10-18-1994 Agreemento cy
no
MEMORANDUM
To: City Council
From: John Cook
Gentlemen:
City of Okeechobee
55 S.E. Third Avenue Okeechobee, Florida 34974 2932.813/763 -3372
re: City /County interlocal utility
authority agreement
October 18, 1994
I have reviewed the proposed utility authority agreement, and
offer the following general observations:
1. The basic agreement is the preliminary framework for the
creation of the authority. This agreement establishes the existence
of the authority, and outlines the makeup of the board, and its
powers. There is no transfer of ownership of City assets until the
"closing date which appears to be October, 1995. At any time up
to closing, with 90 day notice, either entity can withdraw from the
agreement, being liable for expenses incurred up to that point.
2. Of course included in the powers are the very same powers
the City can exercise now as a utility provider, including th
ability to created bonded debt, and to assess non -ad valorem
assessments. The ability to set rates is autonomous, without
interference from either government.
3. The framework, as far as setting up how the authority will
work, seems to be to be very basic; there are certainly
additional items that will have to be discussed and inserted into
any final agreement. The document, aside from creating the
authority, is also an agreement to make another agreement in the
future. The real nuts and bolts of the agreement as far as the City
goes will be the "Master transfer agreement which is where the
assets of the City will be transferred to the Authority, and our
liabilities and equity will be agreed upon.
4. Legally, this interlocal will do what it is intended to do.
T. see the Council's efforts should next go to the details necessary
for the MTA. Of course, if the council is concerned about how the
board will be made up; what power it will have, etc., those areas
of concern should be addressed right now, in this interlocal. Even
under this agreement however, once the board is in place, they can
change the rules as they see fit anyway, without any input from the
City, County, or OBWA.
page
5. Some areas I saw that bear discussion are:
a. The agreement states that the basis for the authority
acquiring OBWA is the County franchise agreement with OBWA. In
other words, this interlocal recognizes the franchise contract to
be legitimate. This is one point in our lawsuit with OBWA; that the
franchise contra' is invalid. However, I discussed this with Mr.
Lotspeich in Tallahassee, and for purposes of this interlocal
agreement, this point would not be an admission by the City; just
a vehicle by which the County can transfer their ability to
purchase OBWA to the authority, and therefore would not affect our
lawsuit if it ever fires up again.
b. The agreements states that "..the City has determined that
the transfer of the City's utility system to the Okeechobee Utility
authority would be in the public interest... However, it would
appear under Florida Statutes 180.301, prior to the transfer of the
utility system, the City is required to hold a public hearing to
justify that it is in the public interest, with a whole list of
things we must present at the meeting to meet this burden.
c. The agreement authorizes the authority to mandate water and
wastewater hook -up by the customers. This arises in the City once
in a while when a customer says they do not want City water and we
cannot make them hook up. This provision requiring the hook up is
legal, and probably a good idea.
d. Once this interlocal is approved, an "interim operational
agreement" will be set up, and at that point, the authority will
have the sole say -so in disputes between the City and OBWA on line
extensions, and "other related matters which is a broad
statement. Therefore, this power granted to the authority, between
this interim agreement and the final closing and transfer of City
assets, should be carefully looked at.
e. The ability to set rates is also very broad, as it should
be. However, the interlocal states that in addition to such money
as is necessary to support the system and its debt, the authority
can "provide a margin of safety" in its finan This would permit
raising rates in their sole discretion, to keep a certain amount of
money in reserve. There is no limit or cap set on how much "margin
of safety" the board can set, so the question is whether there
should be some formula for the amount of the reserve, or just leave
it in the discretion of the board and trust their judgment that
they will not set the reserve, and of course the rates, too high.
page 3
f. The interlocal provides for the "same rates" for county,
school district or other political subdivision. I am not sure what
this means, but if it has not already been considered, the immunity
of school districts from impact fees, by statute, should perhaps be
addressed in this interlocal, or a subsequent agreement.
g. The agreement provides for liens, and foreclosure, for
unpaid utility bills, but does not set out a policy for turn -offs.
As you know, this issue pops up every year in the City, and perhaps
the intent is to include this in the more comprehensive operating
rules to be adopted by the board, once it is established. I would
suggest that the authority review the City ordinances and our
policies, as well as any other sources they can obtain, in drafting
their operating rules.
In summary, this interlocal is simply the legal means,
authorized by F.S. Chapter 163, by which two governmental agencies
can set mutual agreements down in writing. Again, while the basic
framework of the authority is set out for your approval, there is
still work to do. The course of action would appear tc. t be
working on the "interim operating agreement then the wording of
the transfer of the City system, and its value. I would assume the
operating rules for the authority would be left up to that body
once they are in place.
Kindest Regards
'\1\I
John R. Cook
City Attorney
JRC /rb