Water systems would cost Apple Valley $102 million (April 12, 2006)

Town Council forges ahead with acquisition plans. Only a handful of residents speak on the issue of Apple Valley taking over water companies

APPLE VALLEY — Some warned of a quagmire while others applauded the town’s efforts to proceed with getting into the water business at a potential cost of more than $100 million.

On Tuesday night the Town Council unanimously decided to push forward with efforts to acquire the two largest water companies in Apple Valley: The Apple Valley Ranchos and the Golden State Water companies.

Within the next 30 days town staff will meet face to face with representatives of the two companies and begin negotiations. Eventually the people of Apple Valley could be asked to vote on taking over the companies.

Getting into the water business might mean increased property taxes and increased water rates for residents to pay for the acquisition the two companies.

A report presented to the council Tuesday night by Bartle Wells Associates and released to the public (available on the town’s Web site: www.applevalley.org), estimates the total acquisition costs of the two companies at $102.1 million.

The study proposes four possible ways to finance the purchase: general obligation bonds, Mello Roos community facilities district bonds, assessment bonds or revenue supported borrowing.

Bartle Wells Associates finds the acquisition of the two water utilities financially feasible if the voters approve a new property or special tax, according to the report.

Net revenues, the report continues, may not be sufficient to repay any borrowings and rates would have to be increased to pay annual principal and interest and satisfy any debt service coverage requirements.

Members of council said it was in the best interest of the town to move forward with the take over.

If we don’t do it now (the price) will skyrocket out of control, Mayor Mark Shoup said. I think we all agree there are tremendous amounts of good public policy reasons the town should acquire the two water companies.

Only a handful of residents spoke on the issue and their opinions were split.

Lawrence Johnston warned the town was only looking at the acquisition as a new revenue source and argued that prices for water might be high now, but are worth the service the companies provide.

You pay for what you get, he said.

Randy Hill applauded the council for its initiative. The difference between the public and the private sector, he said, is who their customer is.

The real customer of the private sector is the shareholders, Hill said. A public agency, by contrast, their customer and their ratepayer are one in the same: The citizen.

Others argued that private companies currently have the regulatory authority of the California Public Utilities Commission reviewing any increases in rates. If the town was in control there would be no such gate keeper, the Town Council would have sole discretion at setting rates.

The Ranchos and the Golden State water companies serve a combined 21,800 customers, have 25 wells and currently charge customers about $44 a month, according to the Bartle Wells study. The study also estimates that the town would realize $7 to $7.5 million in revenues each year between 2006 and 2010.

Source: LeRoy Standish, Daily Press