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HomeMy WebLinkAboutMinutes_Special Meeting_07/25/1995VILLAGE OF TEQUESTA Post Office Box 3273 357 Tequesta Drive Tequesta, Florida 33469-0273 (407) 575-6200 Fax: (407) 575-6203 THE TOWN COUNCIL OF THE TOWN OF JUPITER AND THE VILLAGE OF TEQUESTA VILLAGE COUNCIL JOINT MEETING MINUTES JULY 25, 1995 I. CALL TO ORD}3R AND ROLL CALL The Town Council of the Town of Jupiter and the village Council of the Village of Tequesta held a joint meeting at the Jupiter Town Hall, 210 North Military Trail, Jupiter, Florida, on Tuesday, July 25, 1995. The meeting was called to order at 7:10 P.M. by Jupiter Mayor Karen Golonka. Jupiter Councilmembers present were: Mayor Karen Golonka, Vice. Mayor Daniel Amero, Councilor Thomas McCarthy, Councilor Barbara Henderson, Councilor Donald Daniels. Also in attendance was Town Manager Lee Evett and Town Attorney Thomas Baird. Tequesta Councilmembers present were: Mayor Ron T. Mackail, Elizabeth A. Schauer, Carl C. Hansen, and Joseph N. Capretta. Also in attendance were: Village Manager Thomas G. Bradford and Village Attorney John C. Randolph. Mayor Golonka's opening comments indicated that the joint meeting was held per Chapter 164.103 of the Florida Statutes for the purpose of discussing proposed litigation intending to be filed by the Village of Tequesta against the Town of Jupiter in an effort to amicably settle any and all Recycled Paper village Council aad Jupiter Toara Council Jofat Meetiag Miautes July 25, 1995 Page 2 ---------=--------------------- controversies related thereto and to understand the issues and concerns of Tequesta, and the reason Jupiter was proposing the rate increase, before proceeding with the rate hearing. Mayor Mackail called upon Village Attorney Randolph to provide a historical perspective. Attorney Randolph stated that Tequesta had been asked a direct question by Jupiter relating to tonight's meeting, `What are the issues you intend bringing in this lawsuit?' Attorney Randolph provided those present with copies of three documents he had assembled, and explained the first of the documents was the relevant section of the bulk sale water agreement between Tequesta and Jupiter; the second was a copy of the order received from the Court that day regarding the rate hearing; and the third was a copy of a letter from Mayor Golonka to Mayor Mackail. As to the issue of the lawsuit, Attorney Randolph commented that as stated in Tequesta' s notice to sue, the suit was proposed to be based upon the fact that rates proposed to be charged Tequesta pursuant to Tequesta's consultant's report were computed in a manner contrary to the agreement which had been entered into, and that the agreement had a very specific way of calculating rates. Mayor Golonka questioned whether the Tequesta Councilmembers were familiar with the issue raised by Attorney Randolph, and stated she had wanted Council to Council negotiations. Attorney Baird stated he did not know that legal arguments would be made at this meeting, and that it was fair for the town to hear the position of the Village. Attorney Randolph pointed out in the agreement that it was contemplated when the agreement was initially drafted that there would be a need for increases from time to time, that the agreement made the distinction between bulk sale customers and retail village Council and Jupiter Toa~a Council Joist Meeting Minutes July 25, 1995 Page 3 ------------------------------- customers; and that nothing contemplated rates to be equalized between them. Attorney Randolph explained that Tequesta had felt forced to keep the hearing from going forward because it was contrary to Public Service Commission procedures, and an order had been issued that no rate hearing could be held until October 24, 1995. The village Attorney explained the reasons for the lawsuit: The manner in which rates could be raised, costs of operating the water system being passed on, and equating between retail and bulk. Attorney Randolph commented that capital costs up to two million gallons per day were established and had not changed, and that Jupiter had a guaranteed fixed income from Tequesta from the requirement to take 1.5 million gallons per day whether used or not. In addition to that minimum, Jupiter now wanted Tequesta to pay another fixed amount, a base facility amount, which was the amount charged retail customers, and Tequesta was not a retail customer. Attorney Randolph read the applicable portion of the contract which he stated was Tequesta's position; that Tequesta wanted Jupiter to live within the terms and intent of the agreement; that Tequesta had lived up to the terms of the contract to its financial detriment; that if Jupiter lived up to its agreement there would be no reason for the lawsuit; and that Tequesta believed Jupiter's action violated the agreement. Attorney Randolph commented that the Tequesta representatives were present at the meeting to amicably resolve any differences and would appreciate hearing Jupiter's rationale for the increase in rates. Mayor Golonka remarked that correspondence had indicated that within the contract Tequesta could have rate increases, but the Village was taking issue with the methodology, and questioned what was acceptable. Attorney Randolph responded that the contract provided for a way for Jupiter to recoup Village Council and Jupiter Toaa Council Joint Meeting Minutes July 25, 1995 Page 4 ------------------------------- costs of supplying water to Tequesta and to have annual rate hearings in order to do that, and that their consultant's report was outside the scope of the contract, since Tequesta did not believe the contract allowed equalizing rates between retail and bulk customers. Mayor Mackail commented that the real effect would be a 91~ increase to Tequesta customers, and referred correspondence from Mayor Golonka dated March 21, 1995, and April 14, 1995. The March 21, 1995 memo from Mayor Golonka had requested Tequesta's intentions after the conclusion of the bulk water agreement in 2007, and stated that the Village at the end of the contract term must either renegotiate a new agreement or discontinue service from Jupiter and obtain it elsewhere. Mayor Mackail's response had been that Tequesta's intentions were to discontinue service, and Mayor Golonka had agreed in her letter dated April 19, 1995 to wait six months to allow Tequesta time to complete a study and devise a plan beneficial to both. Mayor Golonka responded that in her letter where Jupiter gave Tequesta six months, that the time had been intended for long-term planning and not for rates; and referred to correspondence since 9/94 where both staffs had met to discuss Tequesta's refusal to pay a i$ increase. Mayor Mackail stated that Tequesta wanted what was right, and asked whether the Jupiter Councilmembers had read the contract. The Jupiter Councilmembers responded they had read the contract. Councilmember Capretta commented that Mayor Golonka's comments regarding the rate increase and long-range planning had gotten mixed up in the correspondence, that Tequesta had been willing to discuss previous rate increases, and that Tequesta felt Jupiter had violated the agreement, which was a wonderful contract for Jupiter since Tequesta had to purchase 1.5 million gallons per day whether they used it or not. Councilmember Capretta pointed out that if Jupiter had proceeded in the same manner as in the past that this issue Village Couacil sad Jupiter Toaa Council Joist Meeting Miautes July 25, 1995 Page 5 ------------------------------- would have been resolved by this time; that he believed that Jupiter wanted to make more money by charging Tequesta retail rates, and that Jupiter had an absolute customer who would purchase 1.5 million gallons each day of the week for the next 12 years, unlike the bulk water purchased by Jupiter from Seacoast under a contract which had no base facility charge and allowed Jupiter to buy only what they needed. Councilmember Capretta indicated that he had thought Mayor Golonka's letter had implied Jupiter wanted to phase out of the agreement. Councilmember Capretta explained that Tequesta sold the water purchased from Jupiter to 4,578 homes, including 582 Jupiter residents and residents of other communities who would be antagonized by the rate increase. Councilman Capretta stated that Jupiter's base facility charge was taken care of in their minimum, that what they were proposing was illegal, and urged them to think politically what they were doing as well. as financially. Councilmember Schauer commented that friends of hers in Jupiter who purchased water from Tequesta had asked whether Tequesta would pass on the cost of the rate increase and she had responded that the Village would have to pass it on, and had asked that they speak to Jupiter regarding their concerns. Councilmember Schauer stated that she also had interpreted Mayor Golonka's letter that Tequesta had six months to plan for the Village to be hopefully someday totally independent from Jupiter. Councilmember Hansen observed that the agreement had been in existence 18 years and that the report Tequesta had received needed experts to explain. Councilmember Hansen stated that the Council was there in good faith to work with Jupiter and felt that 91~ was a little bit out of line; that he would like to negotiate and was looking forward to a good relationship. When possible in the future, Councilmember Village Couacil sad Jupiter To~va Couacil Joist Meetiag xinutes July 25, 1995 Page 6 ------------------------------- Hansen commented, Tequesta was looking forward to being self sufficient. Mayor Golonka directed attention to schedule 3 of their consultant's report, which explained why Jupiter did not think they were being covered by what they were presently charging Tequesta. Consultant Howard Ostermann presented his explanation of issues which included the following points: • Since the commodity charge had been discussed with Tequesta staff since 1992, Tequesta should not have been surprised by the method of increasing rates. • The language in the existing contract had been drafted by Mr. Ostermann. • The requirement to purchase 1.5 million gallons per day whether used or not had been put into the original contract at Tequesta's request. • The Public Service Commission made no distinction between retail and bulk sale; in offsetting costs of operating a system with rates how the rate was collected was not sacred--it was a formula chosen by different utility systems for any number of reasons. • Mr. Ostermann's company had been very cognizant of the contract in preparing their report, and reference to the PSC in the contract was done to give a measure of protection to Tequesta so that rates would be made in proper classical ways and no advantage would be taken of Tequesta and they would be entitled to equality and fairness the same as any other customer. Village Couacil and Jupiter Iowa Couacil Joist Meetiag Miautes July 25, 1995 Page 7 ------------------------------- • Mr. Ostermann referred to the statement `Jupiter's judgement regarding matters of rate shall at all times be based on consideration of the cost of operating the system' and explained that his report had been prepared particularly with regard to identifying and allocating the cost of operating the system, and had taken great pains to identify those costs not applicable to bulk sale customers. The report had recommended the creation of a separate category of billing or meter charge since Jupiter did not have that expense with Tequesta--the costs of operating the internal distribution lines were eliminated. • Mr. Ostermann referred to the contract provision that Jupiter shall be obligated to present a comparison between the cost in the first six months of operation with the cost in a recent six months period, stated that such a comparison had been included in the report, and that it was one way of comparing costs against earlier years. Power, chemicals and labor costs were identified. • Mr. Ostermann stated that the purpose of the report had been to establish an equitable and fair balance among different classes of customers and all rate structures, and that the basis for rate adjustment was fairness and equity, and asked why should retail customers of Jupiter, Juno Beach and unincorporated areas of Palm Beach and Martin Counties have to subsidize the Village of Tequesta's service, and if there were any reason why Tequesta should have to compensate for all costs attributable to it. Mr. Ostermann stated that Tequesta consumed 14$ of Jupiter water system's average daily production but contributed only 9~ of daily revenue, and concluded that Tequesta should pay 14~ of the costs. • Mr. Ostermann stated that any recommended rate structure Village Couacil aad Jupiter Town Couacil Joint Meeting Minutes July 25, 1995 Page 8 ------------------------------- should treat all customers equally unless direct cost differences existed between the customer categories, and that Tequesta should get credit for performing billing and collecting, and for operating their water distribution system. • In meetings between Jupiter and Tequesta staffs, never had it been suggested that Jupiter was trying to end the contract early but it had been conveyed to Tequesta that it was their choice whether to terminate at the end of 2007, whether to terminate on an earlier date, or whether to terminate because they had total reliance on their own system; but Jupiter was concerned what Tequesta's long- range planning was since Jupiter was continually searching for water and had the responsibility to provide service under the contract. Mr. Ostermann agreed that 91~ was a substantial increase, but stated the cost of water was relatively low for either bulk or retail in comparison with State standards. • Mr. Ostermann assured Jupiter their staff and consultants were following the contract to the letter. • Under the increased rate the costs would be redistributed in accordance with a cost formula to all customers including Tequesta. Discussion ensued, with questions directed to Mr. Ostermann. In response to Councilman Capretta's question why this concept had never been discussed, Mr. Ostermann responded that Jupiter was not getting $600,000 more but that it was simply a redistribution. In response to Village Manager Bradford's comment that page 7 of the report indicated an inadequacy of $246,000, Mr. Ostermann responded that the system had not undertaken a major rate review until 1992, rates had remained the same since inception in 1977 to 1992, village Council and Jupiter Iowa Council Joint Meeting Minutes July 25, 1995 Page 9 ------------------------------- and 1992 rates had been taken in parts; retail, bulk sale commodity, and now bulk sale base facility; prior Councils had allowed furnishing water even though their costs had been steadily increasing, which Tequesta was suggesting had been indiscreet, but it had been forbearance. Conservation measures had not been taken through rate structure but Jupiter's conservation approach had been to back out from the Biscayne Aquifer and to provide water from a more prolific source which had not been used, and up until this time Jupiter had been satisfied with the consumption levels of its customers. Councilmember Schauer stated that as a bulk rate customer Tequesta should be treated differently from a retail customer since they purchased in bulk. Mr. Ostermann responded that it used to be common to give discounts for more water used, but the practice had been discontinued during the 1950~s, and Jupiter did not have step rates up or down. In response to Village Manager s reference to the $246,215 shortfall, Mr. Ostermann responded that he did not see that as unusual, and outside of the application of certain of the funds generated by a proposed change in the Tequesta rate which would improve the position of renewal and replacement, which was deemed to be under funded, all of the increase recommended under the rate schedule for Teguesta was spread back to all customers of the system, retail and bulk sale alike. Mayor Mackail commented that the report reflected about $520,000 related expenses coming from the water enterprise fund to other areas of the town of Jupiter and therefore questioned consistent application, and stated that he wanted the application to be very precise and consistent. Mr. Ostermann responded that in the early years of the contract that Jupiter had provided services without reimbursement and was now reimbursed, and services provided Village Couacil aad Jupiter Towa Couacil Joiat Meeting Minutes July 25, 1995 Page 10 ------------------------------- by Jupiter were believed to be properly allocated to water. Mr. Ostermann explained that over $200,000 annual credit was given Tequesta for performing their own billing and collection. Councilman Capretta commented that in Tequesta's discussion to go to reverse osmosis it had been determined that it would be advantageous to the village to stay with the Jupiter agreement for the differential; however, it would not be advantageous under the proposed rate increase. Councilman Capretta asked Mayor Golonka whether Jupiter wanted to stay with the contract, to phase it out over the years, or to force Tequesta to stay with the contract even if they requested release. Mayor Golonka's reply was that they would adhere to the contract, and that the question was what Tequesta wanted to do. Vice Mayor Amero commented that it was time the two municipalities sat down to talk, and that no one wins with litigation, that the issue was not the contract which everyone interpreted differently, but was a fairness and equitable balance issue, and proposed arriving at something fair for everyone. Councilor McCarthy commented that it would be better for everybody if the two systems were merged but that would not happen since they provided income streams; that litigation would be a shame; and if some rate adjustments were agreed upon he would like to see the adjustments phased in to avoid a large adjustment at one time. Councilor Henderson stated Jupiter had not gone to reverse osmosis until after studies had been done; 1992 had been the first opportunity to review the R/O plant coming on line; Tequesta had refused to pay a 1g increase; this was the first Jupiter had heard of phasing out of the contract; and Village Couacil aad Jupiter Toxa Council Joint Meeting Miautes July 25, 1995 Page 11 ------------------------------- asked why the 1~ increase had not been paid. Village Manager Bradford responded the 1$ rate increase had not been paid since indexing was not allowed within the contract and in April 1994 Tequesta staff had met with Jupiter staff and at that meeting had been advised Jupiter wanted to impose irk under indexing. Tequesta was threatened if they did not pay the 1~ that Jupiter would go to a base facility charge, and asked if indexing was in the contract why Jupiter's consultant was now telling the Town to make sure the rates were applicable to Tequesta. Also, Village Manager Bradford explained, there were legal reasons involved; and commented that Tequesta had planned for many years to go to R/O and had possessed a permit for five years, and had told Jupiter's staff that Tequesta's intent was to be independent. Further discussion included comments by Councilor Henderson to the effect that a possible alternative to litigation would be to sever the contract and do a new one with a range of equality to give Jupiter long range planning parameters and to put Teguesta on notice to build their own R/0 plant. Mayor Mackail stated he would recommend to Council that negotiations be delayed until Tequesta had time to discuss this matter with staff and neighbors. Councilor Daniels commented he agreed with the fairness issue and that some rate increase should be structured, explained he paid water bills to both municipalities, had been concerned that Tequesta did not pay the 1~ increase, and believed Tequesta and Jupiter should discuss common issues. Town Attorney Baird stated he believed Tequesta's interpretation of the contract did not hold water, and for him to comment would be counterproductive since he would only rebut Attorney Randolph's comments, therefore, those comments should be made in a courtroom. village Council and Jupiter Iowa Council Joint Meeting Minutes July 25, 1995 Page 12 ------------------------------- Mr. Ostermann indicated that the report was based on putting the recommended rates into effect on the target date of 7/25/95. Mayor Golonka expressed her view that the Village and Jupiter should find common areas to work from and decide what is right, and that Jupiter did not want to litigate, but she took issue with comments by the Tequesta village Attorney and Manager, and did not like to see the type of article which had appeared in the Tequesta newsletter. Mayor Mackail commented that emotions should be put aside so that the issue could be considered objectively, and believed there was some common ground to work together as good neighbors, and stated that after the Village Council had met with the Village Manager they would be willing to meet for further discussion. After discussion of a future meeting date, it was decided that Mayor Mackail would call Mayor Golonka after a short time to set up a meeting date. Village Manager Bradford offered as a suggestion that one elected official become a part of any negotiations since a group as large as present at this meeting would find negotiations difficult. ADJOIIRI~NT Mayor Mackail moved that the meeting be adjourned. Councilor Daniels seconded the motion. The vote on the motion was unanimous to adjourn the joist meeting at 9:15 P.M. After adjournment of the joint meeting, the Jupiter Town Council deferred discussion of Ordinance 27-95 until September 5, 1995. Councilor Henderson expressed concern Village Council and Jupiter Town Council Joint Meeting Minutes July 25, 1995 Page 13 ------------------------------- that Jupiter's cost was $51,000 for each month they were subsidizing Tequesta. Respectfully submitted, ,~- ~ Betty Laur Recording Secretary ATTEST: ~~ ~~~~ oann Mangan ello Village Clerk DATE APPROVED: io.i993