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PUBLIC BRIEFING DOCUMENT
CHAPTER 180.301 FLORIDA STATUTES
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ACQUISITION OF THE
ROLLIN� HILLS WATER FACILITIES
OF THE JUPITER-MARTIN WATER
ASSOCIATES, INC, UTILITY SYSTEM
Prepared for
VILLAGE UF TEQUESTA, FLORIDA
June 2004
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PUBLIC BRIEFING DOCUMENT
CHAPTER 180.301, FLORIDA STATUTES
ACQUISITION OF TAE ROLLING HILLS WATER FACILITIES
TABLE UF CONTENTS
Section
No. Title Pa�e
1.0 BACKGROUND 1-1
l.l System Background 1-1
1.2 180.301 Statement 1-2
2.0 INCOME AND EXPENSE STATEMENTS 2-1
3.0 BALANCE SHEETS 3-1
4.0 STATEMENT OF EXISTING RATE BASE 4-1
5.0 PHYSICAL CONDITION OF THE UTILITY FACILTIIES 5-1
6A REASONABLENESS OF PURCHASE PRICE AND TERMS 6-1
7.0 IMPACTS OF PURCHASE 7-1
8.0 ADDITIONAL INVESTMENT REQUIRED 8-1
9.0 ALTERNATIVES TO THE PURCHASE 9-1
10.0 STATEMENT OF QUALITY SERVICE 10-1
11.0 STATEMENT OF PUBLIC INTEREST 11-1
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PUBLIC BRIEFING DOCUMENT
CHAPTER 180.301, FLORIDA STATUTES
ACQUISITION OF THE ROLLING HILLS WATER FACILITIES
LIST OF TABLES
No. Title
Table 2-1 Estimate of Net Contribution Margin of Acquired Service Area
Table 3-1 Estimate of Net Replacement Cost of Acquired Service Area Facilities
Table 4-1 Comparable Sales Analysis — Rolling Hills Service Area
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SECTION 1
BACKGR4UND
1.1 System Background
The utility system owned by the Jupiter-Martin Water Associates, Inc. (JMWA), a Florida Non-
profit corporation, is a privately owned water utility system which provides water service in
south Martin County (the "County"), JMWA owns and operates a water distribution system
which provides service within the corporate limits of the Town of Jupiter Island (the "Town")
and to the Rolling Hills subdivision and surrounding properties within unincorporated Martin
County. With respect to the acquisition of the JMWA by the Village of Tequesta (the
"Village"), only the Rolling Hills subdivision and those properties located within unincorporated
Martin County (the "Acquired Service Area") are being purchased by filie Village. Those
properties located within the Town are to be acquired by the Town coincident with the
acquisition of the Acquired Service Area by the Village.
The Acquired Service Area presently serves approximately 46 residential accounts. The JMWA
water facilities located in the Acquired Service Area consists of a water distribution system; all
potable water requirements are provided by the Village pursuant to the Water Service Agreement
dated January 10, 1983 between the Village and JMWA (the "Water Agreement"). It should be
noted that the Village provides the potable water requirements to all of the service area that
comprises the JMWA Water System and was scheduled to terminate on June 1, 2007. The
Acquired Service Area includes approximately 4,700 linear feet of 4-inch, 6-inch, and 8-inch
water distribution mains and road crossings, 8 fire hydrants, and other appurtances associated
with the water distribution system including associated water service lines and meters to the 46
individual water customers.
The rates for the JMWA system, including the Acquired Service Area, are not regulated by the
County, the Town, or the Florida Public Service Commission (FPSC) but by the owners of the
corporation. The rates for service are based, in part, on the cost of bulk service from the Village
adjusted for costs associated with its retail distribution system.
This transaction would allow for the Acquired Service Area to be integrated with the Village's
existing water system and would allow the system to be regulated by the Village Council. The
transaction would provide benefit to the constituents of the development due to i) the availability
of long-tertn, reliable water supply; ii) availability of ability to provide operations under a
municipally operated system, including ability to finance future improvements to the system; and
iii) would allow for the continuity of service (going concern). The transaction will not affect the
existing customers of the Village's utility system since the System will be a retail customer of
the System and will not be subject to receiving service from any other provider once the term of
the Water Agreement ends. As such, the transaction should not compromise the ability of the
Village's utility system to meet the financial requirements.
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1.2 Requirements of Chapter 180.301, Florida Statutes
Any potential utility transaction that results in the transfer of utility ownership from one entity to
another is governed by Section I80.301 of the Florida Statutes that state:
1$0.301 Purchase, sale, or privatization of water, sewer, or wastewater reuse utility by
municipality.
No municipality may purchase or sell a water, sewer, or wastewater reuse utility that provides
service to the public for compensation, or enter into a wastewater facility privatization contract
for a wastewater facility until the governing body of the municipality has held a public hearing
on the purchase, sale, or wastewater facility privatization contract and made a determination that
the purchase, sale, or wastewater facility privatization contract is in the public interest. In
determining if the purchase, sale, or wastewater facility privatization contract is in the public
interest, the municipality shall consider, at a minimum, the following:
(1) The most recent available income and expense statement for the utility;
(2) The most recent available balance sheet for the utility, listing assets and liabilities and
ciearly showing the amount of contributions-in-aid-of-construction and the accumulated
depreciation thereon;
(3) A statement of the existing rate base of the utility for regulatory purposes;
(4) The physical condition of the utility facilities being purchased, sold, or subject to a
wastewater facility privatization contract;
(�) The reasonableness of the purchase, sales, or wastewater facility privatization contract
price and terms;
(6) The impacts of the purchase, sale, or wastewater facility privatization contract on utility
custorners, both positive and negative;
(7) (a) Any additional investment required and the ability and willingness of the purchaser,
or the private firm under a wastewater facility privatization contract, to make that investment,
whether the purchaser is the municipality or the entity purchasing the utility from the county;
(b) In the case of a wastewater facility privatization contract, the terms and conditions on
which the private firm will provide capital investment and financing or a combination thereof for
contemplated capital replacements, additions, expansians, and repairs. The municipality shall
give significant weight to these criteria.
(8) The alternatives to the purchase, sale, or wastewater facility privatization contract, and
the potential impact on utiliry customers if the purchase, sale, or wastewater facility privatization
contract is not made; and
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(9) (a) The ability of the purchaser or the private firm under a wastewater facility
privatization contract to provide and maintain high-quality and cost-effective utility service,
whether the purchaser is the county or the entity purchasing the utility from the county.
(b) In the case of a wastewater facility privatization contract, the county shall give
significant weight to the technical �xpertise and experience of the privafie firm in carrying out the
obligations specified in the wastewater facility privatization contract.
(10) All moneys paid by a private firm to a municipality pursuant to a wastewater facility
privatization contract shall be used for the purpose of reducing or offsetting property taxes,
wastewater service rates, or debt reduction or making infrastructure improvements or capital
asset expenditures or other public purpose; provided, however, nothing herein shall preclude the
municipality from using all or part of the moneys for the purpose of the municipality's
qualification for relief from the repayment of federal grant awards associated with the
wastewater system as may be required by federal law or regulation.
The municipality shall prepare a statement showing that the purchase, sale or wastewater facility
privatization cantract is in the public interest, including a summary of the purchaser's experience
in water, sewer and wastewater reuse utility operation and a showing of the financial ability to
provide the service, whether the purchaser is the county or the entity purchasing the utility from
the municipality. The remainder of this document provides a summary of the above
considerations.
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SECTION 2
INCOME AND EXPENSE STATEMENTS
180.30(11 The most recent available income and expense statement for the Utilitv.
Based on discussions with JMWA, no financial information regarding the operations of the
JMWA system was provided. Additionally, the utility does not segregate the operations of the
utility area by specific service area and, therefore, no statement of income and expenses for the
Acquired Service Area was provided to the Village. Furthermore, the operations of the JMWA
utility system are not subject to regulation by the FPSC which would require the annual filing of
an Income and Expense Statement.
However, information regarding the customers served and the revenues derived from the
operations of the Acquired Service Area was available to the Village since the bills for service
are based on the number of ineters ar accounts served by JMWA. Based on previous analyses
performed by the Village, it is estimated that the net contribution to the Village's Water System
from the Acquired Service Area is as follows:
Table 2-1
Estimate of Net Contribution Margin of Acquired Service Area
Annual Amount
Estimated Sales Revenue $15,074
Direct Cost of Water Suppiy [1] 5,979
Net Contribution Margin to System [2) �10�483
[1] Amounts represent allocated cost of water production and treatment expenses, billing
and a contingency allowance for the estimated water sales to the Acquired Service
Area.
[2J Amount represents net revenues available for other system expenses and capital
improvements not considered as a direct cost of service.
It should be noted that the Village currently receives such revenues from the Acquired Service
Area pursuant to bulk service being provided pursuant to the Water Agreement. However, the
acquisition of the Acquired Service Area will allow the Village to continue to receive such
contributions beyond the current termination date of the Water Agreement since the Village
would now be the retail provider of potable water service.
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SECTION 3
BALANCE SHEETS
18D.3D1(2) The most r-ecent avarlable balance sheet or the utilitv, listin��assets and liabilities
and clearlv showing the amount of contr-ibutions-in-aid-of-construction and accumulated
depreciation thereon.
As previously mentioned in Section 2, no �nancial information regarding the JMWA operations
was provided and the utility does not individually segregate the operations of the Acquired
Service Area. As such, no Balance Sheet or Statement of Financial Position is available for the
specific operations of the JMWA System or the Acquired Service Area system .
Presented on Table 3-1 is an estimate of the net plant in service for the water facilities located
within the Acquired Service Area as provided by JMWA, which is considered by the Village to
be subject to acquisition. Since the water production and treatment facilities will continue to be
provided by the Village's regional facilities, no applicable utility assets is shown for the
Acquired Service Area (only a water distribution system and carresponding customer base being
acquired). The estimate of the net plant in service value of the remaining assets was based on
i) the facilities in service within the Acquired Service Area based on an inventory of facilities
provided by JMWA; ii) estimates of the cunent replacement cost and average service life of such
facilities; and iii) other information as provided by the Village and its engineering consultants.
The estimate of the net plant in service for the Acquired Service Area system is considered to be
the estimated net replacement cost of the applicable utility plant facilities as of the Fiscal Year
2002. As shown on Table 3-1, the estimated net replacement cost of the Acquired Service Area
water facilities is approximately $68,300. As can be seen on Table 3-1, the facilities comprise of
a water distribution system and do not include any water production and treatment facilities.
Table 3-1
Estimate of Net Replacement Cost of Acquired Serviice Area Facilities [1]
Estimated Repiacemeat Cost
Replacement Cost Less Depreciarion
Water Distribution Mains $92,945 $57,603
Valves and Valve Boxes 7,176 968
Fittings 13,986 8,580
Hydrants 17,780 1,185
Service Connections 31,100 -_
Total Bstimated Facility Costs .��$Z 3 6
[1) Aruounts based on information provided by Village Consu3ting Engineers; amounts reflect 2002
analysis and costs.
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SECTION 4
STATEMENT OF EXISTING RATE BASE
1$0.301(3) A statement of the existin� rate base of the utilitv or regulatory, purposes.
Generally speaking, the rate base of a utility company represents the depreciated cost to the
utility company of the plant and facilities financed by the owners of the utility which is used to
provide service to the public. Specifically, rate base of a utility includes gross plant in service,
less accumulated depreciation and net contributed capital and/or plant, an allowance for working
capital, materials and supplies inventory, and certain other fmancial considerations. The concept
of rate base essentially deals with the establishment of rates for a privately-owned utility which
is usually regulated by the Florida Public Service Commission (for private utilities operated in
Martin County). The rate base represents the level of equity investment of the utility system by
the owners of such private utitity for which they are allowed to earn a rate of return. The JMWA
is a non-profit corporation and is not regulated by the FPSC. It is the Village's understanding
that such corporation has not set rates based on a rate-making approach which would include a
rate of return on its equity in the system. As such, establishment of rates for the JMWA system
does not recognize the provision of a return on rate base. Finally, because JMWA does not
separately account for the individual operations of the Acquired Service Area, the components of
the rate base are not readily available. Therefore, this statement is not applicable for this
transaction.
As previously mentioned in Section 3 of this Briefing Document, the estimated net replacement
cost of the utility plant located within the Acquired Service Area subject to acquisition by the
Village was estimated by the Village's Consulting Engineers to be approximately $68,336.
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Table 41
Pa=e 1 ef 3
Vf1la�eofTequesb �
Compara6k Salea Analyxis - Ro➢iog AOIs Service Area
ComoanLk Sales Aaalvsia - Devetooment of Timo-Adfusted PurcAaae Prkes
L'mc Ycar Purchaxc T'vnc Adj. pdjmted
No. NamcofUtility(Scllcr) NemcofPurchascr Parchaxcd Pricc Factor(1) PmehesoPr.
1 Finrida Citiav Watcr Company -PoincianaUftlitica, Inc. FinridaGovemmc+riel Utiliry Aut{�osity 1999 S 25,216,737 10.85% E 27,952,7i1
2 FloridaCiticsWatwCompany-SarasotsSyntcm FloridaGw��rnmcntalUtitityAulhoriry 1999 12,493,568 IO.ASYo IJ,N49,120
3 Sprucc Crcck South Ufilitics, Tnc. Fbrida Watcr Scrvi�c.a, fna 2000 7,321,236 (2) 7.31Yo 7,A56,418
4 Florida Citica Watw Company - North/South Ft. Myair Lcc Covnry 1999 12%,&59,183 I O.SSYe I42,i{40,404
i FlaridaPublicUtifiticsCompsmy CityoPFemindioaHcach 2003 24355,070 (3) 0.00^/. 24�55,070
6 Or[cgaUtiliryCompany JEA(DwalCounry) I99R 7,IS0,000 IJ.SSy A,152,K90
7 AquaSoarccUliliticA, Tce. (Rotanda Syatcm) Charlottc Counry 199% 20,30q000 13.SSYe 23,OSQ650
R United Watw of Florida, Tnc. JEA (Doval County) 2001 219,000,000 5.95% 212,030,500
9 iBSCO, Ina Martin Covnry 1998 695,000 (4) 13.SSYo 7N9,173
Flmide Watcr Scrviccs, inc. - Fox Run, Lcliani Hcighta,
10 and Finhcrtnan's Havcn (Eandicd pmchasc) Martin Counry 2003 2,350,000 O.00Y. Z,75Q,000
Florida Watcr Scrricuw, inc. - Bcacon Hillv, Woabncrc,
11 Palm VaUcy, Remingtan Forest @wdkA purchssc) JEA (Doval Caanty) 2003 25,000,000 � O.00Yo 25,000,000
12 Florida Watcr Scrviccx - Palm Coa9t Systcm City of Pahn Coast 2003 82,772,934 (5) 0.00°/s 82,772,934
13 Flmida Watcr Scrvicca - Spring Hill Systan Hctnando County 2003 35574,025 (S) 0.00% 35,574,025
Flmida Walcr Scrvicc.a - Marco Island and
14 Mnrco Shma Syxtc�m (bandlcd purchaac) City of Marco Txlend 2003 $5,317,143 (5) 0.007• R5,3I3,143
15 Floride Watcr Scrvicca • Citrua Fbrida Govemmenta{ Ufility Authority 2003 16 O.00Ye 1 b,OSA,337
16 FloridaWs[crSi.'rvicaa-Lchigh FloridaGovommcnlalUtilityAuthority 2003 34,503,53R 0.00% 34�0J,538
( I) Adjunhnrnt to roflca inflationary cffxtx upon purcl�axc price; baned on conAhuction coxt indes av pnblinhod by thc Enginecring Ncan Rccord.
Indcx factorx aasumc thc chengc from Janc i xt of cach yav (midycar convenHon) snd wcrc dctumincd as follua�:
Pcrcrnt
. FiscalYcaz Indcx Chsngc
1998 5895 13.55%
t999 6039 10.X5Yo
2000 623% 7.31X
2(101 631R 5.95Yo
2002 6532 2.48%
2007 6694 0.00'/0
(2) Pvrchasc pricc incladcd: i) cash pa}ancnt at cloxing; ii) fulurcx paymrntx for growih throogh 2005; and iii) a caxh paymrnt oncc a catain numbcr of £RCs havc bcrn
cottncetcd. Estimalcd pumhaac pricc dctcrtnincd � followA:
Amoan[ Notcn
Caxh at Clasing S 5,500,4FS0
Prrncn[ Value of Funttc» Paymcn[x 1369,'709 Asmttnc 200 ERCa at 51500 ncr ERC, diacavntcd at 6%a
Prcacn[ Valac of Fumrc Caeh Paym�.�nt 55?,047 At 200 ERCx per ycar, rach 1,100 ERCa ia ycar ]7
Asamncd Pmd�asc Pricc of U61ity S 7321,236
(3) Purchaxc pricc includcd: i) cash pnymrnt at claaing; ii) Poturcs paymrntc for growih thruugh 2005; m�d iii) a cash paymcnt oncc a ccrtein numbcr of ERCn havc bccn
conncetcd. EstimatcQpuroNavc �nicc detrnnincd aa follows:
Amunnt Notcs
Caxh at Cloaing 5 I8,950,000
Prcacnt Valuc of Funrcca Paymrn�s 2,212,796 Aasumc J00 ERCs at S15IX1 per ERC for 6 ycars, diacovntcd at 6%
Prcacnt Valac of Final FnUUCx Paymcnt 7, I92,274 Diffacncc bctwccn E7,500,000 end paymrntx to detc, discow�led at 6%
AsxumedPurchenePriccofUdlity E 24,753.070
(4) Purchasc pricc inciudcd thc roquin:�rant of thc Scl�r to consWct � intcrconncct fo conncct thc porchaccd axecw to thc Connty �tcm. Na purohaec pricc
detcrrnincd as folkwa:
Amoont
Ca9h at Cloaing S RT3,670
Coxt of (ntacmmcc! Rcquircd of Scltcr (17%,670)
Nct Purchanc Pricc S 695_000.00 �
�
(5) Purchenc pa�ding and undcr ncgotiation bclwccn partice; amounts rcFlcct bca[ c�timatww of salcs �nicc baxcd on ncgo�iationx with trimsaction a�iricipatcd to
occur on or bcfarc Dcccmbcr 1, 2003.
7Lble 4•1
Page 2 of 9
Vflia�e of Teqodh
Componble Sales Andyets - Rolling Fi➢e &rvia Area
Comnsnble Sala Aealwie Allocallon of Adiueted Puechate Prke
� L�� Syatcm pdjuxMd Nd U61ityPlent in Scrvicc (2) Pcrccn[ of Total Allocatcd Piache� Pcicc
No. NemcofUtiliry(Scllcr) NemcofPurchaecr i c PurcheacR.(1) Watcr Waetcwetcr Tael Watcr Waxtcwatcr Watcr WeMcwpta
I Florida Ci6aa Wata Company-Poincisne Utili6cx, Inc. Floride Goremmrntnl Utility Authority W/S S 27,952,757 S 11,4R7,925 S 25,b9R,OC3 S 37,I85,9RR 30.R9h b9.i 1 h S R,Cx34,605 S 19,31&14R
2 FloridaCificxWatcrCompairy-SsraxomSyatan Flori�iC3ovcrmncorolIItilityAnthairy W/S 13,R49,120 3,567,756 9,224,919 12,792,675 27.R9% 72.11"/e 3,AC2,520 4,9R�,601
1 Sptucc Gcck Sonth Utilitiaa, Inc. Florida Wetcr Scrviax, inc. W/S 7,R56,415 3,R03,821 3,776,259 7,SRO,ORO SO.IR % 49.82% 3,942,351 3,914,UC7
4 Florida Citicn Wata Cnm{rem� - NorthlSfluth Ft. Mycm Lcc Camty W/S 142,840,404 50,253,690 27,fi59,515 77,913,205 64.50°ib 35,50% 92,132,061 50,70R,344
5 FlotidaPublicUtiliriatCompeny CityofFanindi�Bcx6 W 24,355,070 1t,199,158 - 11,199,I58 I00.00% 0.00'/e 24,355,070 -
fi Ortcge Utility Can�mnY 7EA @uvel County) W/S R,152,A90 1,837,616 2,S I0,099 4,347,715 42,27 % 57.73 % 3,44C,Yt7 4,70F,C�Ci3
7 AquaSoiaccUfiliticx,inc.(RorondaS}retcm) CherlottcCom�ty W/S 23,OS0,650 6,0.43,08R 5,530,fi97 I(,bt3,9R5 52.3R% 47.62% 12,0T3,430 I0,97(,720
R UnitcdWatcrofFlorida,inc, JEA(DuvelConMy) W/S 232,030,500 65,472,77R 92,,902,5C5 ISR,375,343 4134% SA.66% 95,921,409 136,109,091
9 IBSCO,inc. MartinCounry W/S 789,173 147,743 205,102 352,R45 4I.87% SR.I3% 330,427 458,74fi
Florida Watc Scrvixa, inc. - Fox Run, Ldiani Hoighfe,
10 and Fiahrnnen'e Navcn (bnndlcd pmchenc) Martin Counry W!S 2,350,W0 86R,012 744,117 1,552,129 52.Ob^/o 47.94"/0 1,223,410 I,I2�,590
Florida Watcr Setvicca, inc. - Bcacon Hilln, Woodmcrq
I I Palm Velicy, Ranington Foroiat (bundlcd piachaec) 7EA (Duval Cowty) W/S 25.000 R,�2R,753 7,324,916 15,653.6C9 53.21% 4fi.79% 13,302,500 I1,697,500
12 Florida Watcr Scrviccx - Petm Coset Syetcm City of Palm Caeet W/S R2,772,934 40, I R3,R 12 422RSyt9 82,4b9,161 48.73 % 5127 % 40,135,251 42,437,(iR3
13 Floride Walcr Srniaa - Spriug HA1 Syntem Netnenda County W/S 35,574,025 16,2fiCr,fi95 12,752,212 29,01 R,907 56.Q5% 43.94% 19,942,79$ 15,631,227
Florida Watcr Scrviccx -Memo ialand and
l4 Merco S6acx SyxtcmA (Dwdicd pulchaec) City of Muco Tnlnnd W/S 55,313,141 55,824,637 19,636,613 75,4C I,250 73.98% 26.02% 63,1 �4,C�3 22,198,4R0
IS FloridaWata5crviccx-Cihue Fiotida(3ovcrmncqtalUtilityAut6ariry WIS IC�OSR,331 IR,SG2,596 8,715,86Cr 27,278,462 CdS.05% 31.95% 10,927,69R S,i3q639
16 FbridsWataSavicce-Lchigh FlotideOwcmmrnEalUtilityAothariry WB Yf,503,538 16,912,279 22,I03,R54 39,016,131 43.35% Sb.65°R 14,957,2R4 19�4Cy254
(1) AmowU ehowm dcrivcd itan Tabic 4 t, Pegc I of 3.
(2) Bae¢d on infrnmMion pabliehed by t6c me�tive ntititiee in tM Amael RepoAe eubmitted to tl�o eeguletory egoncy aad otMr evei461c finmael infmnation.
Trbk 4-1
Pagc 3 of 3
Villegc of Tcqucaffi
Comparablc Sales Analys� - Rotling Riila Scrvicc Arca
Comoarablc Sales Analvsls - Deveboment of Imolfcd Purchasc Priec - ERC Baeis
4ine Water System
No. Neme of Utility (Seller) Name ofPurchayer Alloc. Price (1) ERCs (2) Price/ERC
Implicd Pricc Bascd on ERCa (Mctcr Equivakutr) Scrved
1 Florida Cities Water Company -Poinciana Utilities, inc. Flaida Gwemmental Utiliry Authority $ 8,634,605 6,46L $ 1,336.42
2 FloridaCitienWaterCocn�any-SazayotaSy�tem FloridaGovemmentalUtilityAuthority $ 3,862,520 7,SR2 $ 509.43
3 Spruce Creek South Utilities, inc. Florida Water Secvices, Inc. $ 3,942,351 4,594 $ 858.15
4 Florida Cities Water Cort�any - North/South Ft. Myera Lce County $ 92,132,OG 1 28,213 $ 3,265.59
5 Florida Public Utilities Company City of Fettdndina Beach $ 24,355,0')0 A,21b S 2,96438
6 Ortey,a Utility Company JEA (Duval County) $ 3,44G,227 2,465 $ L,39R.Ofi
7 AquaSource Utilities, inc. (Rotonda Syytem) Cherlotte Counry $ 12,073,930 3,685 $ 3,276.51
8 United WaterofFloridn, inc. JEA (Duval County) $ 95,921,409 53,929 $ 1,77R.68
9 iBSCQ Inc. Martin Cou�y $ 330,427 352 $ 938.71
10 Flaida WaUer Servicey, inc. - Fox Run, Leliani Heights,
and Fiaherman's Haven (bundled purchave) Martin County $ I,223,410 6b0 S 1,853.65
11
Florida Water Servias, lnc. -Beacon Hill�, Woodmece,
12 Palm Valley, Reminl5tan Fae�t (bundled purcheae) JEA (Duval County) $ 13,302,500 b,426 $ 2,070,11
13 Florida Water Services - Pakn Condt Sysrem City of Palm Coast $ 40,335,251 27,464 $ 1,4l8.l�(i
14 Florida Water Secvices - Spring Hill System Hemando Counry S 19,942,79R 34,b22 $ 576.02
Floridu Water Services - Marco Island and
IS Macw Sharen Systems (bundled purchave) City ofMarco Island S 63,114,fifi3 1fi,160 $ 3,905.61
16 Florida Water Secvicea - Cimw Florida Gavernmental Utiliry Authority $(0,927,698 l l,CviB $ 938.16
1� Florida Water Services - Lehigh Florida Govemmenml Utility Authority S L4,957,2R4 11,460 S 1,305.17
1$ Avernge Price per ERC $ 1,R24.19
19 Rolling HilLv Service Axee - ERCa (meter equivalentv) 46
20 Implied Purcluae Price per thitity System Comlaneat S 83,913
(1) Amounti ahown daived from Tabk 41, Pege 2 of 3.
(2) Baved oa infametim publinhed by the iespective uulitien in the Amwel RePate submitoed w the ceguleton' egencY uid aha availabk fmmciat informetion.
SECTION 5
PHYSICAL CONDITIUN OF THE UTILITY FACILITIES
180.301(4 The physical condition of the utilztv facilities beingpurchased or sod _d_._
As part of the evaluation of the JMWA system, the Village's Consulting Engineer performed i) a
site inspection of the above ground assets; and ii) reviewed the Fixed Asset inventory and
facility information as provided by JMWA..
With respect to the water distribution system, the overall condition of the current facilities was
considered as being good to average which is expected based on the age of the facilities.
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SECTION 6
REASONABLENESS O� PURCHASE PRICE AND TERMS
180 301(S) The reasonableness ofpurchase or sales nrice and terms.
Based on the review of the utility assets which would convey to the Village from the seller of the
Acquired Service Area system as a result of the transaction, and the praposed acquisition
payment terms of the seller, the Village is of the general opinion of the following:
1. The acquisition price as negotiated with the owners of the JMWA system for the utility water
assets that comprise the Acquired Service Area facilities of $40,000 is a reasonable proposal.
This transaction price was based on i) an analysis of the net present value of the future cash
flow of the Acquired Service Area based upon a) the application of the existing Village
utility rates and b) the estimated direct costs to operate the Acquired Service Area system
(reference Section 2 of this Briefing Document for the discussion on the Income and Expense
Statement of such service area); and ii) the net replacement cost analysis performed by the
Village's Consulting Engineers (reference Section 3 of this Briefing Document for the
Discussion of the Balance Sheet of such service area).
2. In addition to the review of the Acquired Service Area acquisition price based on the net
present value of the contribution margin of the utility and the estimate of the net replacement
cost of the assets to be acquired, a comparison of the purchase price to other recent utility
transactions was also prepared. As shown on Table 4-1, the asset price is comparable with
the amounts paid for other water utility systems by other local governments. This
relationship is summarized below:
Amount
Purchase Price of Acquired Service Area $40,000
Assumed ERCs Served 46
Average Purchase Price per ERC $869.57
Average Purchase Price per BRC of other Utility
Transactions [l] $1,824.19
Implied Purchase Price [2] $�3.21�
[IJ Derived from page 3 of 3 from Table 4-1; represents average rate for all uUlity
ttansactions sutveyed
[2J Calculated based on ERCs of the Acquired Service Area multiplied by the Average
Purchase Price of the other Utility transactions.
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3. The estimated net replacement cost of the acquired water utility plant facilities located within
the Acquired Service Area was estimated by the Consulting Engineer to approximate
$68,336 under cunrent facility conditions (reference is made to Section 3 of Briefing
Document). The estimate of the net replacement cost of the applicable service area assets is
greater than the purchase price, which further supports the overall reasonableness of the
amount to be paid for the utility assets.
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SECTION 7
IMPACTS OF PURCHASE
180.301 t6) The impacts of the z�urchase or sale on utility customers. both positive and ne a�� tive•
There are numerous positive impacts on the utility customers resulting from the purchase of the
Acquired Service Area water distribution system assets and are sumrnarized as follows:
1. Public utility system ownership is expected to ensure better system management
(performance of ongoing maintenance according to adopted standards, improved funds
management [funding for future repairs and asset replacement], local rate regulation, etc.).
The Acquired Service Area represents a very small operating business unit. Based on the
relative size of both the JMWA system and the Acquired Service Area, it may be difficult to
fund needed improvements and meet system needs, generally resulting in deferred system
maintenance. Under Village ownership, such maintenance and management policies will
become part of the overall program of the Village's existing utility system. The regulatory
agencies are limited in how far it can govern how a private utility is operated and maintained.
If acquired, however, all standards can be upheld by the Village, ensuring better service to
the Acquired Service Area.
2. As a result of the acquisition of the Acquired Service Area by the Village, it is expected that
the customers within the service area will become retail customers of the Village. It is
expected that the Village's current retail rate structure will be applied to the customers of the
Acquired Service Area once the purchase is effectuated. Upon acquisition, the customers of
such service area may experience a rate decrease of approximately 10%.
With regard to the existing customers of the Village, we do not anticipate that the purchase
of the Acquired Service Area will cause the rates for the Viilage to be increased.
3. Management policies would be more beneficial to the service area under Village ownership.
If the Village acquires the systern, improvements can be made utilizing financing and the
need for profit in rate collection eliminated. The Village operates the utility as a separate
enterprise fund, whereby the revenues of the utility fully support the operations of the utility
(no general government ta.x monies are used for its purchase or operation).
The negative impacts associated with the proposed service area acquisition are the following:
1. The Village will be responsible for the mainta.ining the facilities that comprise the Acquired
Service Area. Although no deficiencies are anticipated by the Village (reference Sectian 8 of
this Briefing Document), any immediate improvements to such system will need to be funded
by the Village which could have a short-term financial effect on utility operations.
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SECTION 8
ADDITIONAL INVESTMENT REQUIRED
180.301 [,7�nZadditional investment required and the abilitv and willin�ness of the Villa�e to
make that investment.
Currently the additional investment required for the Acquired Service Area is anticipated by the
Village to be immaterial. Specifically, the only capital requirements or needs identified is
associated with the decommissioning of the master water meter, estimated at a cost of less than
$1,000. It is expected that the cunent utility staff will perform the necessary improvements
required to decommission the master water meter. Furtherrnore, it is currently anticipated that
after the acquisition of the Acquired Service Area water distribution system, such utility service
area will only warrant normal additional investments (e.g.- ongoing renewals and replacements
associated with normal operations} in order for the assets purchased to reach the useful or
expectant service life.
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SECTION 9
ALTERNATIVES TO THE PURCHASE
180 301(8) The alternatives to the nurchase or sale and potential im�act on utility customers if
thepurchase or sale is not made.
There are several alternatives to the purchase of the Acquired Service Area water distribution
facilities by the Village. These include:
1. No purchase.
2. Purchase by an investor.
3. Purchase by a non-profit entity.
If the Village does not acquire the Acquired Service Area water distriburion facilities, the owner
can either continue to operate the facilities or sell to another party.
l. The "no purchase" option results in the following:
a) The Village would continue to provide bulk water service to JMWA which is anticipated
to end on June 1, 2007. JMWA would have to negotiate another bulk service agreement
with a water provider (not necessarily the Village) or sell the utility to another party.
b) Uncertainty regarding long-term issues such as the ability to effectively finance the cost
of utility operations and ongoing renewals and replacements of system assets.
c) Continuation of existing management and operations practices.
2. To the best of our knowledge, no outside investor has offered to buy the JMWA system in a
fashion that would elicit a sale. The characteristics of the system do not adequately lend
itself to a purchase by a private entity. Issues such as i) the lack of service area growth
(service area generally built-out); ii) the size and type of the customer base served; and
iii) the inability to expand the service territory since the Town and Village essentially
surrounds this service area generally would, in most likelihood, make this transaction
unattractive to a private utility or outside investor.
3. The "purchase by a non-profit entity" option is not viable due to the fact that no non-profit
entity has offered to buy the system. Additionally, the issues discussed above relative to
reasons why the purchase of the JMWA system by a private investor appear to be
unreasonable would also be applicable here. Additionally, the Town has negotiated the
purchase of the JMWA facilities if the Acquired Service Area is purchased by the Village
(simultaneous transaction). It is the Village's understanding tbat the Town desires to be the
sole provider of water service for all customers located in the Town's cnrporate limits that is
currently not served by another local government and the Town does not wish to purchase
the Acquired Service Area assets (diff'iculty to provide service). As such, unless the Village
purchases the Acquired Service Area, it is doubtful that another non-profit entity would
purchase the JMWA system.
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SECTION 10
STATEMENT OF QUALITY SERVICE
180.301(9J The ability o the purchaser to �rovide and maintain hi�h_-_qualitv and cost-e ective
utility service, whether the �urchaser is the VillaQe or the entit�purchasing the utility from the
Villa e.
In order to provide and maintain high quality and cost effective utility services, the Village will
institute several utility management objectives. The Village, throughout the acquisition process,
has engaged the professional services of a well recognized consulting engineering firm to assist
in technical areas.
The Village currently operates a public water utility system in the area adjacent to the Acquired
Service Area and has consistently complied with all regulations required by various regulatory
agencies and covenants dictated by financing institutions. The Village has continuously
provided and maintained high quality and cost effective utility services, and has kept rates for
such service consistent for many years (only application of price index on cost of operations has
been performed by the Village). In addition, a renewal and replacement fund exists for the
ongoing replacement of the utility plant components within the system to ensure the system
continues to provide the adopted level of service to its customers. Finally, the Village has
consistently rnet the financial and rate covenants outlined in the Bond Resolution which
authorized the issuance of utility revenue bonds for the funding of capital expenditures of the
Village's water system. Based on the foregoing, the management of the Village's utility system
is of the opinion that the Village will be able to continually provide and maintain high quality
and cost effective utility service required to meet the level of service standards of the utility.
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SECTION 11
STATEMENT OF PUBLIC INTEREST
Statement of Public Interest.
Based upon the foregoing, the purchase of Acquired Service Area water distribution system is in
the public interest and the Village has the experience and the financial ability to provide the
highest quality of service to the customers.
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