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How a Stumble Saddled Palm Coast Water Rate Payers With $500,000 in Additional Costs

| October 5, 2012

One of the 12 wells west of Palm Coast on land deeded by Rayonier. (Pam Coast)

In brief: Overeager to get going on a $2.6 million wellfield project during the boom years, Palm Coast never secured an agreement between a land company and FPL to power the wells. When talks broke down between the companies, Palm Coast decided to pay an extra $500,000 to power the wells with a different contractor, a cost it will pass down to rate-payers, even though the need for the water is non-existent.

Palm Coast’s administration says it learned enough from the blunder not to do it again. But also that in this case, it couldn’t have done it any other way. The contradiction was never resolved, even after some questioning by some city council members this week. As a result, water rate payers in Palm Coast will eventually pay just under $500,000 in extra costs, over coming years.

The cost will be amortized in their water bills, but could have been avoided, had the city been more careful about the way it went about a $2.6 million installation of 12 well fields west of the city that may not even be needed for years.

A project Born of the Boom

That project began in 2006, at the height of the city’s growth. The 12 well fields were to produce enough raw water to double the city’s Water Treatment Plant No. 3’s production to 3 million gallons of water per day. That doubling is not needed at the moment, and at the current pace of growth, it won’t be needed for many years yet: Three years ago, the average water demand in the city was 6.9 million gallons per day. In the last week of September, it was 7 million gallons, according to Richard Adams, the city’s public works director.

But the well project went ahead, in anticipation of what the city sees as inevitable growth down the line (and it did so even as the city was also pouring several million dollars in what proved to be another development cul-de-sac: a regional desalination plant.) The 12 wells were drilled at the end of 2006. They are now 85 percent complete. They are located on land owned by Rayonier, the timbering company. Rayonier deeded the actual locations of the wellheads to the city.

To power the well fields, the city needed an electrical distribution system. To make that possible, Florida Power & Light would have had to extend lines to the wells. When the city signed its agreement with Rayonier, it presumed in that agreement that Rayonier would work with FPL to settle any right of way and liability issues. Under what was nothing but an assumption, the city separately signed an agreement with FPL to provide electricity to its well field, for $421,243. The agreement was executed in September 2010 absent an agreement between FPL and Rayonier. The check was cut, and FPL was paid.

That was a mistake.

FPL and Rayonier never worked out their issues, which came down to this: neither side wanted to assume liability if anything went wrong with the powerlines.

Liability Fears

“Everybody wanted to be completely held harmless from the other,” Palm Coast Mayor Jon Netts said. “FPL said we want no liability, and Rayonier said we want no liability. Nobody wants any liability and that’s where the issue breaks down.”

FPL responded through spokesman Dave McDermitt with the following statement on Oct. 8: “In 2010, Florida Power & Light Company reached agreement with the City of Palm Coast to construct a local power line to provide service to the city’s new well fields. The project required an easement agreement across property owned by Rayonier; however, the company declined to agree to FPL’s standard distribution easement. FPL looks forward to providing electric service to the well fields via new distribution facilities owned by the city.” (Rayonier was also contacted but did not respond.)

The city had to seek a reimbursement check from FPL, which it got. Rather than seek a solution between the two companies, which Steve Flanagan, Palm Coast’s utilities development manager, and Jim Landon, the city’s manager, said was tried, the city decided to go off on its own and have its own electrical distribution system built, and do from scratch, expensively, what FPL was in place to have done and maintained for less.

To do that, Palm Coast had to contract with a design company—CPH Engineers—for $130,000. It had to contract with C&C Powerlines for $733,000. And it still has to pay FPL an estimated $50,000 connection fee, and an undetermined amount of money to a powerline-maintenance contractor, yet to be hired. When that contract amount is tabulated, the difference between what Palm Coast would have paid FPL for the distribution project and what it’s ending up paying for it now is over half a million dollars.

“It’s a substantial amount of money that this disagreement and lack of FP&L and Rayonier working together to get us what we needed out there will have cost the city to make this system functional,” Flanagan said.

Palm Coast went ahead with the alternate plan even though by then the city had stopped growing, and water needs were nowhere near those projected when the project started in 2006.

Lessons Learned?

Council member Bill Lewis asked Flanagan if there was any way Rayonier could reduce the costs to the city. Not likely, Flanagan said, “other than just asking them for the damages, and I don’t believe that in any way they will entertain that.”

“Are we going to try?”  Lewis asked.

“We can ask the question but I don’t believe that it has any value, to be honest with you,” Flanagan said.

“What are the alternatives? Before we spend three quarters of a million dollars, what else have we explored?” McGuire asked, referring to the $733,400 contract the administration was asking the council to approve on Tuesday, for just the powerline contract—not the rest of the additional costs.
But other than spending time trying to get Rayonier and FPL to agree, nothing was done.

“Have we learned from this process and is there a way we can protect ourselves with our easement agreements?” council member Jason DeLorenzo asked, citing the city’s right to use the easements. “Could we have started with language that would have allowed a sub like FPL to use the rights?”

“We put into that agreement with FP&L language that said that we needed Rayonier and FPL to work together on providing for that easement,” Flanagan said. “Now, next time, instead of maybe hoping for that language to have worked out, maybe we’ll use much stronger language, or we’ll get that as part of the agreement set up.”

McGuire pressed: “Should we have even put a shovel in the ground unless everything was agreed to beforehand? I mean, to embark upon a $2 million project hoping that something will happen is, you now, dangerous ground to walk on. And if we had to do it over again, what would we have done differently?”

“I’m not sure there’s an answer to that question,” Mayor Netts said. And there wasn’t one given by the administration.

Passing It Down to Customers

But Landon tried to put a brighter interpretation on the stumble: “Rayonier gave us these well sites at no cost. As far as learning, we will next time either buy them and get everything we need, it was like it was a gift but it wasn’t the complete gift that we needed, therefore it cost us additional with construction,” he said, though he claimed buying the easements outright would have pushed the cost to $1 million.

“So the actual end result is the ratepayers in Palm Coast has a reduced price overall,” Landon continued, using a remarkable sleight of words to describe what will be a net increased cost for ratepayers. The “reduction” he claims is from the imagined higher cost of easement acquisitions—as opposed to what council members had wondered: whether a better agreement with FPL and Rayonier could have been achieved, avoiding the half-million cost to Palm Coast.

Landon conceded as much: “Could it have been reduced further if Rayonier and FPL agreed, and we had language in there that said Thou shalt provide easement subject to agreed upon language that they never agreed upon? Yes. Will we remember this? If you recall when this first came up about a year ago, I reminded city council that Rayonier will be here in the future, this is an area that has additional growth potential, we will need additional well sites out there, and we will definitely learn from this and we will have a different approach in our dealings with them next time. We thought we got an excellent deal, and that excellent deal turned out to be a good deal, but it is more costly than we expected because of this conflict between Rayonier and FPL.”

A few people questioned the council over the intricate project, compelling the council and Landon to clarify two issues: the liability FPL and Rayonier did not want does now shift to Palm Coast, though liability is limited by state law, because of sovereign immunity extended local and state governments.  And as for who will bear the extra cost” “Primarily the rate-payer pays for it over time,” Landon said, as part of the overall cost of the project. Impact fees will carry some of the burden, but only a small portion.

After posing only a few questions and accepting the hit as unavoidable, the city council approved the $733,400 contract with C&C Powerlines unanimously.

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14 Responses for “How a Stumble Saddled Palm Coast Water Rate Payers With $500,000 in Additional Costs”

  1. John Boy says:

    Why didn’t you mention the name of the Palm Coast City employee who was FIRED over this fiasco. Oh I get, he was promoted.

  2. palmcoastpioneers says:

    Does anyone know if all these massive water wells are the same as discussed in the 1972 publication & Advertising Promos presented us titled ‘..An Approach to a New City: Palm Coast..’ or are they yet even more additional wells for us on the 93,000 gargantuan acreage comprising the Palm Coast Community Lands?
    Page 140:
    Water Supply Studies

    Studies covering the water supply potential for Palm Coast development have been going on continuously since the inception of this development. At that time, the consulting ground water geology firm of Leggette, Brashears & Graham examined the area and researched all existing data to dtermine the ground water potential. They have reported that the water supply for the area will come from three sources. The first is a water deposit that lies within our property boundaries and would be adquate to supply water for the initial phases of our project. The second source of water also lying within the boundaries of the property would be utilized once the potential of the first supply was reached. Studies also showed that the Floridian Aquifer, which lies to the west of our property, would be adequate from a quantitative and qualitative standpoint to supply the 50-60 million gallons a day needed to meet the demands of our ultimate population. The investigation of these areas of water supply involved an exhaustive search of all existing data available in government records as well as a sampling of production wells in the area. Actual drilling of wells was made in areas of high potential so that quantitative and qualitative tests could be made in the proposed area of water supply.

    Since these preliinary investigations were made, more detailed studies have borne out the exisence of our initial water supply. Investigative studies and drilling programs are presently underway to finalize the quantity of water that exists in our intermediate source of supply. In addition , more detailed investigations of inland tracts, where hydrogeologic conditions indicate most of the eventual supply will have to be obtained, are now underway in order to locate exactly the water source required for our ultimate population.

    Additional studies were also made to determine if there would be any adverse effect by canal construction on the fresh water supply existing in the area. The tests consisted of drilling wells in the shallow sands from the tidal lowlands to a point several miles inland , and they were done to determine the water quality in this area. The tests clearly demonstrated that the ground water in the area planned for waterfront developent was, in its natural state
    Page 141
    too contaminated with brackish water to serve as a potable water supply. The construction of the canals has not degraded any fresh water resources nor should it result in salt water intrusion into the potable water supply in the shallow sands. 2

    A Note on Industrial Pollution Control..’
    Page 129:
    ‘…in the planning and development of a future city for 750,000 people…’:

    Bio-Physical Environment and Pollution Control
    Issues of environment and ecology have captured the interest of government, industry, and most importantly, the public. Mirroring this concern for environmental quality, Palm Coast has committed major efforts toward preserving or enhancing the balance of nature in the planning and development of a future city for 750,000 people. The issue at hand can be simply stated: is it possible to have environment and development as complementary, parrallel objectives, or are theymutually antagonistic to each other? 2
    Page 130

    FR: 1 & 2, ‘…An Approach to a New City: Palm Coast…’ 1972, p. 140 and p. 129.

  3. Umm says:

    This is an absolutely ridiculous, absurd amount of money to spend on something that is only 75% completed and that we might need a few years down the road. Can’t they explore alternative energy sources (solar, wind, etc)? Perhaps that will help with the cost.

    Secondly…how much do we pay these guys and the PC city lawyers to ensure that contracts are written clearly and properly while ensuring the city is protected?

  4. You've been tricked says:

    More hidden costs to come. Cost of running the power to pump and then treat the water. No customers, then water is dumped. Lines have to be flushed, water can’t be stored. Paying to treat water that isn’t used.

  5. Magnolia says:

    We pay the Palm Coast City Manager an OBSCENE amount of money to take care of things like this. Screwed AGAIN! And guess what? His contract has no end!

    He is the man responsible for the Centex fiasco, European Village, Town Center and now this. We have a fairly USELESS city attorney on the payroll as well.

    Time to end these contracts and find a more responsible form of government. This one isn’t working. We have had one disaster here after another.

  6. Ben Blakely says:

    The PC water company operates just like the Democrat liberal party. Bumbling leadership that makes terrible business decisions and shows no regard for costs. Why should they?

    Like the Democrats, they have essentially a bottomless pit of money available. Either raise taxes like the Democrats do to cover their blunders or raise water bill charges like the PC water company is doing.

    • Riley says:

      @Ben Blakely. Do you live in Palm Coast? If you do, then you should know that the city is run by republicans, has been for many years. The republicans are to blame for what has happened to PC.

      • Magnolia says:

        Republicans of the sort of John Pollinger, former democrat since 1970 in NJ? Republicans like Ken Mazzie? Republicans like the Mayor and Sheriff who campaign for Melissa Holland? These are RINOs, NOT Republicans.

    • John Boy says:

      Typical Republican remark, blame the Democrats even when the Republicans are in charge. This is a perfect example of Republican lies, distortions and unwillingness to accept any blame or responsibility.

  7. Maryjoe says:

    “I’m not sure there’s an answer to that question,” Mayor Netts said. You SOOOO need to go. Truly.

  8. Anon says:

    And the mayor continues to be Jim Landon’s cheerleader.

    Who ever thinks that this guy is worth over 200k in yearly compensation should go and get their head examined.

    • Your Fired says:

      The city counsel members have the authority over Landon. If they keep him on the payroll hold them accountable the next election. How much more are they going to allow to happen and turn their heads to beforel they wake up? Remember, Netts and all of the others work for us!

      • SSDD says:

        Your right, they do work for us, but if we can’t get more than 20% or so to actually go out and vote, the same people will just keep getting elected. Oh and if we make a change with our votes, there isn’t anyone who will ever get rid of any of them…

  9. glad fly says:

    typical palm coast buffoonery…the inmates continue to run the asylum….ho hum…

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