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Utility debt's liability creates merger debate

Lawyer Seth Mills says it is "poppycock" to assert that Port Richey taxpayers would save money if New Port Richey annexed their 71-year-old city.

His argument: Port Richey residents would not have lower water and sewer rates after a merger. That's because the city's utility debt _ one of the causes of the high rates _ could not be passed onto New Port Richey residents. That would violate the Florida Constitution.

However, an expert with the Florida League of Cities said Thursday that legal argument is debatable.

And the mayor of New Port Richey said the section of the Florida Constitution cited by Mills would not even apply if his city annexed Port Richey.

"It seems to be a feeble attempt to continue to use scare tactics against their residents," New Port Richey Mayor Peter Altman said.

Thursday, Mills stood by his position, saying it was backed up by an opinion of the Florida Supreme Court.

Sen. Jack Latvala, R-Palm Harbor, has introduced legislation that would merge the two cities if a majority of voters in each approved separate referendums, which would be held in September. Latvala said he was responding to complaints about Port Richey government.

Port Richey officials say Latvala's proposal violates their right of self-rule and would force their residents to pay higher taxes. They have launched a campaign urging voters to reject the merger in an April 8 referendum.

The Times recently reported that most Port Richey residents would save about $220 a year if the cities merged, primarily because of New Port Richey's substantially lower water and sewer rates.

The calculation assumed that Port Richey's debts could be absorbed by New Port Richey without forcing a hike in utility rates.

Port Richey has a $2.3-million bond debt, stemming from a recent expansion of its water system.

Mills, who is assisting the city's attorney, blasted that argument at a Port Richey City Council meeting Tuesday night.

He argued that Port Richey residents would not benefit from New Port Richey's lower water and sewer rates because they would be responsible for paying off their utility debt.

He cited a provision in the Florida Constitution that says that when a county government consolidates with one or more cities, "pre-existing debt" cannot be extended outside the service area for which the debt was incurred.

In 1972, the Florida Supreme Court applied that rule to a case involving the merger of five cities in the Panama City Beach area, Mills said.

Chip Morrison, general counsel for the Florida League of Cities, said Mills' legal interpretation was possible, but he did not agree with it.

Morrison reviewed the 1972 case and said the constitutional section cited by Mills still "wouldn't apply in the case of the merger of two municipalities."

A University of South Florida professor previously told the Times that New Port Richey could legally inherit Port Richey's debts though a merger.

Valid or not, Mills' legal argument is moot, according to Altman.

Why? If New Port Richey did annex Port Richey, he said, it would not pass on the $2.3-million utility debt to its existing taxpayers. Nor would it create an additional taxing district to retire the debt, thus saddling Port Richey residents with even higher water and sewer rates, as Mills suggested Tuesday night, Altman said.

"We would never participate in such a thing," he said. "That's not the spirit of the whole (merger) concept."

Instead, he said, the city could apply some of Port Richey's own assets, including its $440,000 undesignated cash reserves and $800,000 in utility debt service funds, to drastically shave the utility debt.

Port Richey residents would still be responsible for paying off the balance of the debt over time. However, their monthly bills could be lowered to the level of New Port Richey's due to the major cut in the utility debt, Altman said.

Mills dismissed Altman's claims, saying his proposals might violate the city's bond covenants. "This is nothing more than one man's speculation as to what might happen," he said.