Sewage rate showdown is this week

A judge will decide whether St. Pete Beach has been right in paying only a percentage of its bill to St. Petersburg since '95.

By AMY WIMMER

© St. Petersburg Times, published March 26, 2000

ST. PETE BEACH -- Once a month, a sewage treatment bill arrives at City Hall from St. Petersburg.

The beach city records the billed amount, recalculates it, and cuts a check to St. Petersburg for a revised sum. In February, St. Petersburg charged $128,761.73. St. Pete Beach paid $68,241.18.

Those bills have been piling up since 1995, when St. Pete Beach began withholding payments in a squabble over a sewage treatment contract now 15 years old.

Altogether, St. Pete Beach believes it has been overbilled to the tune of $2.63-million.

This week, a judge will consider which municipality is right.

Attorneys for both sides will present their cases at a hearing Tuesday, and a judge will decide whether St. Pete Beach has been correct in paying only a percentage of its bill all these years.

"What's right is right, and the commission has felt it's important to protect the city's integrity and the city's right to enter into contracts and expect them to be executed by the other city," St. Pete Beach City Manager Carl Schwing said.

St. Pete Beach already has won an important round in the case. A judge ruled last summer that St. Petersburg must honor the 1985 contract.

Now the beach city must show that St. Petersburg failed to live up to its end of the deal. Specifically, St. Pete Beach believes St. Petersburg broke the contract's limits on rates.

Last summer, on the other side of the courtroom, St. Petersburg attorneys tried to show that the contract should be disregarded because it had severely limited the City Council's ability to establish sewer rates.

The judgment was a setback for St. Petersburg. Had the judge ruled the contract invalid, St. Petersburg attorneys would have to show this week that sewer rates are equitably set for the city's customers. Now, St. Petersburg must show that not only are the higher rates fair, but that they are legitimate under the 1985 contract.

Any judgment could affect Treasure Island, which also has been withholding payments in protest of a new rate structure the St. Petersburg City Council passed in 1999.

St. Pete Beach's agreement with St. Petersburg has its roots in the 1970s, when environmental regulators forced the closure of St. Pete Beach's polluting treatment plant. St. Pete Beach helped finance the northwest treatment plant to handle the city's sewage.

In return, St. Pete Beach was promised that the beach city's bills would always be in line with the actual cost of treating its sewage. That guarantee was solidified in the 1985 contract.

The contract stipulates that St. Pete Beach can be charged only for the direct costs of treating its sewage, but over the years St. Petersburg has tried to include other costs it considers "direct" -- such as compensation for property taxes that St. Petersburg would be earning if the treatment plant property were in private hands.

Last year, St. Pete Beach changed from a flat rate to a system with charges based more on consumption. The switch effectively raised the rates.

Much of the sewer rate increase is part of $1.1-million that St. Pete Beach has set aside in this year's budget -- in case it loses its lawsuit with St. Petersburg.

"We physically take whatever the millions of gallons are and multiply it by the rate that we agreed to pay," St. Pete Beach Finance Director Stephen Gallaher said. "They're billing us at one rate; we're paying them at a different rate."

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