DATE:	September 3, 2015
TO:	Office of Commission Clerk (Stauffer)
FROM:	Office of the General Counsel (Corbari, Ames) Division of Accounting and Finance (Bulecza-Banks, Fletcher, Polk) Division of Administrative and IT Services (Belcher) Division of Economics (Earnhart)
RE:	Docket No. 150022-WU – Initiation of show cause proceedings against Wildwood Water Company in St. Johns County for violations of Sections 350.113, 367.121, 367.145 and 367.161, F.S., and Rules 25-30.120 and 25-30.110, F.A.C.
AGENDA:	09/15/15 – Regular Agenda – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Brisé
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None

 

 Case Background

On January 6, 2015, staff opened the instant docket to initiate a show cause proceeding against Wildwood Water Company (Wildwood) for apparent violations of Florida Statutes and Commission rules and regulations in failing to submit, or timely submit, its Annual Reports for the years 2009, 2010, 2011, 2012, and 2013, as well as failing to remit payment of its annual Regulatory Assessment Fees (RAFs) for the years 2009, 2010, 2011, 2012, 2013, and 2014.

 

 

 

Wildwood is a Class C water utility providing service to approximately 397 residential and commercial customers in St. Johns County.  Wildwood is located in the St. John’s River Water Management District, but outside the water resource caution area.  The following information provides a historical overview of the Commission’s activities related to Wildwood.

 

Wildwood has been in existence since 1979.  Between 1985 and 1989, Wildwood was regulated by the Commission until the Board of County Commissioners of St. Johns County adopted Resolution Number 89-214, rescinding the Commission’s jurisdiction over private water and wastewater utilities in St. Johns County.  On December 20, 1989, the Commission acknowledged the St. Johns County Resolution.[1]  In December 2008, the Board of County Commissioners of St. Johns County passed Ordinance No. 2008-57, which transferred jurisdiction over privately-owned water and wastewater utilities in St. Johns County to the Commission, effective January 16, 2009.  The Commission acknowledged the St. Johns County Ordinance on February 12, 2009.[2] 

 

Pursuant to Section 367.171(2)(b), Florida Statutes (F.S.), each utility engaged in the operation or construction of a system is entitled to receive a grandfather certificate for the area served by the utility on the day the Chapter becomes applicable to it.  In 2010, Wildwood filed an application with the Commission requesting a grandfather certificate of authority to provide water service in St. Johns County.  The Commission granted Wildwood Water Certificate No. 648-W, effective January 16, 2009, pursuant to Order No, PSC-10-0367-PAA-WU.[3]

 

Since coming back under the Commission’s jurisdiction in 2009, Wildwood has failed to remit payment of its RAFs and, with the exception of 2014, has failed to timely file its Annual Reports.   Prior to the issuance of the Order granting Wildwood’s certificate, Wildwood was advised that its 2009 Annual Report and RAFs were due by March 31, 2010.[4]  Wildwood requested and was granted an extension of time, until April 30, 2010, to file its 2009 Annual Report and RAFs,[5] which it failed to do.  The Commission noted in Order No. PSC-10-0367-PAA-WU, that Wildwood’s Annual Report and RAFs for the period it became subject to the Commission’s  jurisdiction (January 16 - December 21, 2009) remained delinquent and that Wildwood was subject to associated penalties and interest for failing to timely file its RAFs and Annual Report.[6]

 

 

Four years after the Commission granted Wildwood its certificate, Wildwood still had not remitted payment of its 2009 or subsequent years RAFs, nor had it filed its Annual Reports for 2009, 2010, 2011, 2012, and 2013.  In May 2014, Commission staff attempted to contact Wildwood with regard to its delinquent RAFs and Annual Reports.  In June 2014, the President and Owner of Wildwood, Mrs. Diane Mills, contacted Commission staff and requested a payment plan for resolving its delinquent RAFs.  Staff attempted to work with Mrs. Mills in order to resolve Wildwood’s delinquent status and bring Wildwood back into compliance.  Mrs. Mills agreed to staff’s request that Wildwood submit its Annual Reports and RAF Returns for the years 2009 through 2013, and make an initial payment toward its delinquent RAFs by June 30, 2014. In exchange for Wildwood submitting a RAF payment, its RAF Returns, and Annual Reports, staff would continue to assist Wildwood to further resolve its compliance delinquencies and Wildwood’s RAF account would not be sent to collections or an enforcement proceeding.

 

Despite staff’s numerous efforts, Mrs. Mills refused to fully cooperate with staff to resolve Wildwood’s RAF and Annual Report delinquencies. Wildwood never made any payment toward its delinquent RAF balance.  In May 2014, Mrs. Mills dropped off copies of Wildwood’s RAF Returns for the years 2010, 2011, 2012, and 2013 to the Commission in person.  The RAF Returns Mrs. Mills provided, however, were not signed by a representative of the Utility and were therefore incomplete.  On July 25, 2014, Wildwood submitted its Annual Reports and RAF Returns for the years 2011, 2012, and 2013, along with signed RAF Returns for 2011, 2012, and 2013. Although Mrs. Mills submitted signed RAF Returns along with Wildwood’s Annual Reports for 2011, 201,2 and 2013, Mrs. Mills refused to submit Wildwood’s Annual Reports for 2009 or 2010, a RAF Return for 2009, or a signed RAF Return for 2010. In addition, Staff attempted to complete a formal audit of the Utility, however, Mrs. Mills refused to provide any of Wildwood’s billing records to Commission staff.

 

The Commission notified Wildwood of its non-compliance status numerous times, with no response.[7] In certified letters, dated October 23, 2014 and November 21, 2014, the Commission’s Office of the General Counsel notified Wildwood of its apparent violations of Sections 350.113, 367.145 and 367.161, F.S., and Rules 25-30.120 and 25-30.110, Florida Administrative Code (F.A.C.), and demanded Wildwood submit its delinquent RAFs and Annual Reports.[8]  Both notices advised Wildwood that, should it fail to remit payment of its 2009-2013 RAFs, plus penalties and interest, to remit payment of penalties for its late and unfiled Annual Reports, and/or to file its Annual Reports for 2009 and 2010, Commission staff would open a docket to initiate a show cause proceeding.  In addition, the notices advised Wildwood that, should it be found to have violated Commission rules, it could be subject to additional penalties of up to $5,000 per day, pursuant to Section 367.161, F.S.[9]  Wildwood did not respond to any of staff’s notices, nor did it remit any RAF payments, file its outstanding annual reports, or attempt to contact Commission staff.

 

After receiving no response from Wildwood, the Commission’s Office of General Counsel established the instant docket and notified Wildwood that a show cause proceeding had been opened for its apparent violations of Commission rules and statutes.[10]  The notice of show cause proceeding also advised Wildwood that it was required to submit its 2014 Annual Report and RAFs by March 31, 2015.[11] 

 

In March 2015, staff counsel was contacted by Mr. Deterding, who informed staff that he had been retained by Mr. Gregory Mills, the son of Mrs. Mills and the Vice-President of Wildwood, to represent Wildwood in this matter.  Mr. Deterding advised staff that, until recently, Mr. Mills oversaw the plant operation of the Utility, while his mother, Mrs. Mills, handled the administrative aspects of the Utility’s operations. Wildwood Counsel advised staff that Mr. Mills was just beginning to assume the administrative duties from his mother due to Mrs. Mills’ deteriorating health and that, until Staff initiated the show cause proceeding, Mr. Mills was unaware of Wildwood’s compliance issues with the Commission.  Counsel for Wildwood then requested that Wildwood be given an extension of time to file its 2014 RAF Return and Annual Report. 

 

On March 26, 2015, Wildwood was granted an extension, until April 30, 2015, to file its 2014 Annual Report.[12]  On March 31, 2015, Wildwood filed its Annual Reports for 2009 and 2010, and its RAF Return for 2014. On April 3, 2015, Wildwood filed its RAF Returns for 2009 and 2010.  On April 30, 2015, Wildwood requested an additional extension of time, until May 31, 2015, to file its 2014 Annual Report, which was granted.  On May 29, 2015, Wildwood filed its 2014 Annual Report, along with a revised RAF Return for 2014.

 

Settlement Discussions

 

On May 7, 2015, staff participated in an informal meeting with Wildwood to discuss a possible settlement.  Although a settlement was not reached on that date, the parties agreed to continue settlement discussions, during which staff and Wildwood counsel exchanged drafts of a proposed settlement agreement.  On August 18, 2015, Wildwood filed a letter requesting the Commission approve its proposed Settlement Agreement, which is attached hereto as Attachment “A.”

 

As of September 15, 2015, the amounts owed by Wildwood for delinquent RAFs, plus statutory penalties and interest, are as follows:

 

			WILDWOOD OUTSTANDING RAF AMOUNTS
Year				Revenues	RAFs  (4.5%)	Penalty (25%)	Interest (1%) (As of  09/15/15)	Payments	Totals Due (As of  09/15/15)
2014				$177,341.00	$7,980.34	$1,995.09	$478.92	$0.00	$10,454.35
2013				$172,676.00	$7,770.42	$1,942.61	$1,398.68	$0.00	$11,111.71
2012				$161,630.00	$7,273.35	$1,818.34	$2,182.01	$0.00	$11,273.70
2011				$162,446.00	$7,310.07	$1,827.52	$3,143.33	$0.00	$12,280.92
2010				$147,232.00	$6,625.44	$1,656.36	$3,643.99	$0.00	$11,925.79
2009				$161,931.00	$7,286.90	$1,821.73	$4,882.22	$0.00	$13,990.85
Totals				$983,256.00	$44,246.52	$11,061.65	$15,729.15	$0.00	$71,037.32

 

As of September 15, 2015, the penalty amounts owed by Wildwood for delinquent Annual Reports, are as follows:

 

 

The Commission has jurisdiction pursuant to Sections 120.57, 350.113, 367.121, 367.145, 367.161, F.S., and Rules 25-30.110 and 25-30.120, F.A.C. 

 

 

Discussion of Issues

Issue 1: 

 Should the Commission accept the Settlement Agreement proposed by Wildwood Water Company, to resolve the apparent violations of Sections 350.113, 367.121, 367.145 and 367.161, F.S., and Rules 25-30.120 and 25-30.110, F.A.C.?

 

Recommendation: 

 Yes. The Commission should accept the Settlement Agreement proposed by Wildwood Water Company, to resolve the apparent violations of Sections 350.113, 367.121, 367.145 and 367.161, F.S., and Rules 25-30.120 and 25-30.110, F.A.C., and to pay its delinquent Regulatory Assessment Fees, plus statutory penalties and interest, for the years 2009, 2010, 2011, 2012, 2013, and 2014, as well as pay a $2,500 penalty for its delinquent Annual Reports for the years 2009, 2010, 2011, 2012, and 2013. The Settlement Agreement provides a reasonable resolution of the outstanding issues in the docket, appears to be in the public interest, and promotes administrative efficiency.   (Corbari, Ames, Earnhart)  

Staff Analysis: 

 

On August 18, 2015, Wildwood filed a letter with a proposed Settlement Agreement, in an effort to fully resolve its apparent violations of Sections 350.113, 367.121, 367.145 and 367.161, F.S., and Rules 25-30.120 and 25-30.110, F.A.C.  A copy of the Settlement Agreement is attached hereto as Attachment “A.”

 

The goal of any show cause proceeding is to ensure compliance with Florida law and the Commission’s rules and orders.  Staff believes the Settlement Agreement accomplishes this goal, as well as provides a remedy for apparent past violations, and, therefore, recommends that the Commission approve the proposed Settlement Agreement, in full, as attached hereto.  Highlights of specific provisions of the settlement offer are as follows:

 

• Wildwood acknowledges its obligation, pursuant to Sections 367.145 and 350.113, F.S., and Rule 25-30.120, F.A.C., to remit payment of its RAFs, plus statutory penalties and interest, for the years 2009, 2010, 2011, 2012, 2013, and 2014.

 

• Wildwood acknowledges its obligation, pursuant to Section 367.121, F.S., and Rule 25-30.110, F.A.C., to remit payment for penalties associated with the delinquent filing of its Annual Reports for the years 2009, 2010, 2011, 2012, and 2013.

 

• Beginning in October 2015, Wildwood will begin making monthly payments, by the twentieth of each month, in the amount of $1,000, in an effort to pay off the balance of its 2011, 2012, 2013 and 2014 RAFs, as well as penalties and interest for 2009, 2010, 2011, 2012, 2013, and 2014. 

 

• Beginning in October 2015, Wildwood will begin making monthly payments, by the twentieth of each month, in the amount of $250, in an effort to pay off the $2,500 penalty for the delinquent filing of its Annual Reports for the years 2009, 2010, 2011, 2012, and 2013. 

 

• Wildwood will submit payment of its 2015 and future RAFs to the Commission, timely and in full.

 

• Wildwood will submit its 2015 and all future Annual Reports to the Commission in a timely manner.

 

• Wildwood agrees to waive its right to an administrative formal hearing pursuant to Sections 120.569 and 120.57, F.S.

 

• In consideration of Wildwood’s complete and timely performance of all the obligations agreed to in this Settlement Agreement, the Commission conditionally agrees to:
• reduce the amount of the penalties owed by Wildwood for failing to timely remit its Annual Reports for the years 2009, 2010, 2011, 2012, and 2013 to $2,500 ($500 per year), as set out in Exhibit B of the Settlement Agreement attached hereto; and
• waive its right to seek civil remedies against Wildwood for failing to remit payment of its RAFs, penalties and interest, and failing to timely file its Annual Reports provided that Wildwood complies with all of the terms of this Settlement Agreement and any final Commission order approving the agreement.

 

• Wildwood will notify the Commission prior to any sale, conveyance, or abandonment of the utility or the property it is located upon, and/or the initiation of any bankruptcy proceedings involving the utility or its property.  In addition, Wildwood will provide a copy of the Settlement Agreement and Commission order approving the agreement to any purchaser, operator, or person assuming control of Wildwood and/or any court presiding over any abandonment or bankruptcy proceeding involving Wildwood.

 

• The agreement does not prevent a Party from filing suit to specifically enforce any of the terms of the agreement; and the Commission reserves the right to initiate appropriate legal action to address any violations of Commission rules or statutes that are not specifically related to the agreement.

 

• Should Wildwood fail to comply with any of the terms of the proposed Settlement Agreement, such failure would be considered a breach of the agreement and automatically accelerate the balance of any unpaid RAFs, penalties and interest, which would then become immediately due, and void the Annual Report penalty reduction, reinstating the original penalty amount of $13,914, the unpaid balance of which will become immediately due. In addition, the Commission would seek to enforce the terms of the Settlement Agreement and pursue all reasonable means necessary to collect the amounts owed, including, but not limited to, initiating an action in circuit court and placing a lien on the real and personal property of Wildwood.

 

 

 

Staff believes that, taken in its entirety, the Settlement Agreement provides a reasonable resolution of the outstanding issues in Docket No. 150022-WU.  Staff further believes that the Commission’s approval of the Settlement Agreement would be in the public interest, as it provides for future compliance with Florida Statutes and Commission Rules.  Finally, staff believes that Commission approval of the Settlement Agreement will promote administrative efficiency and will avoid the time and expense of a hearing.  Therefore, Staff recommends the Commission approve the proposed Settlement Agreement submitted by Wildwood.

 

Issue 2: 

 Should this Docket be closed?

Recommendation: 

 No.  If Issue 1 is approved, the Settlement Agreement would resolve all matters in Docket No. 150022-WU, in accordance with Section 120.57(4), F.S. Staff recommends the docket remain open to process the settlement payments and to monitor ongoing compliance with the terms of this Settlement Agreement.  Once all the terms of the Settlement Agreement and all outstanding amounts owed have been satisfied, the docket may be administratively closed. Should Wildwood fail to comply with any of the terms of the proposed Settlement Agreement, staff requests the Commission authorize the Office of the General Counsel to pursue all reasonable means necessary to enforce the terms of the Settlement Agreement, including any Commission Order approving same, and to collect the amounts owed by Wildwood, pursuant to Sections 120.69 and 367.121(1)(g) and (j), F.S., including, but not limited to, initiating an action in circuit court and seeking the placement of a lien on the real and personal property of Wildwood.  (Corbari, Ames)

Staff Analysis: 

 If Issue 1 is approved, the Settlement Agreement would resolve all matters in Docket No. 150022-WU, in accordance with Section 120.57(4), F.S. Staff recommends the docket remain open to process the settlement payments and to monitor ongoing compliance with the terms of this Settlement Agreement.  Once all the terms of the Settlement Agreement and all outstanding amounts owed have been satisfied, the docket may be administratively closed.

Should Wildwood fail to comply with any of the terms of the proposed Settlement Agreement, staff requests the Commission authorize the Office of the General Counsel to pursue all reasonable means necessary to enforce the terms of the Settlement Agreement, including any Commission Order approving same, and to collect the amounts owed by Wildwood, pursuant to Sections 120.69 and 367.121(1)(g) and (j), F.S., including, but not limited to, initiating an action in circuit court and seeking the placement of a lien on the real and personal property of Wildwood.