HomeMy WebLinkAboutDocumentation_Regular_Tab 01_08/09/2007Rose, Sandstrom & Bentley, LLP
Firm Resume
Rose, Sandstrom & Bentley LLP
2548 Blairstone Pines Drive
Tallahassee, Florida 32301
OVERVIEW OF THE FIRM
In 1974, the Miami firm of Myers, Kenin, Levinson, Frank & Richards, opened a Tallahassee
office to meet the growing needs of its clients in the State capital. Robert M. C. Rose, formerly the
deputy director and chief attorney for the Florida Public Service Commission's Water and Sewer
Regulatory Department, became the resident partner.
Over the years the firm's utility practice grew to include representation of governmental as
well as investor owned utilities. Areas of concentration included utility mergers and acquisitions,
rate cases, tax-exempt and conventional financing, territorial rights, permitting, and special district
creation and structuring. In addition, a larger commercial, administrative and environmental law
practice was developed with the growth of the firm.
In 1987, as part of a firm reorganization, the Tallahassee office formed the law firm of Rose,
Sandstrom & Bentley, LLP. Since that time, the firm has grown in directions which compliment its
public utility, environmental and administrative law core practice areas.
Today, Rose, Sandstrom & Bentley, LLP, is a 15 attorney firm with lawyers experienced in
areas such as complex environmental litigation, water rights, commercial litigation, corporate and
not-for-profit companies, health care, and public finance. The firm has also added a central Florida
office located in Longwood, Florida.
Rose, Sandstrom & Bentley, LLP is a law firm with a tradition of excellence in legal services
to its clients in a professional, cost-effective manner.
Biographical information for certain attorneys in the firm involved in the utility practice area
is set forth below.
PRINCIPAL AREAS OF PRACTICE
The lawyers of Rose, Sandstrom & Bentley, LLP do not try to be all things to all people.
Concentration in specialized areas of the law provides our clients with the level of service and
attention to detail necessary to properly address their needs in today's changing legal environment.
The lawyers of Rose, Sandstrom & Bentley, LLP concentrate in areas of law which include the
following:
PUBLIC UTILITIES
! Regulatory and Ratemaking
! Public Finance
! Mergers and Acquisitions
! Corporate and Tax
! Privatization
! Territorial Disputes
ADMINISTRATIVE LAW
! General Litigation
! Professional and Occupational
Licensing
! Bid Disputes
! Environmental and Land Use
! Local Government
ENVIRONMENTAL LAW
! Permitting and Enforcement
! Transmission Line Siting
! Water Quality Issues
! Regulatory Enforcement
HEALTH CARE LAW
! Certificate of Need
! Medicaid and Medicare
! Licensing and Survey
! Rule Challenge
! Cost Containment
! Budget Review
! Fraud and Abuse
! Patient Self-referral
REAL ESTATE
! Environmental Audits
! Title Insurance
! Land Use
COMMERCIAL LAW
! General Corporate
! Tax Exempt Structuring
! Non-Profit Organizations
! Debt/Equity Financing
! Arbitration and Alternative Dispute
Resolution
The firm offers statewide services to clients from Key West to the panhandle, while enjoying
the benefits of access to State agencies and government afforded by a Tallahassee location. General
counsel, special counsel and trial counsel are all roles undertaken by members of the firm within
these specialized areas of practice. We are pleased to offer these services to private and public
sectors clients ranging from individuals and corporations to local governments including cities,
counties and special districts.
Over the past twenty years, members of Rose, Sandstrom & Bentley, LLP have handled
hundreds of public utility cases, many involving water and wastewater utilities. This practice has
taken place before the Florida Public Service Commission, Department of Environmental Protection,
the various Water Management Districts, the U.S. Environmental Protection Agency, and other
Federal, State and local regulatory bodies. Water and wastewater representation may be broken
down into governmental and private sector cases.
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GOVERNMENTAL WATER AND WASTEWATER PRACTICE
The firm has acted as special utility counsel to municipalities, counties and special districts in
a variety of utility matters.
Mercers and Acauisitions
In 1992 and 1993 this firm acted as special counsel to Clay County in its acquisition of
Kingsley Service Company, Clay Utility Company and Mid-Clay Service Corp., the three major
private utilities located within the County. All three transactions required negotiation and drafting of
Agreements of Purchase and Sale, coordination of public hearings, drafting rate and service
availability ordinances, and participation in bond issuance to finance the utility acquisitions. These
acquisitions were structured to provide for conveyance of utility assets to an independent special
district created to serve the County on a regional utility basis. The firm has also represented
municipalities in its capacity as special counsel. We have acted as special counsel to the City of
Winter Springs in its acquisition of Seminole Utility Company; the City of Orange City in its
acquisition of Orange City Water Company; Town of Lake Clark Shores in its acquisition of Florida
Water Service, Co.; and Marion County in the acquisition of Silver Springs Shores.
In 2003, the firm acted as Buyer's Representative on behalf of a consortium of local
governments in the largest water and wastewater utility acquisition in the history of the State of
Florida. Florida Water Services Corporation (f/k/a Southern States Utilities) sold its statewide assets
of over 120 systems. As Buyer's Representative, the firm participated in structuring the transaction
and was counsel to the principal purchaser including the City of Marco Island, the City of Deltona,
the City of Palm Coast, Hernando County, the Florida Governmental Utility Authority and the
TOHO Water Authority.
More recently, in 2006, the firm was hired by Citrus County to provide an acquisition
assessment report as to whether the County should acquire utility assets of a group of water and
wastewater systems owned and operated by the Florida Governmental Utility Authority. The firm
recommended acquisition and represented the County in the subsequent transaction closed in early
2007. The assessment report included a review of the legal, financial and regulatory aspects of utility
acquisition and ownership. A list of recent utility transactions in which this firm was involved is
attached to this resume.
General Utility Matters
In the past, the firm has acted as counsel to Charlotte County and St. Lucie County in drafting
ordinances and an overall regulatory framework following transfer of Public Service Commission
jurisdiction over private utilities to those counties. The firm continues as special counsel to the Clay
County Utility Authority on various matters relating to utility permitting and administration of a
large capital improvement program funded from the acquisitions.
The firm currently represents the City of North Port regarding utility matters including
negotiations of utility development agreements with large landowners negotiation and enforcement
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of rights under water supply contracts with the Peace River/Manasota Water Supply Authority. The
Company has represented the City of Flagler Beach in its service area dispute with Flagler County
and City of Palm Coast and was instrumental in a settlement resulting in substantial system upgrades
to the City's wastewater system.
Special Districts
The use of special districts has become more common as a vehicle for utility services. The
firm has been involved in the establishment of the St. Lucie West Community Development District,
Reserve Community Development District and Falls Chase Community Development District and
the transfer of utility services from private to public ownership. From time to time we also act as
special advisor to city and county attorneys who may call upon the firm to assist in areas of our
particular expertise. The firm has acted as counsel in private utility condemnation matters, having
represented the condemning authority in some instances and the private property owner in others.
Attorneys with the firm have extensive experience with regard to district utility and
operational issues and a variety of matters under Chapter 189, Florida Statutes. The firm is currently
district counsel for the Bridgewater Community Development District in Lake County and has been
instrumental in recent District financings and developer negotiations. The firm is also ongoing
utility counsel for the Dunes Community Development District in Flagler Beach regarding rates,
service area and related utility matters. The firm currently acts as utility counsel or general counsel
for a number of community development districts and other special districts around the State.
Financing
The firm has extensive experience working with city and county attorneys and bond counsel
in utility and general infrastructure financing matters. This experience includes detailed review of
bond documents; presentations before the principal bond insurers and rating agencies; development
of disclosure materials and related due diligence; and negotiation of bond purchase agreements and
conventional loan terms and documentation.
The firm is currently engaged by the City of LaBelle in Hendry County to develop a plan of
finance, secure interim and long term financing for substantial water system upgrades, update City
utility code provisions, and negotiate with developers for system financial support. A listing of
recent financing transactions in which the firm was involved is attached.
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PRIVATE SECTOR WATER AND WASTEWATER PRACTICE
The firm's specialized practice in water and wastewater utility matters is perhaps best
evidenced by its representation of a large number of privately owned water and sewer companies
throughout the State of Florida. The firm has experience in virtually all facets of private sector
utility representation including: rate cases and rate regulation before the Public Service Commission
and County regulatory bodies; territorial rights and disputes before the PSC and in Circuit Court;
Department of Environmental Regulation permitting and enforcement cases; mergers and acquisi-
tions ofprivate utilities (both between private parties and units of government), tax-exempt financing
through issuance of Industrial Development Revenue Bonds, and day-to-day advice regarding utility
operations, tariff provisions, pending legislation and the like.
Public Service Commission Practice
Over the past twenty years, the firm has established itself as one of the principal firms
representing water and sewer companies before the Florida Public Service Commission. The firm
typically has several rate case proceedings as well as other dockets open at the Commission on behalf
of clients at a given point in time. In addition to their experience in private practice, several lawyers
at the firm can draw upon past employment as staff counsel at the Public Service Commission.
In addition to its PSC practice, the firm also represents large land owners in the development
of utility services for their projects. This representation includes the development of water and
wastewater utility service for the Town of Ave Maria in Collier County for the Barron Collier
Partnership and the utility services for the Town of Babcock Ranch in Charlotte County.
Mergers and Acquisitions
In recent years, the firm has handled a large number of utility purchase and sale transactions.
The firm has extensive experience in representing both buyers and sellers in these matters, including
condemnation cases. In particular, this firm was co-counsel to Atlantic Utilities of Sarasota, Inc. in
the only condemnation of an entire utility system which resulted in a jury award in the State of
Florida. In addition to documentation, the firm is often looked to for advice in negotiating and
structuring such business transactions at the request of clients. A list of recent utility transactions in
which this firm was involved is attached to this resume.
Financing
In recognition of the role played by private utilities in providing a critical public service, the
Internal Revenue Code and State law provide for issuance of tax-exempt bonds to finance utility
infrastructure. The firm has acted as borrower's counsel in over $500,000,000 worth of industrial
development revenue bond issues for all aspects of utility improvements. These financings range
from limited system upgrades to construction of entire utility projects secured by municipal bond
insurance and obtaining and investment grade bond rating. A listing of recent financing transactions
in which the firm was involved is attached.
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General -Environmental Matters
As environmental laws become increasingly more stringent to protect our natural resources,
the firm has represented clients innumerous permitting and environmental compliance cases. This
representation has ranged from administrative hearings before the Department of Environmental
Protection, to negotiations with the U.S. Environmental Protection Agency, to consumptive use
permit applications before the Water Management Districts. In addition to its utility clients, the firm
has substantial experience in complex water rights and environmental law litigation.
PROFILE OF ATTORNEYS
John R. Jenkins
Born: New Rochelle, New York, November 16, 1958; admitted to bar, 1984, Florida.
Education: Iona College (B.A., Philosophy, 1980); Florida State University (J.D. 1984; B.S.
Finance, 2000).
Member: The Florida Bar; Tallahassee Bar Association; American Water Works Association;
Water Environment Federation.
Special Agencies: Florida Public Service Commission, Florida Department of Environmental
Protection, Water Management Districts.
Practice Areas: Public Utilities; Mergers and Acquisitions, Public Finance; Administrative Law;
General Corporate.
Since being admitted to the Florida Bar in 1984, Mr. Jenkins has handled a range of public
utility, administrative law, and general corporate matters. Mr. Jenkins has practiced before the
Florida Public Service Commission on territorial disputes, rate and service availability issues, utility
transfer cases, wastewater reuse and land development issues. He has similar experience with the
Department of Environmental Regulation regarding permitting, enforcement, water quality,
environmental litigation and environmental rule challenges, as well as environmental issues
involving the United States Environmental Protection Agency, and the various water management
districts.
In recent years his practice has focused on utility financing and corporate acquisitions, with a
concentration on water utilities. He has been involved in all aspects of the purchase and sale of water
and wastewater utility systems and companies in a large number of asset and stock transactions.
These acquisitions include negotiation, valuation, financing, and general representation of investor
owned utilities, non profit cooperatives, parties and governmental units including cities, counties and
community development districts. In 2003, Mr. Jenkins acted as buyer's representative and counsel
in the acquisition of the assets of the Florida Water Services Corp., the largest water and wastewater
utility in the State of Florida. In this transaction, the largest of its kind in Florida, Mr. Jenkins
represented a coalition of local governments including the Cities of Marco Island, Palm Coast,
Deltona, Hernando County, the Toho Water Authority and others.
Mr. Jenkins has closed over $300 million intax-exempt industrial development revenue bond
issues for projects throughout the State of Florida, as well as taxable revenue bond issues and
conventional financing for private borrowers. Pursuing his interest in financial transactions, Mr.
Jenkins received a Bachelor of Science degree in finance in 2000 from Florida State University. He
has also been involved in various rate structure and complex utility tax matters which include
securing federal tax-exemptions for utility cooperatives, establishing not-for-profit utilities and
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advising Revenue Ruling 63-20 corporations for financing purposes. Mr. Jenkins has also assisted
clients in other industries including natural gas, co-generation, and telecommunication matters,
particularly involving competitive local exchange companies.
Throughout his career, Mr. Jenkins has also handled a variety of administrative and general
corporate law matters and commercial transactions on behalf of clients. This representation has
included professional licensure cases before state licensing boards, establishing and advising
corporations, stock and asset sales, contracts and collections litigation.
William E. Sandstrom
Born Cadillac, Michigan, March 4, 1948; admitted to bar, 1974, Michigan; 1976, Florida; 1978,
U.S. Supreme Court and U.S. Court of Appeals, Fifth Circuit.
Education: Michigan State University (B.A., 1971); University of Detroit (J.D., 1973).
Assistant City Attorney, City of East Lansing, Michigan, 1974-1976. Staff Counsel, Florida
Public Service Commission, 1977-1979.
Director, Florida Chapter of the National Association of Water Companies, Florida Water Works
Association, 1981-1988.
Member: The Florida Bar; State Bar of Michigan.
Practice Areas: Utility Finance; Mergers and Acquisitions; Water Law; Water Utilities; Water
Districts; Permitting and Funding.
Mr. Sundstrom's private practice has included representation of cities and counties in
complex negotiations, particularly as regards the acquisition, expansion, and financing of water and
sewer utility and related infrastructure projects. Such representation has included the Clay County
Utility Authority and the Cities of Coconut Creek, Lake Worth, Lake Clarke Shores, Orange City,
Juno Beach, Winter Springs, Venice and Tequesta, the Utility Board of the City of Key West, St.
Lucie County, and Bonita Springs Utilities, anot-for-profit quasi-governmental tax-exempt utility.
He has led the firm=s activities in approximately 100 closed purchases/sales of private utilities, with
an aggregate value of over two billion dollars, including the sale by United Water Resources of its
Jacksonville subsidiary, the largest private water and wastewater sale in Florida history. He currently
has in process multiple major cases involving negotiations with or for governmental entities,
primarily in central and south Florida. Mr. Sandstrom has also been involved in substantial tax-
exempt capital project financing, having closed approximately 50 of such transactions in recent
years.
Mr. Sandstrom is outside General Counsel to Utilities, Inc., a utility holding company based
in Chicago, with over 400 separate water and wastewater utility systems located in 18 states. His
practice, on behalf of private utility companies, involves mergers, acquisitions, defense of eminent
domain activities by local governments, negotiation of complex transactions involving the negotiated
of sale of individual utility systems to local governments, and actions against local governments
when they interfere with the private property rights of utilities operating in or about their
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jurisdictions. He has successfully represented clients in these matters in Florida, Georgia, South
Carolina, Maryland, Pennsylvania, Kentucky, Indiana, Mississippi, Louisiana, New Mexico,
Arizona, and California. Mr. Sandstrom is one of the four founding Partners of Rose, Sandstrom &
Bentley. Mr. Sandstrom is an AAV@ rated lawyer in Martindale Hubbell.
Martin S. Friedman
Born Tallahassee, Florida, January 30, 1950; admitted to bar, 1975, Florida; 1976, U.S. District
Court, Middle District of Florida; 1977, U.S. District Court, Southern District of Florida
including Trial Bar, U.S. District Court, Northern District of Florida and U.S. Court of Appeals,
District of Columbia Circuit; 1978, U.S. Supreme Court; 1980, U.S. Court of Appeals, Second
and Fourth Circuits; 1981, U.S. Court of Appeals, Eleventh Circuit.
Education: Florida State University (B.S., 1972); Stetson University, College of Law (J.D.,
1975).
Author: Chapter Article, "Quo Warranto," Florida Appellate Practice, The Florida Bar, 1996.
Speaker: Mastering Real Estate Titles and Title Insurance in Florida (1995 & 1998).
Assistant Attorney General, State of Florida, 1975-1980. Bureau Chief, General Civil Litigation,
1979-1980.
Member: The Florida Bar; Florida Rural Water Association; American Land Title Association
(Legal Division).
60 Reported Cases among which are: Adam Smith Enterprises v. Florida Dept. of Environmental
Regulation, 553 So.2d 1260; Lake Utility Services v. City of Clermont, 727 So.2d 984; City of
Oviedo v. Alafaya Utilities, 704 So.2d 206; Knadle v. Estate of Knadle, 686 So.2d 631; Kilgore
v. Killearn Homes Assoc., 676 So.2d 4; Ciry of Kissimmee v. Department of Environmental
Regulation, 753 So.2d 770.
Practice Areas: Administrative Law; Environmental Law; Utility Regulation; Real Estate.
During the five years Mr. Friedman spent with the Florida Attorney General's Office, he
worked in the local government section, was involved in consumer protection matters, and handled
environmental litigation. Mr. Friedman was Chief of the General Civil Litigation section for the last
eighteen months of his tenure with the Florida Attorney General's office. As such, he has gained
much experience in both federal and state litigation, including a substantial amount of litigation
surrounding Section 1983 of the Federal Civil Rights Act. While with the Attorney General's office,
he represented a large number of state agencies involving litigation of the constitutionality and inter-
pretation of Florida laws.
Since leaving the Attorney General's office, his practice has primarily been in the areas of real
estate, environmental regulation and utility regulation. Along with Mr. Bentley, Mr. Friedman was a
primary attorney in the complex litigation involving the proposed Department of Environmental
Regulation Rule on wellhead protection. Mr. Friedman was retained by the Utility Board of the Ciry
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of Key West to advise it with regard to its rights and responsibilities under the Federal Resource
Conservation and Recovery Act of 1976, as amended in 1984, and the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended in 1986, with regard
to contamination by hazardous waste and hazardous substances. He has also been involved with
permitting solid waste disposal facilities.
He is authorized to write title insurance for First American Title Insurance Company and
Attorneys' Title Insurance Fund. Mr. Friedman has lectured at seminars on real estate titles, and is
author of an article on "Quo Warranto" in The Florida Bar Appellate Practice Manual.
Mr. Friedman is one of the four founding Partners of Rose, Sandstrom & Bentley and
currently is the Resident Partner in the firm=s Altamonte Springs office.
F. Marshall Deterding
Born Paris, France, August 19, 1954; admitted to bar, 1985, Florida.
Education: Florida State University (B.S., 1976; J.D., with honors, 1985).
Utility Auditor and Analyst, Florida Public Service Commission, 1977-1982. Director, Florida
Chapter, The National Association of Water Companies. Director, 1987-1993, Legal and
Legislative Vice President, 1990-1995, Florida Waterworks Association.
Member: The Florida Bar; Florida Institute of Certified Public Accountants.
Special Agencies: Florida Public Service Commission.
Practice Areas: Public Utility Law; Environmental Law; General Practice; Administrative Law.
Mr. Deterding served as an auditor and accounting analyst with the Florida Public Service
Commission prior to attending law school and was a Certified Public Accountant. He worked in
various aspects of water and sewer, telecommunications, gas and electric industries during his tenure
at the Florida Public Service Commission.
Sinee joining Rose, Sandstrom & Bentley, his primary emphasis in the practice of law has
been related to various aspects of representation of private utilities before the Florida Public Service
Commission and various local government regulatory authorities, as well as representing those
private companies and municipal governments in environmental matters before the Florida
Department of Environmental Protection and the U. S. Environmental Protection Agency. Mr.
Deterding has served on the Board of Directors of the Florida Waterworks Association for five years,
and serves as its legal and legislative V ice President every other year. He is a member of the Florida
Institute of Certified Public Accountants.
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Dares L. Shippy
Born Muncie, Indiana, December 27, 1959; admitted to bar, 1985, Florida; 1986, U.S. District
Court, Middle District of Florida; 1994, U.S. Court of Appeals, Eleventh Circuit 1996, U.S.
District Court, Northern District of Florida.
Education: Florida State University (B.S., 1982); Cumberland School of Law (J.D., 1985)
Member: Tax Section of The Florida Bar.
Practice Areas: Utility Acquisitions and Litigation.
Mr. Shippy received his undergraduate degree from Florida State University and his Juris
Doctor from Samford University, Cumberland School of Law. He was admitted to The Florida Bar
in 1985, and his areas of expertise include civil trial and appellate practice, including commercial
litigation and eminent domain actions. Mr. Shippy has experience in utility and general
infrastructure financing matters. Mr. Shippy=s practice has emphasized trial and appellate litigation
in several areas of the law, including cases before the Florida Supreme Court. He is lead counsel on
several reported appellate decisions in which clients have obtained relief, has lectured on behalf of
the Association of Florida Trial Lawyers, and has authored two trial practice books. Mr. Shippy
became an Associate with Rose, Sandstrom & Bentley on April 1,1996, and has become a Partner in
2002.
Robert C. Brannan
Born: Summit, New Jersey, November 24, 1950; admitted to bar, 1997, Florida; 200 U.S.
District Court, Northern District of Florida; 2001 U.S. District Court, Middle District of Florida
and U.S. Court of Appeals, Eleventh Circuit.
Education: Westminster College (B.A. 1973); Vermont Law School (J.D. with honors, 1995);
Master of Studies in Environmental Law, with high honors, 1995); Recipient, American
Jurisprudence Book Award in Constitutional Law. Staff editor, environmental journal.
Law Clerk: U.S. Magistrate Judge William C. Sherrill, U.S. District Court, Northern District of
Florida, 1996-2000. Assistant Attorney General, 2000-2002.
Member: Florida Bar
Practice Areas: Environmental Law; Land Use; Public Utility; Real Estate; Litigation.
Prior to entering law school, Mr. Brannan spent several years in the securities industry. A substantial
portion of this time was served on the trading desk of a major Wall Street investment banking firm.
During this time he pursued graduate studies in finance and international business.
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Mr. Brannan=s practice areas include Environmental Law; Land Use; Water Law; Water and Sewer
Utility Transactions; Mergers and Acquisitions; Public Finance; Community Development Districts;
General Corporate Matters; and Litigation.
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REFERENCES
CITY OF LABELLE
c/o Michael Boyle
Post Office Box 580
La Belle, Florida 33975
(863)675-2872
BONITA SPRINGS UTILITIES, INC.
c/o Mr. Fred Partin
General Manager
Post Office Box 2368
Bonita Springs, Florida 33959
(941)992-0711
CITY OF MARCO ISLAND
c/o A. William Moss
City Manager
Marco Island, Florida 34145
CLAY COUNTY UTILITY AUTHORITY
c/o Ray Avery, Executive Director
3176 Old Jennings Road
Middleburg, Florida 32068-3907
(904) 213-2401
NORTH FORT MYERS UTILITY, INC.
c/o Mr. A. A. (ATony@) Reeves, III
Post Office Box 2547
Fort Myers, Florida 33902
(941) 543-4000
OCEAN REEF CLUB, INC.
c/o David C. Ritz, Community Administrator
24 Dockside Lane, #505
Key Largo, Florida 33037
(305) 367-3067
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RECENT UTILITY FINANCING TRANSACTIONS
Attorneys in the firm have been acted as co-counsel or borrower's counsel on the following
financings:
(1) $52,230,000 Citrus County, Florida Water and Wastewater System Revenue Bonds, Series
2007.
(2) $23,215,000 Lee County Industrial Development Revenue Authority (Florida) Utility System
Revenue Bonds, Series 2006 (Bonita Springs Utilities, Inc. Project)
(3) $5,100,000 Variable Rate Demand Utility System Revenue Bonds (North Fort Myers Utility,
Inc. Project), Series 2006
(4) Monroe County Industrial Development Authority, $2,965,000 Industrial Development
Revenue Bonds (North Key Largo Utility Corp. Project), Series 2005
(5) $18,000,000 Collier County Development Authority (Florida) Industrial Development
Revenue Bonds (Ave Maria Utility Company Project), Series 2005
(6) $13,240,000 Lee County Industrial Development Authority, Florida Variable Rate Demand
Utility System Revenue Bonds (North Fort Myers Utility, Inc. Project), Series 2005A
(7) $1,790,000 Lee County Industrial Development Authority, Florida Taxable Variable Rate
Demand Utility System Revenue Bonds (North Fort Myers Utility, Inc. Project), Series 2005B
(8) $13,485,000 Bridgewater Community Development District Special Assessment Bonds,
Series 2004
(9) $26,160,000 Lee County Industrial Development Authority (Florida) Utility System Revenue
Bonds, (Bonita Springs Utilities, Inc.) Series 2004B
(10) $20, 600,000 Aloha Utilities, Inc. Taxable Utility System Revenue Bonds, Series 2004
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RECENT UTILITY PURCHASE AND SALE TRANSACTIONS
The partners and associates who make up the firm of Rose, Sundstrom & Bentley, LLP were primarily
involved in or acted as senior counsel on the following transactions:
(1) Sale by FAIRWAYS/MOUNT PLYMOUTH UTILITY SYSTEM of its water and
wastewater assets in Lake County, Florida, to Aqua Utilities, Inc. (2007)
(2) Sale by UTILITIES, INC. OF MARYLAND of its water and wastewater assets in Prince
Georges County, Maryland, to the Washington Suburban Sanitary Commission. (2006)
(3) Purchase by SUN RIVER UTILITIES, INC. of all of the outstanding stock of MSM
Utilities, LLC in Charlotte County, Florida. (2006)
(4) Purchase by NORTH FORT MYERS UTILITY, INC. of the wastewater assets of the
DelTura Limited Partnership in Lee County, Florida. (2006)
(5) Sale by The Plantation at Leesburg Limited Partnership ofthe assets of its LAKE UTILITY
COMPANY water and wastewater system to the City of Leesburg, Florida. (2006)
(6) Purchase by PALM BEACH COUNTY of the water and wastewater assets of the V illage of
Royal Palm Beach, Florida. (2006)
(7) Sale by Nuon Global Solutions USA of 100% of the stock of UTILITIES, INC. to Hydro
Star, LLC. (2006)
(8) Acquisition by PALM BEACH COUNTY of the present and future interests of the water
and wastewater utility assets of the Seminole Improvement District in Palm Beach County,
Florida. (2006)
(9) Sale by GRAND HAVEN COMMUNITY DEVELOPMENT DISTRICT of its water and
wastewater assets to the City of Palm Coast, Florida. (2005)
(1 O) Purchase by NORTH FORT MYERS UTILITY, INC. of the wastewater assets to
Heron's Glen Utilities In Lee County, Florida. (2005)
(11) Sale by OCEAN CITY UTILITIES, INC. of its water and wastewater assets to Flagler
County, Florida. (2004)
(12) Purchase by UTILITIES , INC. OF HUTCHINSON ISLAND of the water and
wastewater assets of Columbia Properties Stuart, LLC d/b/a Plantation Utilities. (2004)
(13) Purchase by H E R N A N D O COUNTY of the water and wastewater assets of Florida
Water Services Corporation in that County. (2003)
(14) Sale by EAST PASCO UTILITIES, INC. of its water and wastewater assets to Pasco
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County, Florida. (2003)
(15) Purchase by the CITY OF MARCO ISLAND of the water and wastewater assets of Florida
Water Services Corporation within and about the city limits. (2003)
(16) Purchase by the CITY OF DELTONA of the water and wastewater assets of Florida
Water Services Corporation in and about the city limits. (2003)
(17) Purchase by the CITY OF PALM COAST of the water and wastewater assets of Florida
Water Services Corporation in and about the city limits. (2003)
(18) Purchase by UTILITIES, INC. OF PENNBROOKE of the water and wastewater assets
of Pennbrooke Utilities, Inc. (2003)
(19) Sale by PARK MANOR WATERWORKS, INC. of its water and wastewater assets to
Orange County, Florida. (2003)
(20) Transfer of assets and assumption of financial obligations of GULF ENVIRONMENTAL
SERVICES, INC. to and by Lee County, Florida. (2003)
(21) Purchase by the CLAY COUNTY UTILITY AUTHORITY of the water system assets of
Keystone Heights, Lake View Villas, Post Master Village, Geneva Lake Estates, and
Keystone Club Estates Water Systems in Clay and Bradford Counties, Florida. (2003)
(22) Sale by FLORIDA PUBLIC UTILITIES CORPORATION of its water system assets to
the City of Fernandina Beach, Florida. (2003)
(23) Purchase by BONITA SPRINGS UTILITIES, INC. of the wastewater assets of Bonita
Country Club Utilities, Inc. (2002)
(24) Purchase by UTILITIES SERVICES OF SOUTH CAROLINA, INC. of the water and
wastewater assets of Utilities of South Carolina, Inc. (2002)
(25) Purchase by UTILITIES SERVICES OF SOUTH CAROLINA, INC. of the water and
wastewater assets of South Carolina Water and Sewer, LLC. (2002)
(26) Purchase by WATER SERVICE COMPANY OF GEORGIA, INC. of the water and
wastewater assets of Georgia Water and Sewer, LLC. (2002)
(27) Purchase by WATER SERVICE CORPORATION OF KENTUCKY of the water and
wastewater assets of Utilities of Kentucky, IncJAqua/KWS, Inc. (2002)
(28) Purchase by UTILITIES, INC. of the water and wastewater assets of U. S. Utilities, Inc.
(2002)
(29) Purchase by LABRADOR UTILITIES, INC. of the water and wastewater assets of
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Labrador Services, Inc. (2002)
(30) Purchase by UTILITIES, INC. OF CENTRAL NEVADA of the water and wastewater
assets of Central Nevada Utilities Company. (2002)
(31) Sale by UNITED WATER FLORIDA, INC. of its water and wastewater assets to the
JEA.(2001)
(32) Sale by PINE RUN UTILITIES, INC. of its water assets to Marion County. (2001)
(33) Sale by DECCA UTILITIES of its water and wastewater assets to Marion County. (2001)
(34) Sale by STEEPLE CHASE UTILITY COMPANY, INC. of its assets to Florida Water
Services Corporation. (2000)
(35) Purchase by BURKIM ENTERPRISES, INC. of the water and wastewater assets of
Connecticut General Development Utilities, Inc. in Brevard County. (2000)
(36) Purchase by UTILITIES, INC. of all of the outstanding stock of Bermuda Water
Company, Inc. (2000)
(37) Purchase by SKIDAWAY UTILITY, INC. of the wastewater facilities of the Olde
Atlanta Club in Forsyth County, Georgia. (2000)
(38) Sale of Residual and Futures Interest of ST. LUCIE WEST UTILITIES, INC. to the St.
Lucie West Services District. (1999)
(39) Purchase by NORTH FORT MYERS UTILITY, INC. of the assets of MHC Systems, Pine
Lakes and Lake Fairways Water and Wastewater Facilities in Lee County. (1999)
(40) Sale of assets of UNITED WATER SOUTH GATE, INC. to Utilities, Inc. (1999)
(41) Purchase by AQUASOURCE UTILITY, INC. of all of the outstanding stock of Lake
Suzy Utilities, Inc. (1999)
(42) Purchase by BONITA SPRINGS UTILITIES, INC. of the assets of Hacienda
Treatment Plant, Inc. (1999)
(43) Purchase by AQUASOURCE UTILITY, INC. of all of the outstanding stock of
Longwood Run Utilities, Inc. (1999)
(44) Purchase by AQUASOURCE UTILITY, INC. of all of the outstanding stock of Kensington
Park Utilities, Inc. (1999)
18
REPORT ON
UTILITY BILLING ISSUE UNDER
VILLAGE ORDINANCE N0.547
Prepared for:
Village of Tequesta
345 Tequesta Drive
Tequesta, Florida 33469
Rose, Sundstrom & Bentley, LLP
2548 Blairstone Pines Drive
Tallahassee, Florida 32301
850-877-6555
REPORT ON
UTILITY BILLING ISSUE UNDER
VILLAGE ORDINANCE N0.547
Executive Summary
1. It has been determined that residential water customers utilizing meters larger
than 3/4" are being billed utilizing a rate structure inconsistent with the rate schedule set
forth in Ordinance No. 547, in effect since 1999.
2. The following excerpt from Ordinance No. 547 sets out the approved
consumption groupings for gallonage or consumption charge billing purposes:
Consumption in Gallons
Meter Size Block 1 Block 2 Block 3 Block 4
5/S" 0-12,000 12,001-25,000 25,001-40,000 Above 40,000
3/4" 0-12,000 12,001-25,000 25,001-40,000 Above 40,000
1" 0-30,000 30,001-62,000 62,001-100,000 Above 100,000
3. Customers with a meter size of 1" or larger are billed utilizing the same
consumption blocks as the smaller meter sizes. This results in higher rates for customers
with 1" meters than they would incur under Ordinance No. 547. This billing practice is
not consistent with Ordinance No. 547, but is in keeping with the Public Resources
Management Group, Inc. ("PRMG") Water Rate Evaluatian dated August, 1999 and prior
Village billing practices.
4. Ordinance No. 547 was not drafted in accordance with the Village's history of
billing practices regarding residential customer consumption blocks. Nor was it drafted
in accordance with the recommendations set forth in the PRMG study commissioned at
that time.
5. The weight of the evidence supports a conclusion that, in drafting Ordinance
No. 547, utility staff inadvertently incorporated the non-residential consumption blocks
into the residential customer billing structure for 1" meters.
6. Based on information available at the time of its adoption, there is no reason to
believe the Council intended to deviate from the recommendation of the staff, rate
consultant and prior practice and adopt an ordinance that incorporated the non-residential
consumption blocks into the residential customer billing structure for 1" meters.
7. Collection of rates and charges in a manner inconsistent with the Water Rate
Evaluation would result in unfair discrimination between classes of customers, and would
not be in keeping with sound rate making practice.
8. It is recommended that the Village adopt an ordinance correcting Ordinance
No. 547 and continue its current billing practice.
REPORT ON
UTILITY BILLING ISSUE UNDER
VILLAGE ORDINANCE N0.547
1. Scope of Services.
Rose, Sandstrom & Bentley, LLP has been engaged by the Village of Tequesta
("Village") to review a current water system billing practice under Village Ordinance No.
547, and recommend necessary or appropriate action as a result of such investigation.
Village staff reports residential water customers with meters larger than 3/4" are
billed utilizing a rate structure .inconsistent with the rate schedule set forth in Ordinance
No. 547 in effect since 1999. The Ordinance sets rates using an inverted block rate
structure. This means that as customer usage increases into the next block, the price of
water increases, usually by about $1.00 per thousand gallons. The following Ordinance
excerpt sets out the residential consumption groupings or blocks:
Consumption in Gallons
Meter Size Block 1 Bloc15,2 Block 3 Block 4
5/8" 0-12,000 12,001-25,000 25,001-40,000 Above 40,000
3/4" 0-12,000 12,001-25,000 25,001-40,000 Above 40,000
1" 0-30,000 30,001-62,000 62,001-100,000 Above 100,000
Despite this Ordinance provision, customers with meters 1" or larger have been
billed utilizing the consumption blocks for smaller meter sizes. This may result in higher
rates being paid by such customers, depending on usage. This billing practice is not
consistent with Ordinance No. 547. It is however, consistent with the Public Resources
Management Group, Inc. ("PRMG") Water Rate Evaluation dated August, 1999 ("Water
Rate Study")upon which the Village relied in setting its current rates.
2. Background.
The Village provides water service to over 4,500 residential and non-residential
customers within and without the territorial boundaries of the Village. In the late 1990's,
Village water system rates were reviewed and increased on several occasions.
a. Ordinance No. 482
On January 12, 1995, the Village Council adopted Ordinance No. 482 amending
Chapter 18 of the Code of Ordinances ("Code"). Section 2 of the Ordinance amended
Section 18-3(b} of the Code to provide for a base facility (fixed monthly) charge
depending on meter size and a residential water usage commodity rates as follows:
For each 1,000 gallons or fraction thereof
up to 12,000 gallons delivered ................................$1.44
For each 1,000 gallons or fraction thereof
above 12,000 up to 25,000 gallons delivered ................2.40
For each 1,000 gallons or fraction thereof
above 25,000 up to 40,000 gallons delivered .................3.30
For each 1,000 gallons or fraction thereof
for all quantities delivered above 40,000 gallons............4.20
This rate structure, commonly referred to as a conservation rate, is intended to encourage
conservation by increasing the price of water as consumption increases.
Ordinance No. 482 imposed conservation rates on non-residential customers,
however, a stepped approach was employed for the commodity charge based on customer
meter size. For example, the first block or step for non-residential rates provides the
following usage for the first rate level ($1.44 per 1000 gallons):
5/8" meter 1 -12,000 gallons
3/4" meter 1-18,000 gallons
1" meter 1- 30,000 gallons
1.5" meter 1- 60,000 gallons
2" meter 1 - 96,000 gallons
3" meter 1-180,000 gallons
4" meter 1- 300,000 gallons
6" meter 1- 600,000 gallons
b. Ordinance No. 529
On November 13, 1997, the Village adopted Ordinance No. 529, amending
Section 18-3 of the Code to reflect a new commodity rate for residential and non-
residential customers. The new residential rates for all classes (meter sizes) were as
follows:
Residential (Effective November 1, 199'1)
$1.55 for each 1,000 gallons or fraction thereof up to 12,000 gallons delivered
$2.60 for each 1,000 gallons or fraction thereof above 12,000 up to 25,000
gallons delivered
$3.55 for each 1,000 gallons or fraction thereof above 25,000 up to 40,000
gallons delivered
$4.55 for each 1,000 gallons or fraction thereof for all quantities delivered above
40,000 gallons
2
Residential (Effective October 1, 1998)
$1.62 for each 1,000 gallons or fraction thereof up to 12,000 gallons delivered
$2.72 for each 1,000 gallons or fraction thereof above 12,000 up to 25,000
gallons delivered
$3.70 for each 1,000 gallons or fraction thereof above 25,000 up to 40,000
gallons delivered
$4.75 for each 1,000 gallons or fraction thereof for all quantities delivered above 40,000
gallons
In contrast to the residential rates, the non-residential category of rates continued
to recognize meter sizes ranging from 5/8" to 6" in conjunction with the stepped rate
increases approved in the Ordinance.
c. 1999 Water Rate Evaluation
In 1999, the Village retained Public Resources Management Group, Inc.
("PRMG") to conduct a study of the Village's water rates, fees and charges. PRMG
produced its Village of Tequesta Florida Water Rate Evaluation dated August, 1999
("Water Rate Study"). The Executive Summary of the Water Rate Study states:
... [T]he Village felt it would be prudent to perform an in-depth review of
the current monthly water user charges to enhance system revenue, adjust
the capital improvement charges (impact fees) to ensure that growth pays
its fair share for the reservation of capacity in the new facilities, and that
other miscellaneous fees charged by the Village are sufficient to recover
the total cost of providing services. As a result of these rate and fmancial
objectives, the Village retained Public Resources Management Group, Inc.
(PRMG) to review the rates, fees and charges, and recommend changes to
the level of the fees charged where considered warranted.
PRMG recommended changes to both residential and non-residential
consumption rates, effective October 1, 1999, as follows:
Consum 'on Chargglper 1.000 gallons of metered water):
Consumption Block Parameters (OOOsI
Block 1 Block 2 Block 3 Block 4
Rate $1.64 $2.75 $3.74 $4.80
Residential and Multi-
Family Service (per unit) 0-12 12-25 25-40 Above 40
Commercial
Meter Size
g/g°° 0-12 12-25 25-40 Above 40
3/4" 0-12 12-25 25-40 Above 40
1°• 0-30 30-62 62-100 Above 100
1.5" 0-60 60-I25 125-200 Above 200
2°° 0-96 96-200 200-320 Above 320
3" 0-180 180-375 375-600 Above 600
4~> 0-300 300-625 625-1,000 Above 1,000
6"
0-600 600-1,250 1,250-2,000 Above 2,000
PRMG did not recommend a change in the residential rate structure consumption
blocks that was adopted in Ordinance No. 547. When questioned about this, Robert Ori,
President of PRMG, stated in a letter to the Village Manager dated May 23, 2007:
Our recommendation was to continue the water quantity consumption
blocks for the single-family residential class identified in the Prior Rate
Ordinance. PRMG has no knowledge of why the water quantity
consumption blocks for single-family residential class were adjusted. It
appears that in drafting the Current Rate Ordinance, the Village may have
copied the commercial water ~uanti charges inadvertently into the
residential component of the Current Rate Ordinance. (Emphasis
supplied).
d. Ordinance No. 547
Ordinance No. 547, the current rate ordinance, adopted virtually all of the Water
Rate Study's recommendations. However, in contrast to the history of Village rate
ordinances, Ordinance No. 547 adopted water consumption blocks for residential
customers based upon meter size as follows:
(b) Quantity Rate Application to all quantities of water shown by meter readings to have been
delivered
(1) Residential accounts, including single-family and multi-family service classifications
monthly:
For each 1,000 gallons or fraction thereof pursuant to the Quantity Step Rate Table and applicable
Gallonage Allowance Per Quantity Step Rate Table appearing below
Quantity Step Rate
Step 1 $1•~
Step 2 $2.75
Step 3 $3.74
Step 4 $4.80
Gallon~e Allowance Per Ouantit~ep Rate Table
Meter Size Step 1 Sten Z Ste Step 4
ches
5/8 1-12,000 12,001-25,000 25,OOI-40,000 above 40,000
3/4 1-12,000 12,001-25,000 25,001-40,000 above 40,000
1 0 1-30,000 30,001-62,000 62,001-100,000 above 100,000
1 5 1-60,000 60,001-125,000 125,001- 200,000 above 200,000
2 p 1-96,000 96,001-200,000 200,001- 320,000 above 320,000
3 0 1-180,000 180,001-375,000 375,001- 600,000 above 600,000
4 1-300,000 300,001- 625,000 625,001-1,000,000 above 1,000,000
6 1-600,000 600,001-1,250,000 1,250,001- 2,000,000 above 2,000,000
4
Under Ordinance No. 547, for the first time, residential accounts were treated the
same as non-residential accounts for water consumption billing purposes. This,
notwithstanding the fact that under current Village policies, it is unlikely the Village will
ever have more than a handful of residential customers with meters larger than 1", and
unlikely to ever have residential customers with meters as large as 6".1 It is also worth
noting that under Ordinance No. 547, rate schedules for residential and non-residential
customers became identical. Identical rate schedules make it unnecessary to maintain
separate schedules, and would normally result in consolidation into a single schedule.
The fact that there are two distinct rate schedules, with identical rates and identical
consumption blocks, provides some additional support for the proposition that the
Ordinance was drafted in error. If it was the Village Council's intention to treat
residential and non-residential water service customers in the same manner as to billing it
would not make sense to have two separate schedules with identical rates and
consumption blocks as such would be unnecessary. The fact two schedules exist suggests
it was the Council's intent to have two separate schedules and for residential and non-
residential customers to be treated differently with respect to billing rates and
consumptions blocks.
e Agenda Packalre and Memorandum
The Agenda Package provided to Council members in preparation for the
September 9, 1999 Council Meeting considering Ordinance No. 547 included a
Memorandum dated September 2, 1999 from Utilities Director Matthew J. Morrison to
Village Manager Thomas G. Bradford. Therein, Mr. Morrison wrote:
The Ordinance codifies PRMG's recommended changes in Chapter 18-3
of the Village of Code of Ordinances (Attachment 2 -Ordinance).
(Emphasis supplied).
The Memorandum included as Attachment 3 proposed rates and charges as
follows:
Consumption Charge existing Rates Proposed Rates
Block 1 0 to 12,000 gallons $1.62 $1.64
Block 2 12,001 to 25,000 $2.72 $2.75
Block 3 25,001 to 40,000 $3.70 $3.74
Block 4 Above 40,000 $4.75 $4.80
Consumption Blocks to Step 22 to 3 Step 4
Existing Block 3/4"Meter 1-18,000 19-37,000 38-60,000 61,000+
Proposed Block 314" Meter 1-12,000 12-25,000 25-40,000 40,000+
Note: For atl other meter sizes, the consumption blocks remain unchanged
1 Meters with these dimensions are typically associated with water consumption by a commercial
enterprise, not normal household consumption where meter sizes are typically much smaller and often less
than 1" in diameter.
There was a recommendation to change the consumption blocks for 3/4" meters to make
them consistent with the consumption blocks for 5/8" meters. However, Attachment 3
did not state that consumption blocks were to be adopted for residential customers. This
would be unnecessary because the rate ordinance in affect at the time already
incorporated that rate structure for residential customers. Attachment 3 was consistent
with the Water Rate Study's recommendation that consumption blocks for non-residential
customers be modified to treat customers having a 3/4" meter the same as customers
having a 5/8" meter.
According to the minutes to the Council's first reading of Ordinance No. 547:
Utility Director Matthew Morrison reported he and Mr. Ori had reviewed
the rates and charges and with Mr Ori's recommendations, modifications
had been made to the Ordinance. (Emphasis supplied).
f. Billing Practices
Fallowing adoption of Ordinance No. 547 on September 9, 1999, the Village
utility department failed to modify its billing computer program with regard to the
amount of water to be included in each water consumption block for residential
customers utilizing meters larger than 3/4" in size, in conformance with the Ordinance.
The utility department never employed a rate structure for residential customers
dependent upon meter size. At the time Ordinance No. 547 was adopted, the Village
provided residential water service to the following number of single-family customers
based upon meter size:
Meter Size Sin~,le Family Customers
5/8" 3858
3/4" 310
1„ 217
1 i/2" 4
2>, 1
Single family customers comprise approximately 90% of the Villa~e's customer base and
all are billed at the 5/8" meter rate set forth in Ordinance No. 547.
g. Miscellaneous
We have been advised that no current Village staff members with knowledge of
this billing issue were working for the Village at the time Ordinance No. 547 was
adopted. Therefore, there is no further information from Village Staff regarding the
drafting of Ordinance No. 547 or the utility billing program changes occurring after its
adoption.
z This data reflecting the spectrum of residential customer use and residential meter size at the time further
supports the conclusion that the Council did not intend to apply the non-residential rate structure to
residential customers. Given the typical meter size for residential uses it would be illogical to make the
commercial rate structure applicable to such use.
6
We also have been advised that the general procedure followed prior to the adoption
of a revised rate ordinance is as.follows:
• The Village's rate consultant reviews the Village's rate structure to determine
whether sufficient revenues are being generated from the utility system to satisfy
the utility's financial obligations. Such an analysis includes a review of the
Village's bond covenants; and,
• If the rate consultant determines that a rate increase is necessary, a report is
prepared by the rate consultant in support of the rate consultant's recommendation
for a rate increase, which necessarily accounts for the differences between
residential and non-residential accounts; and,
An ordinance, including a rate ordinance, is generally drafted by a Village staff
member.
Finally, the Village has outstanding its $7, 915,000 Water Revenue Bonds, Series
1998. Standard bond resolution provisions establish a contract between the municipality
and the bond holders which obligates the municipality to set rates at a level sufficient to
meet its operation and maintenance, debt service, and reserve needs.
3. Relevant Law.
Issues of utility rate setting and implementation require consideration of certain
areas of law including the following:
a Municipal Rate Setting Authority
A municipality has two sources of power to structure and adopt rates: home
rule power found in Article VIII, §2(b), Florida Constitution, as implemented by
§166.021, Florida Statutes and §180.13, Florida Statutes. Article VIII (?) §2(b)
provides:
Powers. Municipalities shall have governmental, corporate and
proprietary powers to enable them to conduct municipal government,
perform municipal functions and render municipal services, and may
exercise any power for municipal purposes except as otherwise provided
by law. Each municipal legislative body shall be elected.
Section 180.13(2) Florida Statutes provides as follows:
(2) The city council, or other legislative body of the municipality, by
whatever name known, may establish just and equitable rates or charges
to be paid to the municipality for the use of the utility by each person,
firm or corporation whose premises are served thereby;...
7
b. Rate Setting Case Law
In the classic case of Federal Power Commission v. Hope Natural Gas Co., the
United States Supreme Court discussed the issue of utility rate making. In that opinion,
Justice Douglas wrote in relevant part:
Under the statutory standard of `just and reasonable' it is the result
reached not the method employed which is controlling. [citations omitted]
It is not theory but the impact of the rate order which counts. If the total
effect of the rate order cannot be said to be unjust and unreasonable,
judicial inquiry under the Act is at an end. The fact that the method
employed to reach that result may contain infirmities is not then important.
Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591
(1944).
A number of cases in Florida have interpreted the municipal rate making function:
"[I]nherent in .the authority to own and operate a utility is the
authority to set reasonable rates and charges for such services and the
power to do all things reasonably necessary in the conduct of such
functions." City of Pompano Beach v. Oltman, 389 So. 2d 283, 285 (Fla.
4~' DCA 1980).
With regard to the validity of a rate ordinance, the Fourth District Court (which
has jurisdiction over the Village) went on to state:
[l]ike other actions taken by legislative bodies, a utility rate ordinance is
presumed valid, and the burden rests on those who attack such rates to
cleazly demonstrate that such rates are arbitrary, unreasonable, or
discriminatory. The city has no duty to explain or justify its actions in
setting rates until such burden has shifted to it by the establishment of a
prima facie case of invalidity based on competent evidence. City of
Pompano Beach at 286.
c. Mistake in Draftins
Florida case law does not lend much guidance on the issue of clerical mistakes in
ordinance drafting. In Village Saloon, Inc. v. Division of Alcoholic Beverages and
Tobacco, Department of Business Regulation, 463 So. 2d 278, 282-283 (Fla. lst DCA
1984), an emergency amendment to an ordinance was passed three days after the
ordinance containing the mistake. The court held that the original ordinance, which
contained the clerical error, need not be specifically enforced. The court went so far as to
mention that the emergency amendment correcting the mistake could have been given
retroactive effect, although the time lapse between the ordinance containing the error and
the amending ordinance was short.
Case law in other jurisdictions is similarly limited. In Holland v. People, 59 N.E.
753, 754 (Ill. 1901), the court mentioned that if the mistake is clear from the ordinance as
a whole, the mistake can be dismissed as clerical and applied without consequence.
However, this principle is not a central issue in Holland and not discussed at length.
Case law regarding mistakes made in drafting contracts provides some general,
limited guidance. Handling a mistake in a written contract is dependent upon whether the
mistake is mutual or unilateral. With regard to mutual mistake, the rule in Florida
appears to be that courts, in exercising their equitable powers, will reform the contract to
carry out the true intent of the parties. Feldman v. Kritch, 824 So. 2d 274, 277. "Relief
should be given where, through a mistake of the scrivener, the instrument contains an
[sicJ clerical error or fails to define the terms as agreed on by the parties." (quoting
Steffens v. Steffens, 422 So. 2d 963 (Fla. 4~' DCA 1982). With regard to unilateral
mistakes, Florida courts are much less likely to reform or even rescind the contract.
Graham v. Clyde, 61 So. 2d 656 (Fla. 1952). However, subsequent appellate decisions
have distinguished Graham and found that a contract containing a unilateral mistake may
be rescinded In State Board of Control v. Clutter Construction Corp., 139 So. 2d 153
(Fla. 1~ DCA 1962), the court reasoned that the rule of law stated in Graham cannot
possibly mean that equity will not step in to change a nnistake that was the result of
simple negligence. Id. at 157-158.
4. Discussion of the Case.
In 1999, the Village had approximately 220 residential customers with 1" meters,
and approximately five residential customers with 1 1/2" and 2" meters ("Affected
Customers"). Since 1999, the Affected Customers have been billed utilizing the rate
structure for conservation block rates in effect prior to adoption of Ordinance No. 547.
Ordinance No. 547 modified the conservation block rate structure for the Affected
Customers, which modification the utility department failed to implement. As a result,
the Affected Customers paid more for water than they would have had the Ordinance
been fully implemented. How much more is unknown, and depends on customer usage.
The utility department implemented rate changes consistent with the Water Rate Study
provided by the Village's consultants.
Putting aside the discussion of whether Ordinance No. 547 was drafted in error
(as may be surmised based on several factors including its inconsistency with the Water
Rate Study), we look to whether the Affected Customers have been treated equitably. To
determine this we must consider two distinct aspects of rate-making:
Development of a revenue requirement; and,
Allocation of cost to customers through rates.
A utility's revenue requirement is simply the money it must collect to pay its bills.
These bills or costs include operation and maintenance expenses, general and
administrative expenses, debt service (municipal bond payments), renewal and
replacement and other reserve requirements. Costs are typically planned over a five yeaz
period from which an annual revenue requirement is determined. This is the amount of
money a utility must collect each year to cover its expenses.
9
A municipal utility system is funded through collection of impact fees and
customer rates (and miscellaneous charges). Once the revenue requirement is
determined, a rate structure is developed which, to the greatest extent possible, equitably
allocates this revenue requirement among customer classes. These classes may include
residential (single and multifamily), commercial, and general service (industrial).
Customers within each class place differing demands on a utility's resources according to
meter size. While not an exact science, a rate structure of the type recommended by an
expert consultant such as PRMG in its Water Rate Study attempts to fairly allocate costs
across all customer classes. Water demand from each customer class should result in
revenue sufficient to meet utility expenses in a given year.
In addition, costs are typically categorized as fixed or variable. Fixed costs are
those which the Village must pay regardless of how much water is sold or wastewater is
treated (such as debt service and insurance).- Variable costs are those which change based
on usage (such as electricity and chemicals). The bulk of the fixed costs are recovered
through the base monthly charge which customers pay regardless of usage. Variable
costs are largely billed through the gallonage or consumption charge which likewise
varies with customer use.
No information has come to our attention to suggest the findings in the Water
Rate Study were in error. If the Water Rate Study was correct, the actual rates
implemented, and revenues collected, from Village utility customers (including the
Affected Customers) were likewise correct. That is, despite the fact that the rate structure
for the Affected Customers was not implemented as approved in Ordinance No. 547, the
Village's utility revenue requirement and rate structure were determined and implemented
in a manner consistent with the fmdings of the Water Rate Study. In other words,
although the ordinance is not consistent with the recommendations of staff and the rate
consultant, apparently as the result of a drafting error, the billing program is consistent
with the recommendations of staff and the rate consultant. Accordingly, the subject
charges are therefore consistent with the recommendations of staff and the rate consultant
and are charges determined to be just, reasonable and appropriate to sustain the utility.
Conversely, had the rate structure identified in Ordinance No. 547 been frilly
implemented, the Affected Customers would have paid less than required by the rate
structure set forth in the Water Rate Study and the utility system as a whole would have
not met its revenue requirement. Given that the revenue requirement was spread
equitably over all water customers through the Water Rate Study, the collection of rates
from the Affected Customers in accordance with Ordinance No. 547 would, in fact, have
been inequitable.
Had Ordinance No. 547 been implemented with regard to the Affected
Customers, customer rates would then have to be increased to make up for the shortfall in
revenue. As a result of such rate increase, the general body of rate payers would, in
effect, be subsidizing the Affected Customers. As it is, no class of customer was
improperly benefited or harmed by the billing practice of the Village.
10
Under the statutory standard of `just and reasonable' it is the result reached, not
the method employed, which is controlling. Collection of rates and charges in a manner
inconsistent with the Water Rate Study would result in unfair discrimination between
classes of customers, and would not be in keeping with sound rate making practice.
5 Findin s, Conclusions and Recommendations.
Based upon the available information, having given appropriate weight to that
information, and considering applicable law on the subject, we find and conclude as
follows:
a. The Water Rate Study did not recommend changing the Village's billing
practices with respect to residential customers with 1" meters or larger to conform to the
consumption blocks applicable to non-residential customers.
b. The weight of the evidence supports a conclusion that, in drafting
Ordinance No. 547, utility staff inadvertently incorporated the non-residential
consumption blocks into the residential customer billing structure for 1" meters or larger.
c. Based on information available at the time of its adoption, there is no
reason to believe the Council intended to deviate from the recommendation of the staff,
rate consultant, and prior practice and adopt an ordinance that incorporated the non-
residential consumption blocks into the residential customer billing structure for 1"
meters or larger.
d. Following adoption of Ordinance No. 547, the Village's billing practices
did not change with respect to the Affected Customers, and remained consistent with
prior practice and the recommendations set forth in the Water Rate Study.
e. Following adoption of Ordinance No. 547, the Village's billing practices
remained consistent with general utility rate making principles and law.
f. Based upon the Water Rate Study, rates charged by the Village following
adoption of Ordinance 547, including rates charged the Affected Customers, were
reasonable and non-discriminatory.
Our recommendations are therefore as follows:
a. Adopt a corrective ordinance correcting Ordinance No. 547, which
incorporates the recommendations of the Water Rate Study and retains the current utility
billing practice with respect to residential customers.
b. Review and, as necessary, revise internal Village procedures for drafting and
implementing ordinances and resolutions in an effort to avoid future issues of this type.
c. Follow up on the rate consultant's recommendations regarding the Village's
billing system to enable the development of more accurate information to evaluate the
current rate structure.
11
]:n reviewing this issue and preparing this Report we have had the cooperation of
the Village Manager and Counsel. We have been provided relevant documents, and we
have relied upon the authenticity of the documents reviewed and accurateness of other
information provided to us. We have undertaken no independent investigation of the
Village's utility billing system or practices and have relied on Village staff for
information regarding such issues. We have undertaken no independent investigation of
the accuracy or completeness of the Water Rate Study. This Report, and the information
contained herein, may be relied upon only by the Village; there are no other intended
beneficiaries. G'~ ~.{.~ ~.a~.
. CJ~~`Llo¢.~-~ t
John R. Je s, Esq.
Daren L. Shippy, Esq.
Rose, Sandstrom & Bentley, LLP
2548 Blairstone Pines Drive
Tallahassee, Florida 32301
12