they do not live inside the city; with Mayor Hill proposing the City and County together lobby the Delegation to do away with the legislation, then through cooperative efforts Countywide, come back after the legislation is amended to allow the users, supplier and County to put together something they can all live with.

Commissioner Ellis stated the Delegation believes the problem is solved; Titusville asked for change and the Delegation did not want to open it up; they will not be interested in revising it at all; and if the City of Cocoa is going beyond the 10% differential, the Delegation will not be interested. Commissioner Higgs stated it is not okay for the people who pay that difference, but she does not think the Delegation will consider it.

Mayor Hill advised the City?s rates are equal; there is no differential; getting a declaratory judgment is the next step; and recommended the Board not close the door on what they talked about.

Commissioner O?Brien expressed appreciation for considering outside representation on the Utilities Advisory Board of the City.

Councilwoman Phyllis Churchill advised all the meetings of the Utilities Advisory Board are open to the public; they take public input; and anyone who wants to come and be a part and hear what is going on can attend. She stated they meet on the third Monday of each month.

Commissioner O?Brien stated it is different being on the Board and having a vote than making a speech from the audience; with Councilwoman Churchill responding it is also good to become involved from the audience standpoint and have additional input as to where they are going. She stated the Board welcomes input from all the areas and the people they serve. Commissioner O?Brien stated the people he receives complaints from are mostly senior citizens who have a problem driving at night, and giving them a seat on the Board would provide direct input.

Mayor Hill advised Council passed a Resolution that on all boards it has the right to appoint non-residents who do not live in the City, but they have to be property owners. He instructed the City Manager to put in the mail on Friday night to the Council information on the appointment of two outside members to the Utilities Advisory Board.

Chairman Cook advised at the next meeting the Board will take a position; this has been informative and good to talk face-to-face instead of working through staff; and he appreciates the opportunity to speak with the City Council and resolve the issue if possible.

The meeting adjourned at 6:50 p.m.

ATTEST: _________________________________

MARK COOK, CHAIRMAN

BOARD OF COUNTY COMMISSIONERS

BREVARD COUNTY, FLORIDA

__________________________

SANDY CRAWFORD, CLERK

(S E A L)